Crude Oil Posts Biggest Weekly Loss in a Month on Supply Concerns

Crude oil futures plunged more than 2 percent on Friday, helping it to post the biggest weekly loss in a month. The catalyst behind the selling pressure were concerns over increasing U.S. production and high inventories and their negative influence on OPEC’s attempt to reduce the global supply glut.

U.S. West Texas Intermediate crude futures fell below $50 for the first time since early April. After starting the week with below average volume, the selling pressure picked up on Friday with volume in the front-month contract exceeding 560,000 contract, more than the daily average.

Although Saudi Arabia and Kuwait favor extending their production-limiting deal with non-member producers, the Saudi’s said earlier in the week that it is probably too early to talk about it since OPEC isn’t scheduled to meet until May 25.

There is also growing sentiment that OPEC will pass on extending the program because it could potentially leave the cartel vulnerable to losing more share to the U.S.

U.S. production is expected to keep rising if OPEC keeps giving up its market share. Additionally, according to oil field giant Baker Hughes, U.S. drillers added rigs for a 14^th consecutive week. This means production will continue to increase.

Gold

June Comex gold prices posted as two-sided trade on Friday as investors prepared for Sunday’s French elections. The market was supported by uncertainty over the outcome of the election.

According to the latest poll, French centrist Emmanuel Macron is expected to win the first round of France’s presidential election as far right leader Marine Le Pen fell further behind him in the polls.

The poll found that Macron would get about 24 percent of the vote in the first round and Le Pen would get 21.5 percent. However, investors noted that the poll was taken on Wednesday and Thursday before a shootout on Paris’ Champs Elysees Avenue that left a police officer dead and was claimed by the Islamic State. Some experts claim that the alleged terrorist act may actually help Le Pen gain more votes due to her anti-immigration stance.

U.S. Equity Markets

U.S. stocks posted a two-sided trade on Friday as investors looked ahead to the French elections while reacting to another steep decline in oil prices and comments from President Trump on tax reform.

The major indexes were mostly flat until late in the session when comments from Trump on tax reform sent them higher for the session. Trump told the Associated Press his administration will unveil a “massive tax cut” in a new reform, though the timing of that package was unclear.

Economic News

In U.S. economic news, existing home sales rose to levels not seen since 2007 last month. The report showed a build of 5.71 million units versus an estimate of 5.61 million. Flash Manufacturing PMI came in at 52.8, below the 53.9 forecast. Flash Services PMI was 52.5, also below the 53.7 estimate.