While oil rose and gold fell on Friday night trading offshore, their weekly performances reversed that as the upbeat sentiment about commodities from the week before gradually petered out.
Oil futures finished higher on Saturday morning, our time, with prices recovering some losses in the wake of a four-session decline, but they still dropped nearly 5% for the week as the continuing glut of supplies showed no signs of easing, despite much wishing from traders for that to happen.
The latest wish was based on media reports of a one-off meeting of Organisation of the Petroleum Exporting Countries (a “technical meeting”) this week, ahead of its official summit in December.
Venezuela’s president claims this meeting will be held Wednesday night, our time, and will include OPEC and non-OPEC members. Reuters reported that financially embarrassed Venezuela has plans to resurrect the group’s old price-band mechanism to try and boost prices.
The plan, according to Reuters, which cited comments from former Venezuelan Oil Minister Rafael Ramirez, apparently includes progressive production cuts to control prices, with a “first floor” of $US70 per barrel and later a target of $US100 per barrel.
The oil market had been talking about a potential OPEC meeting this month for weeks, with non-OPEC Russia said to be willing to attend.
That has no chance of happening given that OPEC is really dominated by Saudi Arabia and it is still producing at a rate of more than 10 million barrels a day and is determined not to cut back and give other producers the chance to boost production and take its market share (as they did in the mid 1980s when oil prices fell as low as $US10 a barrel).
Saudi Arabia has growing budget problems with a shortfall of revenue from the lower oil price, so it is borrowing and selling off assets.
Venezuela is broke through official maladministration and rampant corruption and could go broke if the oil price doesn’t soon rise.
Russia is also under growing pressure – it’s still in recession, its foreign reserves are falling and it has a war in Syria to pay for and a lifestyle for President Putin to enjoy, hence the continuing stories about special OPEC meetings and whistling in the dark optimism from oil company executives (such as the CEO of Shell) for a bounce back in the market as US production falls.
It did fall by around 76,000 barrels a day last week to 9.1 million barrels, but oil stocks in the US leapt to a new 80 year high.
As a result, November West Texas Intermediate crude futures settled at $US47.26 a barrel, up 1.9%, in New York. But the close was around 4.8% lower than the previous week.
In London, December futures for the global marker crude Brent rose 73 cents, or 1.5%, to $US50.46 a barrel, but prices shed more than 4% in value over the week.
Sentiment was helped on Friday by the weekly Baker Hughes survey showing the number of active US oil-drilling rigs fell 10 to 595 by last Friday. The total active US rig count, which includes natural-gas rigs, was down 8 rigs at 787.
Gold prices fell Friday but ended the week with a reasonable gain after touching a four month high on Thursday.
Comex gold for December delivery lost $US4.40, or 0.4%, to settle at $1,183.10 in New York, up 2.4% for the week and now only down around $1 an ounce for the year so far.
In other metals, Comex silver for December fell 5 cents, or 0.3%, to $US16.114 an ounce – and 1.9% higher for the week.
Comex copper for the same month fell 2 cents, or 0.8%, to $2.404 a pound, for a weekly loss of about 0.4%.
