Oil Extends Decline as Rising U.S. Production Weighs

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On Monday, oil prices prolonged declines, pulled down by indications of growing production in the United States that  would partially offset output cuts by the Organization of Petroleum Exporting Countries and other producers.

After President Donald Trump presented immigration curbs that generated criticism at home and abroad, uncertainty over the outlook for U.S policy also broadly influenced  the financial markets.

Oil trading was quiet with some Asian countries, including China, on holiday for the Lunar New Year. After the opening bell on Monday, the delivery of NYMEX crude for March declined 27 cents at at $52.90 a barrel.

Global benchmark Brent crude oil prices declined 25 cents at $55.26 a barrel at 1010 GMT, while U.S. crude futures fell 8 cents to $53.09.

The number of active U.S. oil rigs increased to the highest since November 2015 the previous week, according to Baker Hughes data, indicating  that drillers are taking advantage of oil prices above $50 a barrel.

The Organization of the Petroleum Exporting Countries and other producers, including Russia, agreed to reduce production by nearly 1.8 million barrels per day in the first half of 2017 to relieve a two-year supply overhang.

“We are in wait-and-see mode, I suspect at the moment. Oil has reached a fair value equilibrium level given the current supply and demand outlook,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“Until we get anything to really disrupt that, we may not see too much change,” he said, adding the market may draw some comfort from official OPEC figures for January production.

However,  U.S. oil output has been increasing, with the International Energy Agency forecasting total U.S. production growth of 320,000 barrels per day (bpd) in 2017 to an average of 12.8 million barrels per day bpd.

“The rise in U.S. output should not be unexpected,” ANZ bank said in a note.

“However, we expect the reductions being made by OPEC will far exceed any rise in the U.S. and quickly reduce the global inventory that has been built up over the past two years,” it added.

Hedge funds and money managers boosted bullish wagers on U.S.crude oil to the highest level since mid-2014, the Commodity FuturesTrading Commission (CFTC) data showed on Friday, as agreed output cuts by the world’s top producers began to eat into a global glut.

In addition, on Sunday, President Donald Trump justified  his move to ban entry of refugees and people from seven Muslim-majority nations and stated the United States would continue issuing visas for all countries in the next 90 days as he faced increasing criticism at home and abroad and new demonstrations in U.S. cities.

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Oil Prices Drop as Increasing U.S. Production Could Offset OPEC Cuts

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On Monday, oil prices dropped as investors anticipate figures from OPEC later this week, which will give additional awareness into demand and supply movements.

On Tuesday, oil markets were mixed, supported by development in U.S. crude output and Saudi Arabia said it would strictly follow to a commitment to reduce production, but held back by doubt in financial markets that glut would be curbed.

In an effort to clear a global glut that has depressed prices for more than two years, The Organization of the Petroleum Exporting Countries (OPEC) has settled to reduce production by 1.2 million barrels per day (bpd) to 32.5 million bpd from Jan. 1.

Russia and other key exporters outside the Organization of the Petroleum Exporting Countries (OPEC) have stated they will also cut production.

However, investors have questioned that the Organization of the Petroleum Exporting Countries (OPEC) and its partners can trim production enough to drive up prices.

This Wednesday, January 18, OPEC releases its monthly output data, offering early indications on the agreement  signed late in 2016.

On the NYMEX, delivery of crude oil futures in February declined 12 cents, or 0.2 percent, to $52.25 a barrel.

Benchmark Brent crude oil increased 41 cents a barrel, or 0.7%, at $55.86 and U.S. West Texas Intermediate crude increase  27 cents, or 0.5%, to $52.64 a barrel.

The analyst believes that for the first quarter of 2017, the price of oil will be about the $55 a barrel-mark, until the real effect of the reductions are felt. Others offer hope for $60 per barrel.

However, anticipations  of  increasing  oil production in the United States, along with the U.S. federal holiday on Monday capped price gains.

Goldman Sachs  stated it anticipates YoY U.S. oil output to increase by 235,000 barrels per day in 2017, take into consideration wells that have been drilled and are expected to begin producing in the first half of the year.

