Commodities

Oil dips on faltering Chinese economy

Published

7 months ago

January 31, 2024

By Natalie Grover

LONDON (Reuters) -Oil prices fell on Wednesday, pressured by lacklustre economic activity in leading crude importer China, but a first monthly gain since September remained in sight as flaring tensions in the Middle East heightened supply concerns.

futures for March, which expire today, fell 87 cents, or about 1.1%, to $82 a barrel by 1103 GMT. The more actively traded April contract fell 80 cents, or about 1%, to $81.70.

U.S. West Texas Intermediate crude futures lost 82 cents, or roughly 1.1%, to $77 a barrel.

Manufacturing activity in China, the world’s second-largest economy, contracted a fourth straight month in January, an official factory survey showed on Wednesday.

The latest sign of the country’s broader economy struggling to regain momentum came days after a court ordered the liquidation of troubled property developer China Evergrande (HK:). The real estate sector accounts for a quarter of China’s GDP.

Major forecasters, including the Organization of the Petroleum Exporting Countries (OPEC), see oil demand growth in 2024 driven primarily by Chinese consumption.

“The factory data confirms our view that China, at least for now, is an impediment to global oil demand growth,” said Tamas Varga of oil broker PVM.

The Israel-Hamas war, meanwhile, has expanded to a naval conflict in the Red Sea between the United States and Iran-aligned Houthi militants.

While that has disrupted oil and tanker shipping, which is driving up delivery costs and starting to affect oil supplies, a Reuters poll suggested that record production in the West and slow economic growth will keep a lid on prices and limit any geopolitical risk premium.

“The main issue with turning outright bullish on here is the technical picture remains bearish and is yet to catch up with recent events,” including a deadly drone attack on U.S. troops near the Jordan-Syria border last week, said IG market analyst Tony Sycamore.

Yemen’s Iran-aligned Houthi group on Wednesday said it would keep up attacks on U.S. and British warships in the Red Sea in what it called acts of self defence, stoking fears of long-term disruption to global trade.

Meanwhile, Israel’s offensive in Gaza persisted, though Palestinian militant group Hamas said it was studying a new proposal for a ceasefire and release of hostages in Gaza.

Commodities

Oil prices settle lower after weak August jobs report adds to demand concerns

Published

10 hours ago

September 7, 2024

Investing.com — Oil prices settled lower Friday, ending the week with a loss as weaker U.S. nonfarm payrolls stoked concerns about an economic-led slowdown in crude demand.

At 2:30 p.m. ET (1430 GMT), the futures (WTI) traded fell 2.1% to settle at $67.67 a barrel, while contract fell 2.2% to $71.06 per barrel.

U.S. economic slowdown worries resurface after weak jobs report

The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve’s next policy decisions.

Nonfarm payrolls came in at 142,000 last month, up from a downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, up from the initial July mark of 114,000.

Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut — rather than a shallower 25 basis-point reduction — increased.

Concerns about the demand come just a day after OPEC+ said it had agreed to postpone a planned increase in oil production for October and November.

U.S., Europe working on Iran sanctions

Geopolitical tensions ratcheted up on Friday after the U.S. and Europe they were working on sanctions to impose on Iran after the Tehran sent missiles to Russia.

The U.S. had previously warned Iran about transferring missiles to Russia, saying it would represent a major escalation in Iran’s support of Russia’s war against Ukraine.

Commodities

Goldman Sachs expects OPEC+ production increases to start in December

Published

10 hours ago

September 7, 2024

(Reuters) – Goldman Sachs adjusted its expectations for OPEC+ oil production saying it now expects three months of production increases starting from December instead of October, the bank said in a note on Friday.

OPEC+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding it could further pause or reverse the hikes if needed.

However Goldman Sachs maintained its range of $70-85 per barrel and a December 2025 Brent forecast at $74 per barrel.

The investment bank expects the effects of a modest reduction in OPEC+ supply in the upcoming months to be counterbalanced by easing effects from the current softness in China’s demand and faster-than-expected recovery of Libya’s supply.

© Reuters. FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside their headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo

“We still see the risks to our $70-85 range as skewed to the downside given high spare capacity, and downside risks to demand from weakness in China and potential trade tensions,” Goldman Sachs said.

Brent crude futures were down $1.63, or 2.24%, to $71.06 a barrel on Friday, their lowest level since December 2021. U.S. West Texas Intermediate crude futures fell $1.48 on Friday, or 2.14%, to $67.67, their lowest since June 2023. [O/R]

Commodities

Citi, Bank of America see oil prices potentially going to $60

Published

1 day ago

September 6, 2024

Investing.com — Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.

While recent supply disruptions in Libya and a delayed production cut unwinding by OPEC+ have offered short-term support for Brent prices in the $70-72 range, Citi views this as temporary.

“At the time of writing, markets have not reacted to the OPEC+ decision, with Brent around flat to the 4 September close. Still, the Libyan situation could take months rather than a week to resolve, strategists wrote.

They highlight the likelihood of a strong market surplus emerging next year, pushing prices lower.

“We recommend selling on a bounce toward ~$80 Brent, as we look ahead to moves down to the $60 range in 2025 as a sizeable market surplus emerges,” the note states.

OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025. This decision comes in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil supplies and broader economic concerns in the U.S. and China.

Separately, Bank of America’s Commodities Research team has revised down its price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.

The team cites concerns about growing global oil inventories despite assuming OPEC+ will delay planned production increases. They note that weaker demand growth, combined with record OPEC+ spare capacity exceeding 5 million barrels per day, has dimmed the outlook for oil prices.

“In effect, we now see Brent oil prices moving from the top toward the middle of our unchanged $60-80/bbl medium-term range faster than previously warned,” BofA strategists said. This surplus in capacity, along with slower demand, also reduces the risk of price spikes from potential geopolitical disruptions.