Reuters: Gold nears 3-month low on U.S. dollar, rate rise bets

(Reuters) – Gold fell toward a three-month low on Tuesday as the dollar hit a seven-month peak on prospects the U.S. Federal Reserve will raise interest rates in December, while silver and platinum extended losses to multi-week troughs.

A forecast-beating U.S. October employment report on Friday pushed up bets the Fed will increase rates for the first time in almost a decade, sending non-interest paying gold to $1,084.90 an ounce, the lowest level since August.

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Oil price forecast to stay below $80 until 2020, IEA says

(Source) Oil prices are likely to remain low over the next five years because of plentiful supply and falling demand in developed countries, the International Energy Agency said Tuesday in its annual forecast.

The Paris-based body, which advises developed countries on energy policy, says it expects oil prices to return to $80 per barrel in 2020, with further increases after that.

Oil prices are down more than 50 per cent since the middle of last year. On Tuesday, the U.S. crude oil contract closed up 26 cents at $44.13 US a barrel.

In its World Energy Outlook, IEA warned members not to become complacent about low cost oil from a handful of producers as that could be a threat to energy security.

And it urged countries to move more quickly towards reducing greenhouse gas emissions.

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Oil just fell below $50 as Russia, Iraq ramp up production amid global glut

(Source) West Texas Intermediate oil fell below $50 a barrel for the first time since April 2009 as surging supply signalled that the global glut that drove crude into a bear market will persist.

Futures slid as much as 5.2 per cent in New York. Brent futures earlier slid below $55 in London for the first time since May 2009. Russia’s output rose to a post-Soviet high in December, preliminary Energy Ministry data showed. Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, plans to boost crude exports to a record this month, the Oil Ministry said.

“This bearish market is being fed by a combination of surging supply and shaky demand,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “We now have Russian production at a post-Soviet high and the Iraqis planning to add even more supply to the market. This just adds to negative market sentiment.”

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Oil moves below $55 and testing $50 a barrel

Oil has settled below $60US per barrel testing the economics of shale production in North America, and oil sands production in Canada while presenting some very interesting investment opportunities in equities.

RBC Capital Markets and CIBC World Markets predict prices will remain below $60 for the first three months of 2015. Societe Generale SA’s Michael Wittner forecasts an average of $64.50 in the first quarter and $61.50 in the second.

Regardless it appears there is continued volatility in price and how low it will is anyone’s guess and one can find a variety of low price forecasts from $43 by J.P Morgan, to as low as $30. Is that sustainable? Not likely, and a price recovery will follow.

In terms of Saudi Arabia, there is plenty of chatter about how low Saudis Arabia’s production costs are and they could drive the price to $20 and still make money. However, keep in mind that Saudis Arabia is a oil export dependent country, and their desired price of oil has more to do with overall expenses (spending) in Saudi Arabia to maintain the country. For Saudis Arabia the concern it is about revenue losses rather then profitability of production. In comparison, in the USA the lower price of oil will have a negative impact on higher cost shale producers,  but a positive impact the overall US economy at a time when the US economy is showing strength.

The low price also represents some significant equity  investment opportunities in the energy sector, as low prices are likely not sustainable under $55 a barrel.