The brief rebound in global oil prices ended as quickly as it happened in the wake of Saudi Arabia revealing it will boost daily output to a record 13 million barrels a day to counter Russia’s planned boost.
That’s a planned lift of a million barrels a day but the Saudis didn’t give a timeline for the rise.
Gold also lost ground, as did iron ore, silver, and copper in another weak day for commodities.
Oil prices, which had recovered somewhat on Tuesday after skidding 25% Monday, again slumped after the announcement with US West Texas Intermedia (WTI) and Brent both shedding more than 2.5% within minutes.
West Texas Intermediate April delivery dropped $US1.38, or 4%, to settle at $US32.98 a barrel in New York while May Brent crude lost $US1.43, or 3.8%, to $US35.79 a barrel.
The news will see another sell-off in Australian oil stocks today after they were sold off in Wednesday’s slump.
Oil Search shares lost nearly 1.9%, Woodside shed 4.55%, Beach a rather large 7.6% and Santos fell 5.3%.
Oil prices declined “as oversupply concerns will go nowhere anytime soon as the Saudis, Russians, and UAE scramble to win market share,” said Edward Moya, senior market analyst at Oanda, in a market update quoted by marketwatch.com
The rebound in oil prices on Tuesday was “overdone and the next question on everyone’s mind should be when will prices retest Monday’s low,” he said.
Adding to the pressures on prices, the US Energy Information Administration revealed that US crude stocks rose by 7.7 million barrels for the week ended March 6.
Rises had been reported in the previous six weeks.
The Saudi increase will be matched by OPEC member United Arab Emirates, which said its state-owned oil company will lift its production by 1 million barrels a day to more than 4 million barrels a day next month.
Russia, which is not a member of OPEC, on Tuesday said it would increase output to respond to signals Saudi Arabia was preparing to boost production. It did not give a target but it produces more than 10 million barrels a day.
Gold futures gave up early on Wednesday, despite more big falls on Wall Street.
“We were less than impressed with gold’s move [higher] on Monday when the bottom fell out of the stock market, as gold barely poked above the $1,700 level and failed to meet upside technical targets,” analysts at Zaner Metals wrote in a daily note.
“Perhaps central banks were selling gold to fund their government’s efforts to deal with the coronavirus,” analysts said.
Gold had fallen on Tuesday after the stock market staged a recovery on reports that the Trump administration was working with Congress on a stimulus package.
Many analysts though think that’s all talk with little actions.
President Donald Trump has called for payroll-tax relief and other measures to help businesses deal with the economic slowdown, but lawmakers in both parties expressed skepticism about such moves, which has hurt risk appetite on Wall Street after yesterday’s gains.
Comex gold for April delivery fell by $US18, or 1.1%, to settle at $US1,642.30 an ounce, after falling 0.9% on Tuesday.
The settlement was the lowest for a most-active contract in a week, according to FactSet data. Comex May silver lost 17.9 cents, or 1.1%, to $US16.776 an ounce, following a slide of 0.6% on Tuesday.
Comex May copper fell 0.8% to $US2.502 a pound.
And iron ore sold off by more than 2% (or $2.04) to $US90.05 a tonne despite fears abut Australian supplies because of weather concerns.
