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Oil Erases 2016 Gains as Saudis Say Output Freeze Hinges on Iran

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Oil erased its gains for the year in New York as Saudi Arabia’s deputy crown prince said the kingdom will only freeze production if Iran and others follow suit.

Futures capped a weekly decline of 6.8 percent, the first since mid February. With producers scheduled to meet in Doha this month to complete an accord on capping output, Saudi Arabia’s Mohammed bin Salman signaled in an interview with Bloomberg that if any country raises output, the kingdom will also boost sales. While Iran will attend the talks, it has ruled out limiting supply as it restores exports after sanctions were lifted in January.

“The Saudis are now saying that they will only freeze if everyone else lines up behind the idea,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “That makes the meeting useless since the Iranians are going to continue increasing output.”

Oil rose 14 percent in March as it rebounded from a 12-year low amid speculation the global glut will ease as U.S. output falls. Russia will join Oman and every member of the Organization of Petroleum Exporting Countries apart from Libya in Doha on April 17 to discuss freezing production. OPEC members, led by Iran and Iraq, boosted output in March, a Bloomberg survey showed.

Tumbling Prices

West Texas Intermediate for May delivery fell $1.55, or 4 percent, to close at $36.79 a barrel on the New York Mercantile Exchange. It was the lowest settlement since March 15. Total volume traded was 10 percent below the 100-day average at 2:46 p.m. Prices rose 3.5 percent last quarter.

Brent for June settlement fell $1.66, or 4.1 percent, to $38.67 a barrel on the London-based ICE Futures Europe exchange. The May contract expired Thursday after gaining 34 cents to $39.60. The global benchmark crude closed at a 47-cent premium to WTI for June delivery.

“If all countries agree to freeze production, we’re ready,” Saudi Arabia’s bin Salman said. “If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

Saudi Arabia hasn’t informed Russia that it has no plans to freeze oil output without Iran doing same, Energy Minister Alexander Novak told reporters in St. Petersburg on Friday. It’s too early to talk about any freeze solutions for Iran within a wider OPEC-Russia deal, he said.

“The Saudi comments about requiring all producers to take part in the freeze doom the Doha talks,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. “The Doha process is falling apart before our eyes. The market has richly rewarded the rhetoric.”

OPEC Production

OPEC boosted output by 64,000 barrels to 33.09 million a day in March, data compiled by Bloomberg show. Iranian production rose by 100,000 barrels a day to 3.2 million last month, the most since May 2012, according to a Bloomberg survey of oil companies, producers and analysts. Sanctions against the nation, which were strengthened in July 2012, were lifted in January.

Commodities rebounded earlier this week as the dollar declined after Federal Reserve Chair Janet Yellen said heightened risks to the global economy warranted a cautious approach to further rate increases. A weaker U.S. currency boosts demand for raw materials priced in dollars.

Other news:

  • Rigs targeting crude in the U.S. fell by 10 to 362 this week, the least since November 2009, Baker Hughes Inc. said on its website Friday.
  • Colombia’s Ecopetrol SA can activate some fields if oil rises to $45 and above, Chief Executive Officer Juan Carlos Echeverry said in Bogota.
  • Nigeria will nominate Mohammed Barkindo, former group managing director of state-owned Nigerian National Petroleum Corp., for the position of OPEC secretary-general, according to two people familiar with the matter.
  • China, which is poised to overtake the U.S. as world’s biggest crude oil importer, will see its domestic production slip this year from a record, the National Energy Administration said on Friday.

Bloomberg

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial market.

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Silver Joins Haven Assets That Pullback on Dollar Strength

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Silver Pulls Back on Dollar Strength

Silver pulled back on Friday after Donald Trump-led administration announced it was working on a new stimulus package to ease economic burden of the American people.

The United States dollar gained as investors jumped on it to hedge against US-China trade tensions.

Silver that has risen to almost eight years high of $29.84 on Thursday pulled back after the US government announced its plan on a new stimulus package.

XAGUSDDaily

The haven asset, like Gold, pulled back to $27.97 on Friday during the New York trading session.

“While there are no early chart clues to suggest the gold and silver markets are close to major tops, both are now getting short-term overbought, technically, and are due for downside corrections in the uptrends,” Kitco Metals senior analyst Jim Wyckoff said in a note.

“And remember that with the higher volatility and bigger daily price gains seen at present, there will also be bigger downside corrections when they come.”

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Gold Pullback on Dollar Strength on Friday

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Gold Pauses its Bullish  Runon Dollar Strength

Gold pulled back from its record rally on Friday after the US dollar received a boost from the new stimulus.

The world’s safe-haven asset pulled back from $2074 per ounce it traded on Thursday to $2030 on Friday during the New York trading session.

XAUUSDWeekly“We’ll see some pullback (in gold) from these levels with USD bottoming for a while and maybe even see some strength in the USD in the near term, which will reverse these gains but not entirely,” said Spencer Campbell, director at SE Asia Consulting Pte Ltd. “People will be looking to re-enter the market on any pullbacks in precious metals as the medium to longer term views are significantly higher.”

Gold rose to an all-time high of $2074 on Thursday after rising over 35 percent on the back of the COVID-19 pandemic. However, economic uncertainties due to the second wave of COVID-19 continues to support gold rally and expected to continue until a concrete solution or vaccine is discovered.

“There are mixed signals that the economy is recovering and some of the signs of recovery are relatively superficial as they show aggregate figures and not how medium and small enterprises continue to suffer,” said Jeffrey Christian, managing partner of CPM Group.

“We have a very long way to go before we see a proper economic recovery.”

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Finances of International Oil Companies Suffered in the Second Quarter

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Finances of IOCs Plunged Amid COVID-19 Pandemic in the Second Quarter

Global leading oil companies suffered substantial losses in the second quarter, according to their various financial statements published in recent weeks.

On Thursday, Royal Dutch Shell posted $18.9 billion loss in the second quarter of 2020, far below the profit of $3.5 billion posted in the same quarter of 2019.

This, the company attributed to the plunge in global oil prices in 2020 due to the COVID-19 pandemic. Shell warned that oil demand remained uncertain, adding that it had cut its exploration plans for this year from about 77 wells to just 22.

This was after the price of Brent crude oil plunged to $15 per barrel during the peak of COVID-19 pandemic while the price of West Texas Intermediate crude oil dipped to -$37 per barrel, the lowest on record.

Also, the company said it has reduced its capital expenditure for the year from the initial $25 billion to $20 billion amid a plunge in revenue and demand for the commodity.

Similarly, ExxonMobil reported a $1.1 billion loss, its biggest decline on record. The oil company also announced it would be lowing spending by 30 percent in 2020 to about $23 billion.

Among the various oil companies posting negative financial statements for the quarter was Chevron Corporation, the company reported $8.3 billion decline in the second quarter of the year. The lowest ever posted by the oil giant in almost three decades.

Chevron, therefore, warned that the havoc caused by COVID-19 pandemic in the energy sector might continue to weigh on earnings.

“While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into the third quarter of 2020,” Chevron’s Chairman and Chief Executive Officer, Michael Wirth, said.

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