Commodities
Crude oil steady ahead of key inflation data, Fed meeting
Investing.com — Oil prices traded largely unchanged Tuesday, as traders prepared for a Federal Reserve rate-setting meeting as well as key inflation data from both the U.S. and China.
By 09:10 ET (13.10 GMT), the futures traded flat at $77.73 a barrel and the contract climbed 0.2% to $81.77 a barrel.
Fed meeting, inflation data loom large
The crude benchmarks posted strong gains on Monday, buoyed by expectations that the Northern Hemisphere summer vacation season will boost fuel demand this summer.
This represented something of a recovery after last week’s sharp losses in the wake of the meeting by the Organization of Petroleum Exporting Countries and their allies, a group known as OPEC+, which indicated the possibility of an increase in supply to market by the end of the year.
“Oil prices moved higher yesterday as the market continued its post-OPEC+ meeting recovery,” said analysts at ING, in a note. “As we mentioned following the meeting, the action taken by the group leaves the market with a sizeable deficit in the third quarter of the year, supporting the view that prices trend higher.”
That said, traders are reluctant to drive the market too much higher ahead of the conclusion of the Fed’s latest policy on Wednesday, the same day as inflation is due from both the and , the two biggest crude consumers in the world.
The Fed keeping interest rates at elevated levels for longer than expected could hit economic activity in the future, while deflation can see purchases dry up as businesses and consumers expect to pay less later as prices fall, hitting economic activity and dampening oil demand.
US crude stockpiles due – API
Traders will also be keeping an eye out for the latest estimate of U.S. crude stockpiles from the later in the session.
Data released last week showed that crude inventories increased by about 4.0 million barrels for the week ended May. 29, a surprise given that economists were expecting a decrease of 1.9M barrels.
Gasoline stockpiles rose by 4.03M barrels, while distillate inventories — the class of fuels that includes diesel and — increased by 2.0M barrels.
The official government is due Wednesday.
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.
(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]
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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