Published: Sun, May 14, 2017
Money | By Armando Alvarado

US jobs report shores up markets but oil weakens further

Oil slid more than 4 percent on Thursday, to its lowest since late November as investor worries about a growing global glut of crude erased most of the gains that followed last year's OPEC's output cut.

US output has been on the rise in recent months, touching production levels not seen since August 2015, according to Bloomberg.

Decline being driven by expanding U.S. output before Opec is set to decide whether to prolong its cuts.

A combination of resilient US shale output and surprisingly sluggish demand for gasoline from American drivers has kept USA oil stockpiles at historically high levels. It was the sixteenth straight weekly increase.

The agreement in Vienna was created to speed the end of the worst oil downturn in a generation by mopping up excess supplies and boost prices, providing some relief to resource-rich nations whose economies have taken a big hit.

Prior to the landmark deal, the volume of production in the country was at the level of 37.72 million tons of oil, while daily output stood at 829,100 barrels.

"The market seems to be much further away from a balanced situation than some had previously forecast".

Money managers have already cut their net long positions, a bet on a further price rally, by a third in the last two months.

American benchmark West Texas Intermediate declined to $45.31 a barrel, after beginning the day at $47.64 per barrel.

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Moreover, the recent EIA report on U.S. crude oil inventory declining only by 900,000 barrels as against market expectation of a 2.3 million barrel decline continue to weight down on market sentiments.

In November, OPEC signed a deal to curb production aimed at easing global oversupply.

Brent for July settlement dropped $1.97, or 3.9%, to $48.82 a barrel on the London-based ICE Futures Europe exchange, falling below $50 for the first time since March 22.

Copper and nickel also weakened, as did iron ore futures, while the spot price (an important consideration in the Australian market) dropped 5.1% to $65.20 a dry tonne, according to Metal Bulletin Ltd. USA crude fell as low as $45.39, Brent touched $48.32. PetroChina, China's biggest oil producer, lost 3.2 percent and Sinopec, the country's largest refiner, fell 2.8 percent.

United States energy company shares fell along with crude on Thursday.

Meanwhile, investors braced for data from Baker Hughes scheduled for Friday, expected to show an increase in the number of active USA oil rigs amid a boom in US shale output.

Investors are anxious that Opec nations will fail to rein in output further at their next meeting later this month.

OPEC is due to meet on May 25 in Vienna to decide whether to extend supply cuts through the second half.

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