Commodities: Crude soars as Opec official signals potential for more measures to curb glut

Crude-oil futures raced ahead Tuesday as a key Opec official said more measures may be needed to curb a persistent global glut of the black liquid, while a stronger dollar weighed on gold.

At about 15:36 GMT, Nymex-listed West Texas Intermediate crude was up 1.82% to $54.37 a barrel, while Intercontinental Exchange-priced Brent was up 1.41% to $56.97 a barrel.

Michael Hewson, chief market analyst at CMC Markets UK, said crude had hit its highest levels since the start of the year, with WTI busting through resistance at $54 a barrel and opening the path to $55.

This was after Opec's Secretary General, Mohammed Barkindo, commented that despite a 90% compliance rate for production cuts to output, more measures may be needed to curb a supply glut that has so far shown no signs of receeding.

Barkindo said that anything less than 100% compliance with output cuts was not satisfactory, and that Opec expected to achieve that level in due course.

Hewson continued that this commentary had seen speculative long positions in oil climb to record highs as traders bet on further upside to prices in the coming weeks.

"What could possibly go wrong, given that inventory levels remain at record levels?" he pondered, amid a session that marked a return to business for US traders after the Presidents Day holiday on Monday.

FXTM research analyst Lukman Otunuga opined that while oil prices could edge higher amid the supply cut optimism, the concealed concerns of US shale boosting oil production and negatively impacting Opec's efforts could create some headwinds in the future.

"If the momentum is sustainable, then the previous $54 resistance could transform into a support that opens a path higher towards $55," Otunuga added.

On Comex, gold was down 0.33% to $1235.0 an ounce, while silver fell 0.15% to $18.08 an ounce and copper flew up 1.49% to 276.05 cents a pound.

Oanda senior market analyst Craig Erlam observed that gold had struggled on Tuesday under the pressure of greenback strength and that further downside could follow in the safe-haven asset.

"Gold failed to break above its 2017 highs in recent days, which may be a sign that the trend is weakening," said Erlam in a statement.

"With the dollar now responding positively to the Fed's position on interest rates, the path of least resistance for the yellow metal may well be lower with a key test below coming around $1216.40," he added.

On London Metals Exchange, three-month industrial metals futures were a lot firmer. Zinc rose more than 2%, with copper gaining nearly 2%, and aluminum and tin ahead about 1%.

Among agriculturals, Chicago Board of Trade-priced corn was down 0.33% to 374.25 cents a bushel, while wheat fell 1.15% to 450.25 cents a bushel.