Oil prices slide as Opec sits tight

07 Jun, 2015

World oil prices slid this week as Opec decided against cutting its output target, while a boost for the dollar also weighed on commodities, including gold.
The cartel, which has traditionally defended price levels by cutting output if needed, dramatically switched strategy last November when it opted to leave production unchanged - despite a dramatic oil price collapse that slashed revenues for its members. Member countries however declared this week they would be happier with higher prices than is currently the case, to between $75 and $80 a barrel, to boost revenues and help their public finances. Opec is also mindful however that high prices can weigh on economic growth.
"Today's Opec meeting did nothing to help oil prices push higher after Opec oil ministers held production quotas at current levels of 30 million barrels per day," said Michael Hewson, chief market analyst at traders CMC Markets UK.
By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in July slid to $61.15 a barrel from $64.35 a week earlier. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for July dropped to $57.54 a barrel from $58.52 a week earlier.
The dollar won a lift on Friday as official data showed US businesses accelerated hiring and raised wages at a faster pace last month in a fresh sign the country's economy is rebounding from the winter stall.
In a report that gives the Federal Reserve more reason to move toward an interest rate hike in the coming months, the Labor Department said Friday that the economy pumped out 280,000 jobs in May, far more than expected and well above the past year's pace of 251,000 a month. "The US labour market finally came out of its winter doldrums," said Harm Bandholz, chief US economist at UniCredit.
"The re-acceleration in employment gains is supporting the notion that the first-quarter weakness of the labour market and the economy in general was indeed transitory."
By Friday on the London Bullion Market, the price of gold dropped to $1,164.60 an ounce from $1,191.40 a week earlier. Silver fell to $16.15 an ounce from $16.67. On the London Platinum and Palladium Market, platinum slipped to $1,092 an ounce from $1,115.
Palladium decreased to $751 an ounce from $783.
"Prices are under pressure due to fears of an imminent slowdown in demand in China, as the second quarter - traditionally a period of strong demand - has now passed its peak," said analysts at Commerzbank.
By Friday on the London Metal Exchange, copper for delivery in three months slipped to $5,919.50 a tonne from $6,071.50 a week earlier.
-- Three-month aluminium fell to $1,730 a tonne from $1,748.
-- Three-month lead decreased to $1,913 a tonne from $1,972.50.
-- Three-month tin declined to $15,210 a tonne from $15,450.
-- Three-month nickel increased to $12,905 a tonne from $12,745.
-- Three-month zinc slid to $2,137.50 a tonne from $2,207.
By Friday on Liffe, London's futures exchange, cocoa for delivery in July fell to £2,094 a tonne from £2,126 a week earlier. On the ICE Futures US exchange, cocoa for July slipped to $3,092 a tonne from $3,121.
By Friday on Liffe, a tonne of white sugar for delivery in August edged up to $351.20 from $350.10 a week earlier. On ICE Futures US, unrefined sugar for July inched up to 12.09 US cents a pound from 12.04 US cents.
The El Nino weather phenomenon is an abnormal warming of surface ocean waters in the eastern Pacific, which occurs every two to seven years, and sparks drought in some areas and flooding in others.
On ICE Futures US, Arabica for delivery in July gained to 135.65 US cents a pound from 126.20 cents a week earlier. On Liffe, Robusta for July jumped to $1,722 a tonne from $1,633.

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