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Gold Prices Decline in Asia on Investor Caution

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Gold prices decline in Asia as investors implement  caution on expectations of Fed rate hikes the approaching year and a likely stronger greenback.

On the Comex division of the New York Mercantile Exchange, delivery of gold in January dropped 0.23% to $1,140.05 a troy ounce. Silver futures plunged 0.13% to $16.068 a troy ounce, while copper futures dropped 0.24% to $2.496 a pound.

As the Bank of Japan held steady on Tuesday, as expected and indicated a little uptick in the economy.

Earlier, the Reserve Bank of Australia on Tuesday in the minutes of its recent board meeting stated “it is ready to lower the cash rate again, if needed, by assessing the benefits of lower interest rates with potential risks to household balance sheets.”

Suddenly, gold prices for February delivery established lower on a stronger greenback and residual sentiment on an expected three Fed rate hike in 2017. On Monday, Fed Chair Janet Yellen stated she sees wage development picking up and a strong job market for recent college graduates.

“While I expect workers will continue to face some challenges in the coming years, I believe, … that the job prospects and career opportunities for new graduates at this time are very good,” Yellen said in remarks prepared for the University of Baltimore’s Midyear Commencement.

Fed Chair Janet Yellen did not mention latest monetary policy or other economic conditions in her  statements that concentrated on the current situation of the job market facing the new graduates.

On Additional News

On Tuesday, crude oil prices floated weaker as investors taken profits on current gains led by plans for OPEC and non-OPEC producers to trim production by approximately 1.8 million barrels per day (bpd) and cast an eye on U.S. shale producers.

On the New York Mercantile Exchange, crude futures for February delivery drop 0.17% to $52.97 a barrel. Global benchmark Brent crude drops  0.27% to $54.88 a barrel on London’s Intercontinental Exchange.

Suddenly, crude prices dropped as U.S. oil production was poised to grow as American energy companies the previous week continued to add oil rigs, extending a seven-month drilling comeback sufficient to substitute planned production cuts by OPEC, Russia, and other producers early next year.

Delivery of Brent oil futures for February were down by 24 cents, or 0.4%, at $54.97 a barrel just before noon. U.S. West Texas Intermediate crude for January increase 6 cents, or 0.1%, to $51.96 per barrel.

“Implied U.S. output increases…will offset a significant portion of the planned OPEC production cuts especially since we don’t anticipate sustained strong compliance,” Jim Ritterbusch, president of the noted Chicago-based energy advisory firm Ritterbusch & Associates, said in a research memo to investors.

“While adherence to (OPEC) cutbacks could be quite high initially, we will be surprised by compliance much above 60% by the end of the first quarter as (U.S.) shale responds to a higher price environment.”

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Oil Recovers After Fed Hike as Tighter Market Looms

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On Thursday, oil prices become stable as tighter market looms in 2017 because of intended output reductions led by The Organization of the Petroleum Exporting Countries  (OPEC) and Russia, after sudden drops earlier following Wednesday’s U.S. interest rate increase that drove investors out of commodities.

International Brent crude oil futures were trading at $54.02 a barrel at 0428 GMT, increase 12 cents from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $51.02 per barrel, virtually flat with their last settlement.

On Thursday, ANZ bank said that oil markets would change into a substantial deficit in the 1st quarter of 2017, if the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia go through with their broadcasted reductions of approximately 1.8 million barrels per day (bpd) in production.

“This will likely push oil prices well above $60 per barrel early next year,” it said.

Crude prices also received some support from declining U.S. crude inventories.

Data from the U.S. Energy Information Administration (EIA) presented that commercial crude inventories the previous week dropped by 2.56 million barrels to 483.19 million barrels.

However, traders stated it is far from sure whether Organization of the Petroleum Exporting Countries (OPEC) and other producers will follow through with their announced reductions.

OPEC pumped 33.87 million barrels per day (bpd) the previous month, according to statistics it collects from secondary sources, up 150,000 barrels per day (bpd) from October, Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report on Wednesday.

