By Georgina McCartney

(Reuters) – Oil prices settled lower on Friday but recorded a second straight week of gains, garnering support from a U.S. interest rate cut and a dip in U.S. supply.

futures settled down 39 cents, or 0.52%, at $74.49 a barrel. U.S. WTI crude futures settled down 3 cents, or 0.4%, to $71.92.

Signs of a slowing economy in major commodity consumer China gave prices a ceiling. But for the week, both benchmarks settled up more than 4%.

Prices have recovered after Brent fell below $69 for the first time in nearly three years on Sept. 10.

“The market concluded that a sub-$70 level combined with hedge funds holding a record weak belief in higher prices of crude and fuel products would require a recession to be justified, a risk this week’s bumper U.S. rate cut helped reduce,” Ole Hansen, head of commodity strategy at Saxo Bank, said.

Prices rose more than 1% on Thursday, a day after the U.S. central bank’s decision to cut interest rates by half a percentage point.

Interest rate cuts typically boost economic activity and energy demand, but some analysts are worried about weakness in the U.S. labour market.

“U.S. interest rate cuts have supported risk sentiment, weakened the dollar and supported crude this week,” said Giovanni Staunovo, an analyst at UBS.

“However, it takes time until rate cuts support economic activity and oil demand growth,” he added.

The Fed projected a further 50 basis points of rate cuts by the end of this year, a full percentage point of cuts next year and a further half-percentage-point reduction in 2026.

“The Fed’s decision to cut interest rates and some hangover from Hurricane Francine are the only two things that are propping up the market up right now,” said Tim Snyder, chief economist at Matador Economics.

“The thought of another 50 to 75 basis points has markets hopeful for some degree of economic stability,” he added.

About 6% of crude production and 10% of output in the U.S. Gulf of Mexico were offline in the aftermath of Hurricane Francine, the U.S. Bureau of Safety and Environmental Enforcement said on Thursday in its final update on the storm.

Additional support for oil prices came from a decline in inventories to a one-year low last week. [EIA/S]

Rising tensions in the Middle East, raising the risk of supply disruption, further boosted the oil market. Israel announced on Friday it killed a top Hezbollah commander and other senior figures in the Lebanese movement in an airstrike on Beirut as fears of a wider war rise.

Still, U.S. President Joe Biden said reaching a Gaza ceasefire deal remains realistic, telling reporters: “We have to keep at it.”

In China, refinery output slowed for a fifth straight month in August and industrial output growth hit a five-month low.

China also issued its third and likely final batch of fuel export quotas for the year, keeping volume in line with 2023 levels. “This move indicates that refinery margins are too weak to justify increased activity,” StoneX Analyst Alex Hodes said in a note on Friday.

Meanwhile, oil refiners in Asia, Europe and the U.S. face a drop in profitability to multi-year lows.

By Anushree Mukherjee

(Reuters) – Gold soared above the $2,600 level on Friday for the first time, extending a rally boosted by bets for further U.S. interest rate cuts, and rising tensions in the Middle East.

was up 1.3% at $2,620.63 per ounce by 1:43 p.m. ET (1743 GMT), while U.S. settled 1.2% higher to $2,646.20.

Bullion’s latest rally got a fillip after the Federal Reserve initiated an aggressive easing cycle on Wednesday with a half-percentage-point reduction, adding to the appeal for gold, which pays no interest.

Prices of the safe-haven asset have climbed 27% in 2024, their biggest annual rise since 2010, as investors also sought to hedge uncertainties spurred by prolonged conflicts in the Middle East and elsewhere.

The record rally could be poised for a correction, analysts said.

“Clearly, there’s still some buying activity associated with the Fed’s decision to begin their easing cycle with a big cut,” said Daniel Ghali, commodity strategist at TD Securities.

However, “the source of this buying activity remains off our radar,” given ETF inflows are relatively marginal and Asian buyers are still on a buyers’ strike, all signs of “extreme positioning,” Ghali added. [GOL/ETF]

The record rally has eroded retail demand in top consumers China and India. [GOL/AS]

The rally in gold “should not go on forever,” Commerzbank (ETR:) said in a note, citing the expectation for rate cuts of only 25 basis points each at the Fed’s next two meetings.

Still, some analysts said gold could see more upward spikes.

“Geopolitical risks, such as ongoing conflicts in Gaza, Ukraine, and elsewhere, will ensure to sustain gold’s safe-haven demand,” Forex.com analyst Fawad Razaqzada said in a note.

Continued weakness in the dollar, which makes gold cheaper for holders of other currencies, offered additional tailwinds, analysts said. [USD/]

Elsewhere, spot silver gained 1.2% to $31.16. Platinum fell 1.1% to $978.50 and palladium shed 0.5% to $1,074.84.

Investing.com — Wells Fargo analysts said in a note Thursday that the recent decision by OPEC+ to extend its production cuts through the end of 2024 is a positive sign for oil prices.

The move, in response to declining crude prices, indicates OPEC+’s continued commitment to maintaining tight global supply conditions and supporting higher oil prices.

Initially, OPEC+ had planned to unwind 2.2 million barrels per day of production cuts—around 2% of global supply—starting in October 2024 and continuing through September 2025.

However, recent global economic weakness and the resulting drop in oil prices prompted the group to delay the planned reduction.

“OPEC+ postponed upcoming changes to its production policies. Prior to this, OPEC+ was planning to unwind a portion of its standing production cuts beginning in October 2024,” Wells Fargo notes, suggesting this extension will help balance the impact of sluggish demand.

Wells Fargo remains optimistic about the near-term outlook for oil prices, citing the extension of the cuts as a stabilizing factor.

“We suspect that the extension of production cuts through year end should help offset recent global demand weakness.”

The bank maintains its price targets for 2024 at $80–$90 per barrel for West Texas Intermediate (WTI) crude and $85–$95 per barrel for , with a potential $5 increase by the end of 2025 as the macroeconomic environment improves.

Looking ahead, Wells Fargo is closely monitoring the global supply situation, especially for 2025.

While OPEC+ has maintained production cuts for nearly two years to support prices, the analysts express some uncertainty over how long this support can continue.

“We do wonder how much longer it can maintain such support,” they caution, though they are not expecting any significant deviation from OPEC+’s strategy in the near future.

Overall, Wells Fargo believes the extension of OPEC+ production cuts is expected to provide stability to the oil market and support prices through 2024.