Commodities
Gold prices rise even as Fed shoots down early rate-cut hopes
© Reuters.
Investing.com– Gold prices rose on Thursday and were undeterred by the Federal Reserve stating that it will likely keep interest rates higher for longer, while safe-haven buying amid an ongoing conflict in the Middle East also aided the yellow metal.
The Fed’s comments spurred a sharp reversal in risk-driven markets, particularly stocks, on Wednesday. This in turn fueled increased safe-haven demand for gold. The yellow metal was also aided by increased demand as a conflict between U.S.-led forces and the Yemen-based Houthi Group worsened.
rose 0.3% to %2,045.21 an ounce, while expiring in March fell 0.2% to $2,062.40 an ounce by 00:22 ET (04:22 GMT). The disparity highlighted more near-term demand for physical gold.
Further gains in the yellow metal were held back by a sharp rebound in the , which traded close to seven-week highs.
Fed’s Powell downplays March rate cuts; Markets see cuts in May
Fed Chair Jerome Powell said it was too soon for the central bank to consider trimming interest rates, especially as soon as March, given that inflation was still running sticky.
But this hawkish rhetoric was somewhat countered by Powell still leaving the door open for eventual reductions in interest rates this year. Powell also noted continued resilience in the U.S. economy, and that he expected inflation to fall further in the coming months.
Powell’s comments fueled increased bets that the Fed will begin trimming rates by May. The showed traders pricing in a 63% chance for a 25 basis point cut in the Fed’s May meeting. The tool also shows traders pricing in greater possibility that the U.S. benchmark rate will end 2024 in a range of 3.75% to 4.0%, down from its current high of 5.25% to 5.5%.
Goldman Sachs analysts forecast a May rate cut, and maintained their outlook that the Fed will cut rates a total five times in 2024.
The prospect of lower lending rates bodes well for gold, given that higher rates ramp up the opportunity cost of buying bullion.
Copper prices cool after rallying to 1-mth high, China outlook mixed
Among industrial metals, copper prices fell on Thursday as traders locked-in profits from a rally to one-month highs in the prior session.
expiring in March fell 0.6% to $3.8705 a pound.
A recent rally in the red metal was driven chiefly by increased optimism over China, as the world’s largest copper importer rolled out more stimulus measures to support an economic recovery.
But data prints for January showed sustained economic weakness. Official released on Wednesday showed the manufacturing sector remained in contraction, while a released on Thursday pointed to stagnating growth in the sector.
A deepening crisis in China’s property sector also dented sentiment, after beleaguered developer China Evergrande Group (HK:) was ordered by courts to liquidate.
By Scott DiSavino
(Reuters) – U.S. energy firms this week cut the number of oil and rigs operating for a third week in a row to the lowest since December 2021, energy services firm Baker Hughes (NASDAQ:) said in its closely followed report on Friday.
The oil and gas rig count, an early indicator of future output, fell by four to 576 in the week to Jan. 24.
Baker Hughes said this week’s decline puts the total rig count down 45, or 7% below this time last year.
Baker Hughes said oil rigs fell by six to 472 this week, their lowest since December 2021, while gas rigs rose by one to 99.
In the Permian Basin in West Texas and eastern New Mexico, the nation’s biggest oil-producing shale basin, the rig count fell by six in the week to 298, the lowest since February 2022.
That six-rig decline in the Permian was the biggest weekly drop since August 2023.
The oil and gas rig count declined by about 5% in 2024 and 20% in 2023 as lower U.S. oil and gas prices over the past couple of years prompted energy firms to focus more on paying down debt and boosting shareholder returns rather than raising output.
Even though analysts forecast U.S. spot crude prices could decline for a third year in a row in 2025, the U.S. Energy Information Administration (EIA) projected crude output would rise from a record 13.2 million barrels per day (bpd) in 2024 to around 13.6 million bpd in 2025.
On the gas side, the EIA projected a 43% increase in spot gas prices in 2025 would prompt producers to boost drilling activity this year after a 14% price drop in 2024 caused several energy firms to cut output for the first time since the COVID-19 pandemic reduced demand for the fuel in 2020. [NGAS/POLL]
The EIA projected gas output would rise to 104.5 billion cubic feet per day (bcfd) in 2025, up from 103.1 bcfd in 2024 and a record 103.6 bcfd in 2023.
By Georgina McCartney
HOUSTON (Reuters) -Oil prices settled slightly higher on Friday but posted a weekly decline, ending four straight weeks of gains, after U.S. President Donald Trump announced sweeping plans to boost domestic production while demanding that OPEC move to lower crude prices.
futures settled up 21 cents, or 0.27%, to $78.50 a barrel. U.S. West Texas Intermediate crude (WTI) settled up 4 cents, or 0.05%, to $74.66.
Brent has lost 2.8% this week while WTI was down 4.1%.
Trump on Friday reiterated his call for the Organization of the Petroleum Exporting Countries to cut oil prices to hurt oil-rich Russia’s finances and help bring an end to the war in Ukraine.
