Commodities
Oil posts weekly losses as US data dents hopes for near-term rate cuts
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© Reuters. FILE PHOTO: The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann/File Photo
By Laila Kearney
NEW YORK (Reuters) -Oil prices fell by about 2% on Friday and posted weekly losses after U.S. jobs data shrank the odds of imminent interest rate cuts in the world’s largest economy, which could dampen crude demand.
Faltering growth in China and the possibility of some easing of tensions in the Middle East also reduced prices.
futures settled at $77.33 a barrel, shedding $1.37, or 1.7%. U.S. West Texas Intermediate crude futures settled at $72.28 a barrel, falling $1.54, or 2%.
Both benchmarks lost roughly 7% on the week.
High interest rates, which tend to dampen economic growth and oil demand, in major economies like the United States and the euro zone appear to be here to stay in the near term.
Data on Friday showed U.S. employers added far more jobs in January than expected, reducing the chances of near-term Federal Reserve rate cuts. The dollar jumped against all major currencies as a result.
“Prices were chugging along little changed prior to the report, but a huge beat on jobs created is kicking the can down the road for interest rate cuts,” said Matt Smith, analyst at Kpler.
Also keeping oil prices lower was an outage at BP (NYSE:)’s 435,000 barrel-per-day oil refinery in Whiting, Indiana, following a power loss that disrupted operations on Thursday, said Bob Yawger of Mizuho.
Power at the refinery had been restored by midday on Friday, but sources said BP had not yet set a date for restarting the plant.
“You end up with barrels with no place to go that could be shoved into storage,” Yawger said.
STEADY RIG COUNT
Energy services firm Baker Hughes said the U.S. oil rig count, an early indicator of future supply, held steady at 499 this week. Money managers raised their combined futures and options oil position in New York and London by 18,082 contracts to 117,226 in the week to Jan. 30, the U.S. Commodity Futures Trading Commission said.
Across the Atlantic, a European Central Bank policymaker also suggested it was too early to cut interest rates in the euro zone.
Concern over China’s economic recovery persisted, with the International Monetary Fund forecasting that the country’s economic growth would slow to 4.6% in 2024 and decline further in the medium term to about 3.5% in 2028.
The weekly loss for oil prices was already in motion after unsubstantiated reports of a ceasefire between Israel and Hamas caused prices to settle more than 2% lower on Thursday.
Mediators are awaiting a response from Hamas to a proposal drafted last week with Israeli and U.S. spy chiefs and passed on by Egypt and Qatar for the war’s first extended ceasefire.
A pause could ease political risk looming over Gulf and Red Sea shipping lanes, which are key for global energy flows.
On Thursday, sources said the Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, had kept its output policy unchanged. The group will decide in March whether to extend the voluntary oil production cuts that are in place for the first quarter, the sources said.
OPEC+ has output cuts of 2.2 million bpd in place for the first quarter, as announced in November.
Commodities
Oil prices settle lower after weak August jobs report adds to demand concerns
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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
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(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.
“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
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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.
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