Commodities
Oil buoyed by US signals on interest rate cuts
© Reuters. An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Kyodo/via REUTERS
By Paul Carsten
LONDON (Reuters) -Oil prices edged higher on Thursday, boosted by the U.S. Federal Reserve signalling a possible start to interest rate cuts.
There was limited immediate price impact after two OPEC+ sources said that the Thursday meeting of the group of oil-producing countries – including Saudi Arabia, Russia and allies – left production policy changes off its agenda.
futures were up 68 cents at $81.23 a barrel by 1140 GMT. U.S. West Texas Intermediate crude futures gained 65 cents to $76.50.
OPEC+ will soon have to decide whether to extend beyond March the 2.2 million barrels per day (bpd) of voluntary oil production cuts announced last November.
Federal Reserve Chair Jerome Powell on Wednesday said that interest rates had peaked and would move lower in coming months, with inflation continuing to fall and an expectation of sustained economic growth.
Lower interest rates and economic growth help oil demand.
But Powell declined to promise that rate cuts would come as early as the Fed’s March 19-20 meeting, as investors had hoped.
China, the world’s second-biggest economy, revealed new support measures to help to reduce fallout from the liquidation of property developer Evergrande.
Analysts at JPMorgan said they expected China to remain the single largest contributor to global oil demand growth in 2024, forecasting that Chinese demand would grow by 530,000 barrels per day (bpd), having jumped by 1.2 million bpd last year.
“Geopolitics aside, our view remains that 2024 will be fundamentally a healthy year for the oil market and we recommended using December’s sell-off as a buying opportunity,” JPMorgan said in a client note.
In another glimmer of better economic news, the downturn in Germany’s manufacturing sector eased in January, a survey showed on Thursday.
In the Middle East, worries over attacks by Yemen-based Houthi forces on shipping in the Red Sea are driving up costs and disrupting global oil trading. The Houthi group also said it would keep up attacks on U.S. and British warships in what it called acts of self defence.
“The energy market remains on edge as it waits for a U.S. response to the drone attack on American troops in Jordan,” ANZ Research said in a note.
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)
LONDON (Reuters) – OPEC+ has yet to react to a call from U.S. President Donald Trump for lower oil prices, with delegates from the group pointing to a plan already in place to start raising oil output from April.
Trump on Thursday announced he would be asking Saudi Arabia and the Organization of the Petroleum Exporting Countries to bring down the cost of oil – a call he often made in his first term in the White House.
Speaking on a panel at the World Economic Forum in Davos on Friday, Saudi Arabia’s Economy Minister Faisal al-Ibrahim said Saudi Arabia and OPEC’s position is for long-term oil market stability, when asked about Trump’s comments.
OPEC+, or OPEC, Russia and other allies as the group is known, does not target oil prices and already has a plan to begin raising output from April 2025, having delayed the hike several times due to weak demand.
“I think this is already in line with OPEC’s easing policy in April,” one delegate from the group said with reference to the U.S. president’s comments.
OPEC and the Saudi government communications office did not immediately reply to a request for comment.
Oil prices have risen this year, with reaching almost $83 a barrel on Jan. 15, the highest since August, supported by concern about the supply impact of U.S. sanctions on Russia. Prices have since eased to below $79 on Friday.
Trump also said that if prices came down, the Russia-Ukraine war would end immediately. Kremlin spokesman Dmitry Peskov, reacting to those comments on Friday, said the conflict is about national security, not oil.
In his first term, Trump often urged OPEC and Saudi Arabia to lower prices and make up for a shortfall in exports from Iran, with his comments on OPEC sometimes having a bigger impact on prices than OPEC’s own.
OPEC+ has a chance to review its policy when a panel of top ministers called the Joint Ministerial Monitoring Committee meets on Feb. 3.
Based on OPEC+ previous practice, a decision to go ahead with the April hike is expected around early March.
By Paul Carsten
LONDON (Reuters) -Oil prices were little changed on Thursday, maintaining the previous session’s losses on uncertainty over how U.S. President Donald Trump’s proposed tariffs and energy policies would affect global economic growth and energy demand.
futures dipped 2 cents to $78.98 a barrel by 0941 GMT. U.S. West Texas Intermediate crude (WTI) lost 4 cents to $75.40.
“Oil markets have given back some recent gains due to mixed drivers,” said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.
“Key factors include expectations of increased U.S. production under President Trump’s pro-drilling policies and easing geopolitical stress in Gaza, lifting fears of further escalation in supply disruption from key producing regions.”
The broader economic implications of U.S. tariffs could further dampen global oil demand growth, she added.
Trump has said he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine.
He also vowed to hit the European Union with tariffs and impose 25% tariffs against Canada and Mexico. On China, Trump said his administration was discussing a 10% punitive duty because fentanyl is being sent from there to the United States.
On Monday he declared a national energy emergency intended to provide him with the authority to reduce environmental restrictions on energy infrastructure and projects and ease permitting for new transmission and pipeline infrastructure.
There will be “more potential downward choppy movement in the oil market in the near term due to the Trump administration’s lack of clarity on trade tariffs policy and impending higher oil supplies from the U.S.”, OANDA senior market analyst Kelvin Wong said in an email.
On the U.S. oil inventory front, crude stocks rose by 958,000 barrels in the week ended Jan. 17, according to sources citing American Petroleum Institute figures on Wednesday.
Gasoline inventories rose by 3.23 million barrels and distillate stocks climbed by 1.88 million barrels, they said. [API/S]
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