That shows the group’s production has continued to increase, adding to a global surplus, in advance of the January start of its 1st supply reduction deal since 2008. That could elevate questions regarding its ability to comply fully with the agreement.

After a sudden decline on Wednesday, more stable prices came on Thursday when crude drop over 3% because of a strong dollar.

The dollar increase to close to 14 year peak against a basket of other currencies as the U.S. Fed Reserve increased rates for the 1st time in a year.

“The Federal Reserve hike … saw bond yields rise, dealing a blow to commodities in general,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

“A stronger greenback, in which oil is traded, can hit crude demand as it makes fuel purchases more expensive for countries using other currencies at home,” according to the reports.

On Additional  News

On Thursday, crude prices decline in Asia as Organization of the Petroleum Exporting Countries (OPEC) production shows continued increased and the Fed position on interest rate hikes in 2017 brings the demand side into attention.

At the end of the week, rig count  statistic from oilfield services provider Baker Hughes will set the short-term tone. The previous week, data presented  the U.S. rig count up 27 rigs from the previous week to 624, with oil rigs up 21 to 498.

On Wednesday, the U.S. Department of Energy reported a 2.563 million barrel drop in the U.S crude inventories,  more than the 1.584 million barrel drop seen, while distillate stockpiles, including diesel and heating oil, dropped by 762,000 barrels, and gasoline supplies increased 497,000 barrels.

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Asia Shares Gain in Cautious Trade as U.S.-China Eyed

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On Tuesday, Asian shares increased with investors watchful as friction between China and the U.S. looks like on the rise following a series of tweets from U.S. president-elect Donald Trump on matters from the South China Sea to the exchange rate.

The Shanghai Composite Index edged up slightly, while Hong Kong’s Hang Seng Index increase 0.75%.

Australia’s S&P/ASX 200 increase 0.82% with strength in its materials sub-index, up 1.16%.

In Australia a narrower than perceived current account deficit was shrugged off as the Reserve Bank

of Australia held steady as anticipated at a record low 1.50% cash rate, while indicating concern over the Aussie’s strength.

In Japan, average cash gains increase 0.1, lower than the 0.2% increase seen year-on-year. Australia reported the 3rd quarter current account deficit came in at A$11.4 billion, smaller than the A$13.7 billion gap expected. The Nikkei 225 increase 0.51%.

On Tuesday, the yuan increase suddenly against the dollar after the People’s Bank of China set a much stronger fixing,  the largest percentage gain in the fixing in six months ,  following the decline in the . US dollar index overnight.

Suddenly on Monday, U.S. stocks were higher after the close, as gains in the Financials, Basic Materials and Technology sectors led shares higher.

At the close in NYSE, the Dow Jones Industrial Average increased 0.24% to hit a new all time peak, while the S&P 500 index  added 0.58%, and the NASDAQ Composite index  increased 1.01%.

On Additional News

On Tuesday, gold eased in Asia following an early round of bargain hunting as investors look further than the widely anticipated Fed rate hike this month for any new language on the pace of increases going forward.

On the Comex division of the New York Mercantile Exchange gold drop 0.07% to $1,175.65 a troy ounce. Somewhere else in metals trading, delivery of silver for March on the Comex increase 0.08% to $16.913 a troy ounce, while  delivery of copper for March drop 0.45% to $2.682 a pound.

On Tuesday, crude oil prices decline in Asia with U.S. industry inventory estimates ahead expected to establish the tone.

Later on Tuesday, the American Petroleum Institute will publish its estimates of crude oil and refined product stocks the previous week. On Wednesday, more closely-watched official figures from the U.S. Department of Energy are due.

Delivery of U.S. crude for January fell 0.98% to $51.28 a barrel on the New York Mercantile Exchange (NYMEX).

Brent crude, the global oil price benchmark traded on London’s Intercontinental Exchange, was last quoted at $54.22 a barrel.

On the other hand, investors are watchful that all 14 members of the Organization of Petroleum Exporting Countries (OPEC) will follow to the production curbs.

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