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Tuesday, May 12, 2015

Marginal losses for crude

China's step to cut interest rate affects prices 


Crude Oil futures settled lower on Monday, 11 May 2015 at Nymex lingering below $60 a barrel, as traders considered the outlook for crude demand after China stepped up efforts to boost its economy. Over the weekend, China, the world's second-largest consumer of oil, cut interest rates for the third time in six months in an effort to stimulate its economy. 

June crude lost 14 cents, or 0.2%, to settle at $59.25 a barrel on the New York Mercantile Exchange. Nymex prices rose 0.4% last week. That was their eighth straight week of gains, based on the most-active contracts. Prices were up 25% in April. 

China's central bank lowered its lending and deposit rates by 0.25% each Monday, to 5.1% and 2.25% respectively. It was the third rate cut by China in six months. This is yet another monetary policy easing move by the People's Bank of China, in an effort to reinvigorate the world's second-largest economy. Asian stock markets were boosted on the surprise China rate cut. Despite the price weakness in metals today, this news is an overall bullish underlying factor for the precious metals markets and the entire raw commodity sector. 

China is the world's largest importer of raw commodities. 

Meantime, Greece and European Union/International Monetary Fund negotiations on Greece's debt restructuring continued Monday, as Tuesday is the deadline for Greece to make a 750 million Euro payment to the IMF. The Euro currency was under pressure Monday due to worries Greece will default on this week's payment or future debt payments. 

Short-term Greece government bonds saw yields above 20% on Monday, which is not a good signal of European Union investor confidence in Greece surviving in its present form in the EU. Early on today, gold did see some slight safe-haven demand from the situation. 

Other energy futures on Nymex ended lower on Monday. June gasoline fell half a cent at $1.986 a gallon, while June heating oil lost nearly a penny to $1.945 a gallon. 

June natural gas settled at $2.802 per million British thermal units, down 7.8 cents, or 2.7%, after gaining 5.3% on Friday.
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