Crude Futures Settle Nearly 5% Lower; Gains From OPEC-Led Deal Erased

by Ben Pena May 6, 2017, 2:18

Other analysts agreed the steep price falls would likely force Opec members to extend production cuts later this month, but they said the prospect of deeper cuts appeared slim.

Renewed weakness in China, an expected hike in United States interest rates - which could make dollar-denominated oil more expensive to holders of other currencies - and signs of slowing demand have also contributed to the dive.

West Texas Intermediate crude fell nearly 5 percent, plunging below $46 a barrel. It has short-listed offers for West African crude from two companies, an oil major and a national oil company, and is expected to award the tender soon, a source with knowledge of the matter said. Investors will focus on Friday's report for signs the economy picked up steam after a sluggish start to the year.

The yen and gold rose in tandem as investors took refuge in safe havens, though the latter remained on track for its biggest weekly decline in almost six months on bets that USA interest rates will rise again in the coming months. "Metals have been a leading indicator of stock prices for much of the a year ago".

"A lot of global players didn't expect USA production to be able to ramp up this quickly, at this price level", said Jenna Delaney, senior oil analyst at Platts Analytics.

-Voters in France go to the polls Sunday for the second round of presidential elections. The S&P Oil & Gas Exploration and Production Index had slid as much as 4.9 percent Thursday to the lowest since August. The measure hasn't moved more than 0.2 percent in either direction for seven straight sessions as it's advance toward an all-time high has stalled.

-Facebook slipped 0.7 percent after its results disappointed, while AIG added 1.9 percent.

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Worse, gasoline stocks increased slightly, offering more evidence that motorists are not willing to burn through all the refined products that the downstream sector is producing. Analysts had been expecting a drop of 2.3 million barrels.

Despite gains on Friday, both benchmarks declined for a third week in a row - Brent by about 5 percent and WTI by 6 percent - in their longest losing streak since November. PetroChina, China's biggest oil producer, lost 2.6 percent and Sinopec, the country's largest refiner, fell 1.5 percent. Australian shares .AXJO fell 0.5 percent with metals and mining related stocks leading the decline.

-Copper futures dropped 1.4 percent, extending Wednesday's worst tumble since 2015. Brent tumbled back below US$50 in the previous session and is its lowest since Jan 14. "The Fed's dot plots says 3 percent, but I'm going closer to 1.5 per cent".

CURRENCIES: The dollar strengthened to 112.59 yen from 112.46 yen.

Two-year U.S. bond yields, which are particularly sensitive to monetary policy moves, are a fraction of a basis point softer at 1.31 per cent, while 10-year Treasury yields are down 1bp to 2.35 per cent.

The euro rose above 64 rubles for the first time since February 3, 2017 and the dollar rose above 58 rubles for the first time since March 22, 2017.

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