Crude prices hit 5-month lows as glut fears weigh

Crude prices hit 5-month lows as glut fears weigh

OPEC oil output fell for a fourth straight month in April, a Reuters survey found on Tuesday, as top exporter Saudi Arabia kept production below its target, which helped offset weaker compliance by other members.

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.

Oil prices stabilized in Asian trading Friday after hitting a five-month low while regional stock benchmarks headed lower in holiday-thinned trading.

Thursday's fall in the price of Brent crude followed weak Chinese economic data - which might threaten demand from the fast-growing economy - and higher-than-expected U.S. inventories, or stock piles of oil. It fell 4% on Thursday.

But shale is on the comeback trail now, aided by technological advances and leaner business models that have allowed companies to pump profitably at far lower prices than before. It's likely to bring prices yet again to $50.

Adding to concerns about bulging inventories, traders pointed to soaring USA oil output, which is up more than 10 per cent since mid-2016 to 9.3 million bpd, nearly matching output of top producers Russian Federation and Saudi Arabia. Australia's Woodside Petroleum slid 3 percent.

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Brent and WTI are on track for their largest two-day percentage loss since February 2016. On the Comex in New York, July copper futures fell 1.2% at $US2.51 a pound.

Oil prices have risen but stockpiles are still high and production from countries that have not agreed to the cut, including the United States, has been rising, keeping crude below the $60 level that OPEC kingpin Saudi Arabia and others would like to see. Any drop below this level is likely to push crude towards the lower support levels of $44.5 and $42 per barrel. "Stocks stand just 7 million barrels off a record high", reports CNBC. That matches OPEC's March production.

Ole Hansen, head of commodity strategy at Saxo Bank, said OPEC's meeting on May 25, where the group plans to make a decision on a possible extension of the output cuts, is "eventually going to attract some opportunistic buying". The external sector will continue to be strong due to a narrower trade and current account deficits, said Madan Sabnavis, chief economist at CARE Ratings.

Brent crude settled at US$48.38, or 4.75 per cent lower, after tumbling as much as 5.17 per cent during the session.

Michael Baxter, an economics commentator for The Share Centre, said: "The oil price has hovered in a corridor of between 57 USA dollars (£44.06) and 46 U.S. dollars (£35.56) for much of the last 12 months, but until recently it seemed as if the oil cycle was slowly turning upwards".