Crude Oil Turns Lower as Rally Attempt Fails to Attract Fresh Buyers
July crude oil futures posted a choppy, two-sided trade before turning lower on Friday. U.S. West Texas Intermediate crude futures traded at $48.18 a barrel, down 49 cents, also falling from a seven month high at $49.56 reached two days ago.
Helping to underpin the market were unexpected supply disruptions across the globe, excluding output cuts in the United States. The amount was around 2.5 million barrels of daily production. Militant activity has cut Nigeria’s oil exports to a more than 22-year low of under 1.4 million bpd.
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In Canada, production has also been cut as wildfires forced closures of around 1 million barrels in daily production, although output is gradually returning. Output in Libya has also been hit by internal conflict.
Bearish traders, however, feel that these are short-term events and that the current rally is unsustainable. The combination of the stronger dollar, excess supply over demand and ongoing overhang of inventories could start to put downside pressure on prices next week.
June Comex Gold futures also posted a two-sided trade on Friday before settling lower. Despite efforts to end the week with a rally, the market remained on track for its biggest weekly slide in nearly two months on growing expectations for an increase in U.S. interest rates as soon as the next Fed monetary policy meeting in June.
The last trade pegged gold at $1252.80, down $2.00 or -0.16%. Prices are down about 1.5% for the week.
On Friday, the USD/JPY rallied to its highest level in more than three weeks on expectations of a potential Federal Reserve rate hike. The EUR/USD rose slightly on profit-taking and short-covering after a steep sell-off this week.
The GBP/USD closed lower after a three-day rally was triggered by a new poll suggesting more Brits were in favor of remaining a member of the European Union. The turnaround in crude oil prices also helped trigger a rebound rally in the USD/CAD.
June Dow Jones Industrial Average futures surged more than 100 points with financials among the top gainers as the other major averages – S&P 500 and NASDAQ – attempted to recover from losses for the week. The Dow and S&P were on pace for their first four-week losing streak since the one ended October 2014, while the NASDAQ composite was on pace for its first five-week losing streak since 2012.
In other news, U.S. existing home sales increased 1.7 percent in April to an annual rate of 5.45 million units, according to the National Association of Realtors. March’s sales pace was revised slightly higher to 5.36 million units from the previously reported 5.33 million units.