Global commodity prices fell sharply for the second day in a row with oil prices down to their lowest settlement levels since November 29, the day before OPEC announced a deal to curb production in an effort to balance the market.
Copper and nickel also weakened, as did iron ore futures, while the spot price (an important consideration in the Australian market) dropped 5.1% to $65.20 a dry tonne, according to Metal Bulletin Ltd.
That pushed this year’s decline to 17% so far.
In London, BHP Billiton Ltd. fell 2.7% overnight Thursday and Rio Tinto fell 1.4%. Earlier, Fortescue Metal Group shares dropped 4.8% to below $A5 on the ASX.
Overnight trading on the share price futures contract for the ASX 200 showed a small fall of around 10 points.
West Texas Intermediate crude fell more than 5%, plunging below $US46 a barrel for the first time since last November. Brent crude prices fell under $US50 a barrel to be down more than 5% as well.
That deal saw prices spike to well over $US50 a barrel ($US56 for Brent crude), then retreat earlier this year and finally bounce back past the $US50 a barrel mark before hitting the wall this week.
The sell off came as other commodity prices fell sharply – gold is down by more than 3%, or $US40 an ounce to around $US1,228 an ounce. Copper and other metals sold off heavily for a second day.
The oil price surge saw US shale production rekindled and output is up a massive 468,00 barrels a day to 9.239 million barrels a day. US oil stocks remain at very high levels historically at 527.8 million barrels, with reserves of some key products at very high levels as well.
Iron ore prices fell sharply – on the China’s Dalian Commodity Exchange, ore for September delivery lost 7.3% the maximum daily drop, while in Singapore, SGX AsiaClear futures fell as much as 9.1% to $US60.37 a ton.
Copper futures dropped 1.4%, extending Wednesday’s 3.6% slide, the biggest fall since 2015.
LME copper for delivery in three months slid 1% to settle at $US5,543 a tonne after Wednesday’s 3.5% drop on Wednesday. The two-day loss is the biggest since July 2015. On the Comex in New York, July copper futures fell 1.2% at $US2.51 a pound.
LME nickel dropped to a 10-month low after lawmakers in the Philippines rejected the appointment of a new Environment Secretary (who is an activist and wants to limit nickel production). The metal fell 2.3% to settle at $US9,015 a tonne, extending a 3% drop on Wednesday.
The oil price slide accelerated overnight Thursday after OPEC delegates downplayed the chance that the group and other producing countries (such as Russia) would deepen their output cuts when they meet on May 25. They did say current output cuts were likely to be extended.
Prices also fell as risks to crude production in Libya, which is not part of the OPEC deal, eased following news that two factions made progress toward a resolution of the nation’s political crisis that has, at times, disrupted crude production.
June WTI crude fell 4.8%, to settle at $US45.52 a barrel in New York.
In London Brent crude slid below $US50 a barrel to its lowest level since November. The global oil benchmark dropped by almost 5% on Thursday to $US48.32 a barrel.
