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Commodities

Oil prices dip on surprise U.S. inventory build, weak China inflation

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Oil prices dip on surprise U.S. inventory build, weak China inflation
© Reuters.

Investing.com — Oil prices fell slightly in Asian trade on Wednesday as data pointed to a large weekly build in U.S. inventories, while weak economic signals from major importer China continued to dent the outlook for demand. 

After Chinese trade data disappointed markets on Tuesday, Chinese sank for the first time in nearly two years, data showed on Wednesday. The reading pointed to more economic headwinds for the world’s largest oil importer.

futures fell 0.2% to $86.03 a barrel, while futures fell 0.2% to $82.76 a barrel by 22:23 ET (02:23 GMT).

Crude prices had settled higher after a whipsaw session on Tuesday, as a positive outlook for the U.S. economy helped somewhat offset concerns over slowing economic growth and oil demand in China.

The prospect of tighter oil supplies this year, especially following bumper supply cuts from Saudi Arabia and Russia, kept prices trading close to four-month highs.

But data pointing to an unexpected build in weekly U.S. inventories raised some questions over just how much supplies will tighten in the coming months. 

Strength in the , ahead of key due on Thursday, also weighed on oil prices.

Chinese inflation weakens further in July 

Chinese consumer price index inflation slid into negative territory for the first time since September 2021, data showed on Wednesday. inflation also shrank for a 10th straight month, amid worsening economic conditions in the country. 

While showed some signs of improvement, it was still well below healthy levels, indicating that economic weakness in the world’s largest oil importer was unlikely to improve in the near-term.

The soft inflation readings follow data on Tuesday which showed that Chinese oil imports also tumbled through July. This in turn fueled more doubts over a recovery in Chinese oil demand this year. 

U.S. inventories unexpectedly rise 

Data from the (API) showed on Tuesday that U.S. crude inventories grew by over 4 million barrels in the week to July 28, much more than expectations for a draw of 0.2 million barrels. 

The build comes after inventories saw their biggest draw on record in the week to July 21, of over 17 million barrels.

But the unexpected build for last week showed that U.S. fuel demand may now be winding down, as the end of the summer season approaches. 

Official inventory data from the is now due later in the day, and is expected to show a draw of 0.6 million barrels.

 

Commodities

Oil jumps more than 3% on concern over more sanctions on Russia and Iran

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By Anna Hirtenstein

LONDON (Reuters) -Oil prices surged on Friday and were on track for a third straight week of gains as traders focused on potential supply disruptions from more sanctions on Russia and Iran.

futures gained $2.66, or 3.5%, to $79.58 a barrel by 1154 GMT, reaching their highest in more than three months. U.S. West Texas Intermediate crude futures advanced $2.64, or 3.6%, to $76.56.

Over the three weeks to Jan. 10, Brent has climbed 9% while WTI has jumped 10%.

“There are several drivers today. Longer term, the market is focused on the prospect for additional sanctions,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Short term, the weather is very cold across the U.S., driving up demand for fuels.”

Ahead of U.S. President-elect Donald Trump’s inauguration on Jan. 20, expectations are mounting over potential supply disruptions from tighter sanctions against Iran and Russia while oil stockpiles remain low.

This could materialise even earlier, with U.S. President Joe Biden expected to announce new sanctions targeting Russia’s economy before Trump takes office. A key target of sanctions so far has been Russia’s oil and shipping industry.

“That would be the farewell gift of the Biden administration,” said PVM analyst Tamas Varga. Existing and possible further sanctions, as well as market expectations of draws on fuel inventories because of the cold weather, are driving prices higher, he added.

The U.S. weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe have also been hit by extreme cold and are likely to continue to experience a colder than usual start to the year, which JPMorgan analysts expect to boost demand.

“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by … demand for , kerosene and LPG,” they said in a note on Friday.

Meanwhile, the premium on the front-month Brent contract over the six-month contract reached its widest since August this week, potentially indicating supply tightness at a time of rising demand.

© Reuters. FILE PHOTO: A pumpjack operates at the Vermilion Energy site in Trigueres, France, June 14, 2024. REUTERS/Benoit Tessier/File photo

Inflation worries are also delivering a boost to prices, said Saxo Bank’s Hansen. Investors are growing concerned about Trump’s planned tariffs, which could drive inflation higher. A popular trade to hedge against rising consumer prices is through buying oil futures.

Oil prices have rallied despite the U.S. dollar strengthening for six straight weeks, making crude oil more expensive outside the United States.

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Commodities

Will USDA data dump spoil the bullish party for corn? -Braun

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By Karen Braun

NAPERVILLE, Illinois (Reuters) -If anything can derail a price rally, it is a curveball from the U.S. Department of Agriculture.

Chicago corn futures have ticked slightly lower to start the year, but they had climbed nearly 12% in the final two months of 2024, an unusually strong late-year run.

Speculators now hold their most bullish corn view in two years, and luckily for them, the trade has already accepted that last year’s U.S. corn yield was a whopper.

Friday will feature USDA’s biggest data release of the year, with primary focus on the most recent U.S. corn and soybean harvests. U.S. quarterly stocks, U.S. winter wheat seedings and routine global supply and demand updates will also compete for attention.

U.S. CORN AND BEANS

On average, analysts peg U.S. corn yield at 182.7 bushels per acre, down from 183.1 in November. The trade estimate is more than 5 bushels above last year’s record and above USDA’s initial trendline yield for the first time in six years.

