MCX - WEEKLY NEWS LETTERS
✍ GLOBAL UPDATE
Oil prices extended gains on Tuesday, buoyed after top producers Russia and Saudi Arabia agreed to cooperate on stabilizing the oil market, but a lack of immediate action to rein in output capped gains. London Brent crude for November delivery was up 22 cents at $ 47.85 a barrel by 0643 GMT, after settling up 80 cents on Monday. The global benchmark on Monday hit a near one-week high of $ 49.40 after the Russia-Saudi news, but has since pared gains after Saudi Energy Minister Khalid al-Falih said there was no need now to freeze production. He added, however, that freezing output was one of the preferred possibilities. NYMEX crude for October delivery did not settle on Monday due to U.S. Labor Day holiday. It was trading roughly 30 cents higher from late Monday, up 94 cents at $ 45.38 a barrel. It rose as high as $ 46.53 on Monday, the highest since Aug. 30. Russian Energy Minister Alexander Novak said Russia and Saudi Arabia were moving towards a strategic energy partnership and that a high level of trust would allow them to address global challenges. The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia will hold informal talks in Algeria later in September. "The two nations' cooperation is understandable," said Kaname Gokon, a strategist with Okato Shoji Co Ltd. "But when oil output is reduced, other producers would receive the benefit. There is still a question whether they can cut production for a sustainable period." Several OPEC producers have called for an output freeze to rein in the glut, which arose as supplies from high-cost producers such as the United States soared. Russia's Novak said outright oil production cuts may also be discussed in Algeria.

Gold gained in Asia on Tuesday as investors continued to mull the chances of a Fed rate hike this month in the wake of weaker than expected U.S. jobs data at the end of last week. Gold for December delivery on the Comex division of the New York Mercantile Exchange rose 0.31% to $ 1,330.85 a troy ounce. Silver futures on the Comex for December delivery added 1.35% to $ 19.627 a troy ounce, while copper futures were last quoted flat at $ 2.082 a pound. Overnight, gold prices held steady near a one-week high during North American hours on Monday, as trade volumes were expected to remain light with many investors in the U.S. away for the Labor Day holiday. On Friday, gold rallied to a one-week peak of $1,334.00 as disappointing U.S. employment data diminished the likelihood that the Federal Reserve will raise interest rates at its policy meeting later this month. The U.S. economy added 151,000 jobs in August, disappointing expectations for an increase of 180,000 and slowing from the 275,000 positions created in July, the Labor Department said Friday. The unemployment rate remained unchanged at 4.9% this month, confounding expectations for a downtick to 4.8%, while average hourly earnings rose 0.1%, below expectations for a 0.2% increase. While the disappointing data dampened expectations for a near-term rate hike, investors still believe the Fed will hike rates at least once before the end of the year, most likely in December. The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced. A report on U.S. service sector growth on Tuesday will be the highlight of the holiday-shortened week, as Fed officials recently indicated that the pace of interest rate increases will be data-dependent. Besides the services PMI, the shortened week could be a relatively quiet one with Wednesday's Fed Beige Book release and JOLTS jobs turnover data also in focus.

Brent crude prices edged lower during Europe's session on Tuesday, as optimism surrounding an agreement between Saudi Arabia and Russia to stabilize the oil market began to fade. On the ICE Futures Exchange in London, Brent oil for November delivery declined 35 cents, or 0.7%, to trade at $ 47.28 a barrel by 4:15AM ET. Brent spiked by more than 5% on Monday to touch an intraday peak of $ 49.40 after Saudi Arabia and Russia pledged to work together to support the market. But prices pared gains later in the session to end well off the daily high at $ 47.63 amid disappointment over the details of the agreement. The world’s two largest oil producers said they will set up a working group to monitor the oil market and come up with recommendations to promote stability. Saudi Arabian oil minister Khalid al-Falih and his Russian counterpart, Alexander Novak, will meet in Algeria in October and in Vienna in November to discuss how to cooperate under the new agreement. The Organization of the Petroleum Exporting Countries, led by Saudi Arabia and other big Middle East crude exporters, will meet non-OPEC producers led by Russia at informal talks in Algeria between September 26 and 28 to discuss a freeze output. Despite the supportive remarks, chances that the upcoming meeting in late September would yield any action to reduce the global glut appeared minimal, according to market experts. Instead, most believe that oil producers will continue to monitor the market and possibly postpone freeze talks to the official OPEC meeting in Vienna on November 30. An attempt to jointly freeze production levels earlier this year failed after Saudi Arabia backed out over Iran's refusal to take part of the initiative, underscoring the difficulty for political rivals to forge consensus. Meanwhile, crude oil for October delivery on the New York Mercantile Exchange was at $ 45.01 a barrel, 57 cents, or 1.3%, higher than its last settlement on Friday.

Oil prices trimmed earlier gains during North American hours on Monday, after an announcement from Saudi Arabian and Russian officials failed to live up to market expectations. On the ICE Futures Exchange in London, Brent oil for November delivery jumped more than 5% to touch a daily peak of $ 49.40 a barrel earlier in the day before giving back some gains to trade at $ 47.18 by 8:42 AM ET, up just 35 cents, or 0.75%. Meanwhile, crude oil for October delivery on the New York Mercantile Exchange tacked on 77 cents, or 1.74%, to trade at $ 44.92 a barrel after soaring more than 5% to a session high of $ 46.53. Oil prices spiked sharply on reports that Saudi Arabia and Russia planned to make a joint statement at the G20 meeting in China on Monday. But futures started to give back some gains amid disappointment over the details of the agreement. The world’s two largest oil producers said they will set up a working group to monitor the oil market and come up with recommendations to promote stability, according to reports. Saudi Arabian oil minister Khalid al-Falih and his Russian counterpart, Alexander Novak, will meet in Algeria in October and in Vienna in November to discuss how to cooperate under the new agreement, the reports said. OPEC members are set to discuss a potential production cap at an informal meeting on the sidelines of an energy conference in Algeria between September 26-28. On Friday, crude settled 3% higher after Russian President Vladimir Putin said in an interview with Bloomberg that an agreement between major oil exporters to freeze output would be the right decision to support the market. His comments followed similar rhetoric from Saudi Arabia's foreign minister Adel al-Jubeir, who reportedly said on Thursday that some sort of a production agreement could be made between OPEC and non-OPEC producers at this month's meeting. Despite the supportive remarks, chances that the upcoming meeting in late September would yield any action to reduce the global glut appeared minimal, according to market experts. Instead, most believe that oil producers will continue to monitor the market and possibly postpone freeze talks to the official OPEC meeting in Vienna on November 30. An attempt to jointly freeze production levels earlier this year failed after Saudi Arabia backed out over Iran's refusal to take part of the initiative, underscoring the difficulty for political rivals to forge consensus.



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