Nickel and copper led the base metals complex higher on Friday, supported by a softer dollar, though both metals ended the week lower.
Crude Oil Prices Start the Week on The Backfoot – Crude prices were a bit lower to start the week on Monday, as reduced expectations for an extension of OPEC-led output curbs combined with fears over rising U.S. output weighed on sentiment. Oil prices jumped more than 2% on Friday, but failed to offset their first weekly loss in six weeks, amid ongoing investor fears that rising U.S. output would dampen OPEC’s efforts to rid the market of excess supplies. Domestic U.S. output has rebounded by almost 15% since the most recent low in mid-2016, casting doubts over the past few months’ narrative of tightening energy markets. Meanwhile, growing concern that Russia was reluctant to support an extension of an existing OPEC-led production cut agreement further weighed. Under the original terms of the deal, OPEC and 10 other non-OPEC countries led by Russia agreed to cut production by 1.8 million barrels a day (bpd) for six months. The agreement was extended in May of this year for a period of nine more months until March 2018 in a bid to reduce global oil inventories and support oil prices. Discussions are continuing in the run-up to the Nov. 30 meeting, which oil ministers from OPEC and the participating non-OPEC countries will attend. In the week ahead, trade volumes are expected to remain light around Thursday’s Thanksgiving holiday and Friday’s shortened trading session. Market participants will eye fresh weekly information on U.S. stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer.
Gold Prices Drift Lower at Start of Holiday-Shortened Week – Gold prices drifted lower at the start of a holiday-shortened week on Monday, as investors kept an eye on U.S. tax reform developments. The yellow metal booked a weekly gain of about 1.8% last week, marking its second-straight weekly rise, as investors remained skeptical over whether Republicans can pass a historic tax overhaul. The House of Representatives passed a bill last Thursday that would lower corporate taxes and cut individual taxes for most households in 2018, in a step towards the biggest U.S. tax code overhaul since the 1980s. But the legislation may face a tougher fight in the Senate amid resistance within Republican ranks. Senate lawmakers are expected to vote on their version of the bill after this week’s Thanksgiving holiday. Besides U.S. tax reform developments, global financial markets will focus on minutes of the Federal Reserve’s latest policy meeting in the week ahead, as they look for fresh clues on the likely trajectory of monetary policy. In addition to the minutes, markets will also be watching Fed Chair Janet Yellen, when she speaks in New York on Tuesday evening. Staying in the U.S., a report on durable goods orders will be the highlight of the holiday-shortened week. Markets stateside will remain closed on Thursday for the Thanksgiving holiday. Few expect this week’s data to halt the third Fed rate hike of the year next month. The U.S. central bank is scheduled to hold its final policy meeting of the year on Dec. 12-13, with interest rate futures pricing in a 100% chance of a rate hike at that meeting, according to Investing.com’s Fed Rate Monitor Tool. For 2018, the Fed is currently forecasting three interest rate hikes, but the markets expect two at most. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
Nickel and copper led the base metals complex higher on Friday, supported by a softer dollar, though both metals ended the week lower. Benchmark copper on the London Metal Exchange closed 0.6 percent up at $6,777 a tonne but was off by half a percent on the week. Nickel added 1.8 percent to $11,5720, but ended the week with a 4.4 percent decline. Nickel, mainly used in stainless steel, rallied to a two-year high this month on its expected use in electric vehicles, but prices have since pulled back because of high inventories. On-warrant inventories of copper those not earmarked for delivery fell by 6,925 tonnes to 148,250 after fresh cancellations. On-warrant nickel stocks fell by 7,302 tonnes to 246,504 tonnes. That helped prices on the day, but they are still flat on the year. It is estimates that nickel demand in electric vehicle (EV) batteries will rise to about 220,000 tonnes in 2025 from about 40,000 tonnes last year. Volkswagen will spend 34 billion euros ($40 billion) on electric cars, autonomous driving and new mobility services by the end of 2022, it said on Friday. In other news, A fire broke out at the main port used by copper miner Freeport-McMoRan Inc in Papua, Indonesia, on Thursday night, the company said, adding that the incident would not affect shipments. The dollar index slipped to a four-week low after the Wall Street Journal reported that investigators looking at possible Russian interference in the 2016 U.S. election had subpoenaed President Donald Trump’s election campaign for documents.
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