“One way to stop it quickly is for OPEC to stop making so much money and drop the price of oil … that war will stop right away,” Trump said as he landed in North Carolina to view storm damage.
The threat of harsh U.S. sanctions on Russia and Iran, which are key oil producers, could undermine Trump’s goal of lowering energy costs, StoneX analyst Alex Hodes said in a note on Friday.
“Trump knows this and has leaned on OPEC to cover the void that these will create,” Hodes said.
On Thursday, Trump told the World Economic Forum he would demand that OPEC and its de facto leader, Saudi Arabia, bring down crude prices.
OPEC+, which includes Russia, has yet to react, with delegates from the group pointing to a plan already in place to start raising oil output from April.
“I don’t really expect OPEC will change policy unless there is a change in fundamentals,” UBS commodities analyst Giovanni Staunovo said. “Markets will be relatively muted until we get more clarity on sanctions policy and tariffs.”
TARIFFS
Chevron (NYSE:) said on Friday it had started production at a $48 billion expansion of the giant Tengiz oilfield, which will bring its output to around 1% of global crude supply, and could further pressure OPEC’s efforts in the last few years to limit production.
Trump declared a national energy emergency on Monday, rolling back environmental restrictions on energy infrastructure as part of his plans to maximize domestic oil and gas production.
These rollbacks could support oil demand but have the potential to exacerbate oversupply, said Nikos Tzabouras, senior market specialist at trading platform Tradu.
Trump’s policies so far have largely followed predictions on the supply side, including cutting red tape to promote domestic supply growth, according to StoneX’s Hodes. However “the lower hanging fruit for growth has already been picked.”
The U.S. president vowed on Wednesday to hit the European Union with tariffs and impose 25% tariffs on Canada and Mexico. He also said his administration was considering a 10% punitive duty on China.
As attention shifts to a possible February timeline for new tariffs, caution is likely to persist in the market, given potential negative implications for global growth and oil demand prospects, said Yeap Jun Rong, a market strategist at IG. Traders expect oil prices to range between $76.50 and $78 a barrel, he added.
While bullish catalysts such as a significant drawdown in stocks are providing temporary positive swings, an over-supplied global market and projections of ailing Chinese demand continue to weigh on crude futures, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.
U.S. crude inventories last week hit their lowest level since March 2022, the U.S. Energy Information Administration said. [EIA/S]
LONDON (Reuters) – Oil prices edged up on Friday but remained on track for a weekly decline after U.S. President Donald Trump announced sweeping plans to boost U.S. production and demanded that OPEC move to lower crude prices.
futures gained 25 cents, or 0.3%, to $78.54 a barrel by 1147 GMT while U.S. West Texas Intermediate crude (WTI) was up 22 cents, or 0.3%, at $74.84.
Over the week Brent has lost nearly 3% while WTI is down close to 4%.
“After a week of Trump being in office, the various executive orders are not being disruptive to oil supplies. Most of what he has done has been with an inward domestic focus,” said Harry Tchilinguiran at Onyx Capital Group.
“We were looking for pronouncements around tariffs, around Iran, Venezuela and Russia.”
Ahead of Trump’s inauguration the market had built up a net long position in oil futures to hedge against price gains arising from supply disruption, but this has now started to unwind, Tchilinguiran said.
Trump told the World Economic Forum on Thursday that he would demand that the Organization of the Petroleum Exporting Countries and its de facto leader, Saudi Arabia, bring down the crude prices.
He also said he would ask Riyadh to increase a U.S. investment package to $1 trillion, up from $600 billion reported earlier by the Saudi state news agency.
“I don’t really expect OPEC will change policy unless there is a change in fundamentals,” said UBS commodities analyst Giovanni Staunovo. “Markets will be relatively muted until we get more clarity on sanctions policy and tariffs.”
Trump declared a national energy emergency on Monday, rolling back environmental restrictions on energy infrastructure as part of plans to maximise domestic oil and gas production.
On Wednesday he vowed to hit the European Union with tariffs and impose 25% tariffs on Canada and Mexico. He also said his administration was considering a 10% punitive duty on China.
As attention shifts to a possible February timeline for new tariffs, caution is likely to persist in the market, given potential negative implications for global growth and oil demand prospects, said IG market strategist Yeap Jun Rong.
Traders expect oil prices to range between $76.50 and $78 a barrel, Yeap added.
While bullish catalysts such as a significant drawdown in stocks are providing temporary positive swings, an over-supplied global market and projections of ailing Chinese demand continue to weigh on crude futures, said Priyanka Sachdeva at brokerage Phillip Nova.
U.S. crude inventories last week hit their lowest since March 2022, a U.S. Energy Information Administration report said.
The report, issued a day late because of a U.S. holiday on Monday, said crude stockpiles fell by 1 million barrels to 411.7 million barrels in the week to Jan. 17 for a ninth consecutive weekly decline. [EIA/S] (This story has been corrected to fix the spelling of ‘price’ in paragraph 6)
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