Crude Oil & Brent Oil In The Green Along With Metals

Crude oil recovered 28 cents this morning to trade at 81.71 while Brent oil added 29 cents to reach 86.30 as traders took advantage of the weaker US dollar to buy up the cheap commodity.  Goldman Sachs has recently been playing the devil’s advocate with both crude oil and gold prices sending both on a bear run. U.S. shale oil will replace the Organization of the Petroleum Exporting Countries as the first-mover “swing producer,” according to a Goldman Sachs report from the weekend—meaning OPEC is losing its power to set global prices for crude. Saudi Arabia, the world’s largest oil exporter, no longer has “the ability to push prices lower than the production costs of U.S. shale” because any cuts from the kingdom would “accommodate the further expansion of U.S. shale, as well as reduce Saudi profits,” Goldman said. These words are being proved accurate as the Saudi’s seem unable to help prices to recover as OPEC nations begin to worry about their budgets with crude oil and Brent oil well under their average prices. In past years OPEC and primarily the Saudi’s could influence the price simply by turning off or on the tap.

The boost in consumer spending on things other than gasoline will probably show up in real spending in November and December data. “The hope I’m sure in the retail sector is that the extra money that consumers find in their pockets is going to be spent in the holiday season,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. The sharp drop in gasoline prices this month could also put some jingle in holiday sales, and economists expect to see several tenths added to fourth-quarter GDP growth. The national average per gallon of unleaded gasoline Tuesday was $3.03, 6 cents cheaper than a week ago and $0.31 below a month ago levels, according to AAA. Falling oil prices could be a shot in the arm for the US economy. “Every penny on seasonally adjusted gasoline prices should be worth about $1 billion,” Stanley said. “Over the course of the year…That’s probably an extra three or four tenths on GDP. I think that will help at the margin.” Economists say for the savings to carry real punch.

Base metal prices were higher on the London Metal Exchange on Tuesday. Nickel soared 5.2 per cent as analysts speculated that the Indonesian ban on exports may remain in place. Prices of other metals rose up to 1.6 per cent. Gold rose slightly on Tuesday with the Comex gold futures quote up by 10 cents an ounce to $1,229.40 per ounce. Iron ore was down by 80 cents on Tuesday or 1.0 per cent to $78.80 a tonne. Gold steadied near $1,230 an ounce this morning, grabbing modest gains from the previous session, ahead of the next guidance from the Federal Reserve on whether it will hike U.S. interest rates sooner or keep them lower for longer.  The Fed wraps up its two-day policy meeting later on Wednesday at which it is expected to end its bond purchases amid signs of strength in the U.S. economy. Keeping U.S. interest rates lower for a longer period bodes well for a non-interest bearing asset such as gold.  U.S. gold futures were nearly flat at $1,229.30 an ounce.