Crude prices plummet on OPEC decision

Friday, November 28, 2014

Attention this week has been firmly fixed on the crude oil market with OPEC confirming what many market participants had expected by leaving their official production quota unchanged at 30m bpd. Hints from oil ministers and member’s representatives in the build up to the meeting attempted to prepare market participants, with Saudi Arabia’s oil minister, Ali Al-Naimi stating several times over the days prior to the meeting that production would not be curtailed. However, many investors had hoped for some positive steps forward as the global supply glut continues to exert considerable downward pressure on futures prices. Front month Brent futures faced a considerable sell-off, losing 6.2% yesterday as prices closed at a fresh low of $72.58/bbl, intraday dips at one point saw the global benchmark slip to $71.25/bbl at one stage. Front month futures remain on track to post their largest weekly drop since 2011 as futures trade over 11% below Monday’s opening level.

Front month WTI prices also faced considerable selling pressure early on this morning as market participants viewed OPEC's unwillingness to cut output as a sign of its escalating price war with US shale producers as its members attempt to expand their market share. WTI prices fell a modest 0.24% on Wednesday and with US markets closed yesterday for Thanksgiving investors have had to wait until today to get rid of WTI holdings. Prices have traded 6.9% lower early on today and the US benchmark is on track to post losses in excess of 10% this week with selling pressure dominating in all but one of the last nine weeks.

Three month LME aluminium prices fell by 1% yesterday as the slump in oil prices signalled at lower energy prices, potentially reducing the production costs for the metal. Activity this week has been largely rangebound with yesterday’s selling pressure seeing three month prices close at $2,044/tonne, once again testing support around this level. Trade early on this morning has seen tentative support levels around $2,040/tonne breached with selling pressure extending declines towards $2,030/tonne. The recent rout in crude prices could potentially add further deflationary pressure to production costs which could register additional price declines towards near term support at the 100 day MA which currently remains untested at $2012/tonne.

Brent futures plummet on OPEC outcome

CO1 Comdty Generic 1St CO Fut 2014 11 28 07 41 34

3-M aluminium prices move lower on hopes for energy price deflation

LMAHDS03 Comdty LME ALUMINUM 3 2014 11 28 07 56 59

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