Crude oil prices were as low as 5% on Thursday amid weaker market sentiment. Prices started to recover and were stable in the early hours on Friday.
Change in market sentiment
Crude oil prices rose to five-week high price levels at the beginning of the week amid huge expectations about extending the supply cut agreement. The market expected the supply cut agreement to be extended nine months. The market also expected deeper supply cuts. In producers’ meeting in Vienna on May 25, OPEC decided to extend the supply cut agreement until the end of 1Q18—a nine-month extension. The market was disappointed because deeper supply cuts weren’t announced.
Considering that the nine-month supply cut extension and deeper supply cuts were already priced into oil prices, OPEC’s disappointing update triggered a sell-off on Thursday. At 6:50 AM EST, West Texas Intermediate crude oil futures contracts for July 2017 delivery were trading at $49.03 per barrel—a gain of ~0.29%. Brent crude futures contracts for July 2017 delivery rose ~0.39% and were trading at $51.68 per barrel. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) closed at $33.85 after falling 2.6% on May 25. The market is looking forward to the release of US oil rig count data by Baker Hughes at 1:00 PM EST today.
After rising to three-week high price levels on Thursday, copper prices are slightly weaker in the early hours on Friday. Signs of weaker demand from China, the biggest copper consumer, are still weighing on copper prices. The PowerShares DB Base Metals ETF (DBB) rose 0.06%, while the SPDR S&P Metals & Mining ETF (XME) fell 0.98% on May 25. Gold (GLD) and silver (SLW) are stable in the early hours on Friday. There’s dented sentiment in global markets amid the sell-off in oil prices, which supported gold prices. Platinum and palladium are stable in the early hours.