Oil slumped again on Friday, and appears to be heading for a capitulation where the only momentum is negative, and prices will continue to head lower.
Gold weakened, as did copper and other major commodities and the Thomson Reuters commodities index is at its lowest since 2002.
Last week’s loss was the largest in eight months, thanks to growing stocks of crude and oil-based products (especially diesel and jet fuel) on land in storage centres across the globe, and on a growing number of supertankers at sea.
Brent crude futures, the global benchmark for oil, lost 1% on Friday and ended less than $US2 from a new six and a half-year low, while US crude futures fell 2%, and barely held above $US40 a barrel.
Both benchmarks lost 8% last week, which was the largest weekly drop since mid-March. Last Friday night’s atrocities in Paris will probably help oil initially today, but that won’t last.
Driving prices lower was news from the International Energy Agency that prices will remain weak for several more years; that global stocks of crude oil are now at record highs and US government data showing a seventh weekly rise in America’s crude inventories that took stockpiles back to close to April’s record highs.
Adding more pressure to prices was the weekly Baker Hughes report showing the first rise in the US oil rig count in 11 weeks last week.
The news from the International Energy Agency (IEA) took traders by surprise – the record stocks totalling 3 billion barrels of crude and oil products in tanks worldwide was much bigger than thought, even though demand has been a bit stronger than thought.
Brent crude futures settled down 45 cents at $US43.61 a barrel in London, as the December contract which served as the front-month expired. It lost nearly $4 on the week.
US crude futures in New York finished down $US1.01 at $US40.74, losing $US3.65 on the week.
An estimated oversupply of 0.7 million to 2.5 million barrels per day has pushed crude prices down by almost two-thirds since June 2014.
Tens of millions of barrels are sitting on tankers at sea, looking for buyers.
The IEA said a mild winter (which is evolving in parts of the US northeast) could further swell the global glut, while the semi-annual Opec meeting on December 4 won’t offer any relief
Meanwhile, Comex gold futures ended a rough week around more than five-year lows, extending its losses to a fourth week.
December gold futures shed 10 cents to settle at $US1,080.90 an ounce on Comex in New York, the lowest settlement for a most-active contract since February 2010.
For the week, gold lost 0.6% – its fourth weekly loss and the longest stretch of declines since the five-week losing streak in July.
Gold and other commodities are being battered by the growing expectation that the US Fed will lift rates next month – and that in turn is bolstering the dollar and undermining commodity prices.
Comex December silver lost 2.1 cents, or 0.2%, to end at $US14.204 an ounce.
Comex December copper fell half a cent to $US2.168 a pound.
Both metals saw weekly declines of roughly 3.3%.
