CRUDE OIL – Oil prices fell on Tuesday, pressured by concerns that production cuts by the world’s big exporters may not be enough to drain a global glut that has depressed the market for almost three years. The Organization of the Petroleum Exporting Countries and other oil producers, including Russia, agreed last week to keep a tight rein on supply until the end of the first quarter of 2018, nine months longer than originally planned. Collective output by OPEC and other producers will be held around 1.8 million barrels per day (bpd) below its level at the end of last year. But the cutbacks have yet to make drain inventories by a significant degree and prices fell after the OPEC deal was announced. The American summer driving season, which by tradition started on the Memorial Day holiday on Monday, may offer some support for prices, analysts said. Demand in the United States for transport fuels tends to rise as families visit friends and relatives or go on vacation during the Northern Hemisphere summer.
GOLD – Gold prices were steady after touching a fresh four week high in European trade on Tuesday as European geopolitical fears sapped risk appetite, underpinning safe haven demand for the precious metal. Concerns over the Greek bailout package, as well as British polls indicating that Prime Minister Theresa May’s Conservative Party has less of a lead over the Labor Party than expected sapped risk appetite. Gold is used as an alternative investment during times of political and financial uncertainty. Worries that Athens and its creditors may not reach an agreement over its bailout program in time mounted overnight, leading to concerns that the euro zone debt crisis could flare up again. Meanwhile, the tightening election race in the UK added to concerns over the political risk surrounding Brexit. The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
NATURAL GAS – Natural gas futures fell sharply on Monday, with trading volumes likely to remain light as U.S. markets remained closed for Memorial Day. The latest U.S. weather model called for mild temperatures over the next two weeks, which should dampen natural gas demand during that time. Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on spring heating demand. Gas use typically hits a seasonal low with spring’s mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning. Nearly 50% of all U.S. households use gas for heating.
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