Commodities
Oil books 3rd weekly gain; market awaits Fed verdict on inflation
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![Oil books 3rd weekly gain; market awaits Fed verdict on inflation](https://i-invdn-com.investing.com/news/LYNXNPEAB10O6_L.jpg)
© Reuters.
Investing.com — Oil booked a third weekly gain, with U.S. crude trading above $90 per barrel the first time in 10 months on better-than-expected data from top importer China, as markets awaited the Federal Reserve’s verdict on inflation in the United States.
The Fed’s policy-makers aren’t expected to raise when they meet on Sept. 20, after 11 hikes that added 5.25 percentage points to a base rate of just 0.25% in March 2020. But what Chairman Jerome Powell says at his news conference on Wednesday will be closely watched for clues on Fed think for the rest of the year, especially with two more policy meetings on the schedule for November and December.
For context, the headline reading for the U.S. rose a second month in a row in August, reaching a year-on-year growth of 3.7% from 3.2% in July. High pump prices of gasoline accounted for more than half of the increase — a phenomenon that could put renewed pressure on inflation fighters at the Fed. The central bank’s desired inflation remains at a max 2% per year and it has vowed to get there with more rate hikes if necessary.
“The Fed are highly unlikely to hike next week but are also unlikely to take the last hike out of their dot plot for later in the year,” economist Adam Button said in a post on the ForexLive forum.
New York-traded West Texas Intermediate, or , crude settled at $90.77, up 61 cents, or 0.7%, on the day. The U.S. crude benchmark rose to $91.15 earlier in the session, its highest since November. For the week, WTI finished up 3.7%, adding to prior back-to-back weekly gains of 2.3% and 7.2%.
London-traded settled at $93.93, up 23 cents, or 0.3%. The global crude benchmark hit a 10-month high of $94.62 earlier. For the week, Brent was up 3.6%, adding to prior back-to-back weekly gains of 2.4% and 4.8%.
Crude prices have been on a tear since early June, with the rally accelerating in the past three weeks after major oil exporters Saudi Arabia and Russia colluded to remove a combined 1.3 million barrels from the market each day until the end of the year.
U.S. fuel demand/inflation picture murkier than thought
Notwithstanding the July-August rise in inflation, the surge in crude prices haven’t made their commensurate impact on U.S. fuel prices. Gasoline at pumps across America averaged at $3.866 per gallon this week, up just 5.8 cents from a week ago. Lower demand for fuel was the reason, especially after the Sept. 4 Labor Day holiday that marked the close of the peak summer driving period and the approach of the fall season, which begins Sept. 23.
“The slide in people fueling up is typical, with schools back in session, the days getting shorter, and the weather less pleasant,” said Andrew Gross spokesperson at the American Automobile Association, which publishes weekly fuel price data. ““Oil costs are putting upward pressure on pump prices, but the rise is tempered by much lower demand.”
The Fed, of course, is watching all these closely, including the global supply-demand picture for energy and how they could hit home.
China has two stories as well to oil demand, economic recovery
In China’s case as well, its oil demand and economic data tell different stories.
China’s industrial output grew 4.5% in August from a year earlier, versus a forecast 3.9%, and retail sales expanded by 4.6%, beating an expected 3% increase. Also, Chinese crude imports rose nearly 31% last month while refinery throughput hit a record 64.69 million metric tons as a function of summer travels.
But these short-term upswings only mask China’s structural challenges, from worsening demographics to slowing productivity growth and an economy overly saturated on its property market. If lucky, China’s Gross Domestic Product, or GDP, growth will exceed 5% this year versus the record expansion of 11.8% in 2020, say economists.
Essentially, what happens with the Chinese economy down the road is far more important than any energy, metals or grains rally of today. That’s simply because continuously underperforming Chinese GDP will come back to rear-end any commodities rally.
(Peter Nurse and Ambar Warrick contributed to this item)
Commodities
Oil prices settle lower after weak August jobs report adds to demand concerns
![](https://letizo.com/wp-content/uploads/2024/09/oil-prices-settle-lower-after-weak-august-jobs-report-addsto-demand-concerns_66dc53fb8f210.jpeg)
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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