OPEC Favors Production Cut Extensions As Next Meeting Nears

Oil fell around 1 percent on Monday as investors continued to unwind bets on higher prices after record cuts last week because of concerns that growing US oil output could hamper an OPEC-led production cut deal.

Responding to rising production, benchmark crude prices are down 10 per cent since January, and analysts warn that more falls could follow. West Texas Intermediate, a US petroleum price indicator, slipped to $48.22 per barrel Monday, ending what appeared to be the start of a recovery from a drop to below $48 from over $53 earlier in the month. Crude prices have fallen 8% over the last two weeks, the biggest weekly drop in four months, and some industry experts have suggested the decline could continue for some time yet.

United States central bank lifted a key short-term interest rate by a quarter-point to a range of 0.75-1pc.

The precious metal climbed to a peak of $1,234.06/oz last Thursday in London, while gold-backed exchange traded funds attracted inflows worth $187m. This is more than 300 million barrels above the five-year average. Chinese jewellery demand rose during the new year holiday, while in India gold imports for February were more than twice their volume last year and about 52pc above the long-term average, according to UBS.

The bigger headwind to prices is also the re-emergence of shale output.

Additionally, continued workers' strikes at major copper mines have also helped price escalation.

Futures lost as much as 1.9 percent in NY after gaining 0.6 percent last week.

"The uptick in arbitrage has not gone unnoticed by the large Middle Eastern (Opec) producers", analysts from consultancy JBC Energy said in a note to clients last week.

"Cuts are not enough to re-absorb the world's excess supply". EIA forecasts show that U.S. shale oil production is expected to rise again in April by 109,000 bpd to 4.96 million bpd suggesting that shale is surely making a comeback at this level of oil prices.

In refined products, RBOB heating oil futures remained flat at 1.509 a gallon at the NYMEX.

Mine disruptions led to copper prices growing roughly 25pc over the past six months.

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