By ,
Published January 13, 2015
Oil fell nearly 4 percent Monday to below $59 as investors put money into other commodities and waited for signs OPEC members would adhere to their pledge to cut crude supply.
U.S. light crude settled down $2.39 at $58.36 a barrel. Brent crude fell $2.40 to $58.68 a barrel.
Oil markets will have to wait until the end of November or early December to assess the impact of production cuts pledged by the Organization of Petroleum Exporting Countries earlier this month on U.S. crude stocks.
Crude shipped from the Middle East takes weeks to arrive in the United States, where healthy inventories have pushed crude from record highs over $78 a barrel in mid-July. The slide prompted OPEC to agree to output cuts to bolster prices.
"The oil market is in a pretty critical place as far (as) whether we are going to see material production come offline from OPEC," said Erik Simpson of Vantage Energy Hedge Fund.
"Should OPEC be serious about cutting, the market will probably find some support. If they don't we might come off a bit more into the lower $50s."
To date, OPEC's largest exporter, Saudi Arabia, and the UAE are the only countries to have informed customers of supply cuts. Refiners who buy crude from other big OPEC producers such as Kuwait and Libya say they have yet to receive notification of the new curbs.
In addition, preliminary data for October showed a small rise in OPEC output.
The fall in prices has pushed some speculators to take their money out of oil and put it into other commodities, said Olivier Jakob of Petromatrix.
"Large speculative funds remain more focused on other commodities where the fundamentals are clearer," Jakob said in a report. "Over the next 10 days we believe we can drift again towards lower values of the range $57-$64."
Zinc futures touched a record high on the London Metal Exchange (LME) Monday and led base metals higher, fueled by strong demand in China and India.
EARLY WINTER
Oil rose last week as U.S. crude stocks fell sharply, chilly winter weather kicked in and concern rose about supply security from Saudi Arabia. The price has risen more than $2 from its 2006 low of $56.55 on Oct. 20.
Colder weather in the U.S. Northeast, the world's largest heating oil market, has lent prices some support. Forecaster Meteorlogix predicted temperatures would be below normal for several days from Thursday onward.
Most projections predict a normal to colder-than-usual winter. The cold may put heating oil stocks under pressure, but for now stocks remain well above year-ago levels.
Last week, U.S. inventory data showed robust demand growth, although there is some concern about the potential effect on oil demand of a slowdown in the U.S. economy.
"You probably won't see much change in U.S. oil demand during a slowdown," said BNP's Harry Tchilinguirian. "But if the slowdown affects the trade balances of emerging economies, that's where we might see a slowdown in oil demand."
Figures out Monday showed China's implied oil demand rose only 3 percent in September from a year ago, the slowest pace since a contraction in January.
https://www.foxnews.com/story/oil-prices-dip-ahead-of-inventory-data