Bearish yield outcomes are less likely when the estimates are already large, and only four of 19 polled analysts see corn yield rising from November. However, the range of trade estimates (2.4 bpa) is smaller than usual, flagging the potential for surprise.

In the last decade, analysts anticipated the wrong direction of U.S. corn yield in January only once (2019). They did so three times for soybean yield (2016, 2019, 2022).

But bets are somewhat off for U.S. soybean yield outcomes because USDA’s slashing of the forecast in November was the month’s largest cut in 31 years. Trade estimates indicate some uncertainty around U.S. soybean production as the ranges for both yield and harvested area are historically wide.

Regardless, U.S. soybean supplies are expected to remain ample and at multi-year highs. However, USDA last month pegged 2024-25 U.S. corn ending stocks below the prior year’s level for the first time.

If USDA cuts U.S. corn ending stocks on Friday as expected, it would be the agency’s seventh consecutive monthly reduction. Such a streak has not been observed in at least two decades, reflective of the strong demand that has recently lifted corn prices.

From a market reaction standpoint, these demand dynamics could be somewhat insulating if the U.S. corn crop comes in larger than expected. The last two times CBOT corn had a distinctly negative reaction on January report day were 2012 and 2024, the latter sparked by a huge yield above all trade estimates.

U.S. WHEAT

USDA will not officially issue 2025-26 outlooks until May, but the wheat market will receive its first piece of 2025-26 U.S. crop intel on Friday with the winter wheat planting survey. Total (EPA:) U.S. winter wheat acres are pegged at 33.37 million, very close to both last year and the five-year average.

Analysts have had a rough time anticipating the planting survey in the last two years, coming in almost 1.4 million acres too high last year but lowballing by nearly 2.5 million acres in 2023. 

Wheat traders have struggled to find viable bullish narratives despite wheat stocks among major exporters seen dropping to 17-year lows, so another big miss in the U.S. wheat acreage could either support or undermine the recent sentiment.

SOUTH AMERICA

The U.S. crops will probably dominate the headlines on Friday, but it is not too early to watch out for forecast changes in South America. Analysts see USDA upping Brazil’s 2024-25 soybean harvest to a record 170.28 million metric tons from the previous 169 million.

USDA has increased Brazil’s soy crop in three of the last eight Januarys, both on area and yield improvements, and many industry participants have already been factoring in a number north of 170 million tons.

For Argentina, there are already fears that ongoing dry weather could eventually warrant more significant cuts to soybean and corn crops than are anticipated for Friday. American and European weather model runs on Thursday remained stingy with the rainfall over the next two weeks.

© Reuters. FILE PHOTO: Corn out of one of the bins at farmer Dan Henebry's farm is pictured, in Buffalo, Illinois, U.S., February 18, 2024.REUTERS/Lawrence Bryant/File Photo

USDA already hiked Argentina’s soybean output last month on higher area. The agency increased the crop last January but reduced it in the prior three Januarys. Current crop conditions are slightly worse than a year ago but better than in the prior three years.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

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Commodities

Oil prices steady; traders digest mixed US inventories, weak China data

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Investing.com– Oil prices steadied Thursday as traders digested data showing an unexpected increase in US product inventories, while weak economic data from top importer China weighed.

At 05:25 ET (10:25 GMT), expiring in March gained 0.1% to $76.25 a barrel, while rose 0.1% to $73.37 a barrel. 

The crude benchmarks had slumped more than 1% on Wednesday, but trading ranges, and volumes, are likely to be limited throughout Thursday with the US market closed to honor former President Jimmy Carter, ahead of a state funeral later in the session. 

China inflation muted in December 

Chinese inflation, as measured by the , remained unchanged in December, while the shrank for a 27th consecutive month, data showed on Thursday.

The reading pointed to limited improvement in China’s prolonged disinflationary trend, even as the government doled out its most aggressive round of stimulus measures yet through late-2024.

China is the world’s biggest oil importer, and has been a key source of anxiety for crude markets. Traders fear that weak economic growth in the country will eat into oil demand.

The country is also facing potential economic headwinds from the incoming Donald Trump administration in the US, as Trump has vowed to impose steep trade tariffs on Beijing. 

US oil product inventories rise sharply 

U.S. gasoline and distillate inventories grew substantially more than expected in the week to January 3, government data showed on Wednesday.

inventories grew 6.3 million barrels against expectations of 0.5 mb, while grew 6.1 mb on expectations of 0.5 mb. 

Overall crude also shrank less than expected, at 0.96 mb, against expectations of 1.8 mb.

The build in product inventories marked an eighth straight week of outsized product builds, and spurred concerns that demand in the world’s biggest fuel consumer was cooling.

While cold weather in the country spurred some demand for heating, it also disrupted holiday travel in several areas. 

EIA data also showed that US imports from Canada rose last week to the highest on record, ahead of incoming U.S. president Donald Trump’s plans to levy a 25% tariff on Canadian imports.

Canada has been the top source of U.S. oil imports for many years, and supplied more than half of the total U.S. crude imports in 2023.

Strength in the also weighed on crude prices, as the greenback shot back up to more than two-year highs on hawkish signals from the Federal Reserve. 

A strong dollar pressures oil demand by making crude more expensive for international buyers.

(Ambar Warrick contributed to this article.)

 

 

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