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Oil falls as US rate hike expectations offset tight supply outlook

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Oil falls as US rate hike expectations offset tight supply outlook
© Reuters. FILE PHOTO: An aerial view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia June 13, 2022. Picture taken with a drone. REUTERS/Tatiana Meel/File Photo

By Paul Carsten

LONDON (Reuters) -Oil prices fell on Thursday, after posting the largest decline in a month in the previous session, as the U.S. Federal Reserve held rates but signalled potential future hikes, offsetting the impact of drawdowns in stockpiles.

futures for November delivery were down 73 cents, or 0.78%, to $92.80 a barrel by 1140 GMT. U.S. West Texas Intermediate crude (WTI) fell 63 cents, or 0.7%, to $89.03, the lowest since Sept. 14. Both benchmarks had fallen more than $1 earlier on Thursday.

The U.S. Federal Reserve on Wednesday maintained interest rates, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50-5.75% by year-end.

That may dampen economic growth and overall fuel demand, and led to the U.S. dollar surging to its highest since early March, making oil and other commodities more expensive for buyers using other currencies.

Central banks’ moves elsewhere also signalled potential pressure on oil prices. The Bank of England mirrored the Fed and held interest rates on Thursday after a long run of hikes, but said it was not taking a recent fall in inflation for granted.

Meanwhile, Norway’s central bank raised its benchmark interest rate on Thursday and, in a surprise move, and said it would probably hike again in December.

Energy markets reacted little to data from the U.S. Energy Information Administration (EIA) on Wednesday showing crude inventories fell in line with expectations last week, with some analysts saying the decline – 2.14 million barrels versus an expected 5.25 million barrels – was smaller than they expected.

“The disappointing inventory drawdown gave impetus for traders to lock in profits following the 10% gain since the start of the month,” ANZ analysts said in a note. [API/S]

The stock draw was mainly driven by strong oil exports, while gasoline and diesel inventories were drawn down as refiners began annual autumn maintenance, the EIA said in a weekly report. [EIA/S]

However, price falls were limited by continuous concern on tight supply globally entering the fourth quarter, with crude stocks at Cushing – the WTI delivery hub – at their lowest since July 2022 and production cuts continuing by the Organization of the Petroleum Exporting Countries and allies.

Commodities

Canadian wildfire reaches Jasper, firefighters battle to protect oil pipeline

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(Reuters) -A wildfire reached the Canadian town of Jasper, Alberta on Wednesday, one of hundreds ravaging the western provinces of Alberta and British Columbia, as firefighters battled to save key facilities such as the Trans Mountain Pipeline, authorities said.

Wildfires burning uncontrolled across the region include 433 in British Columbia and 176 in Alberta, more than a dozen of them in the area of Fort McMurray, an oil sands hub.

The pipeline, which can carry 890,000 barrels per day (bpd) of oil from Edmonton to Vancouver, runs through a national park in the Canadian Rockies near the picturesque tourist town, from which about 25,000 people were forced to evacuate on Tuesday.

“Firefighters … are working to save as many structures as possible and protect critical infrastructure, including the wastewater treatment plant, communications facilities, the Trans Mountain Pipeline,” Parks Canada said in a post on Facebook (NASDAQ:).

The pipeline operator did not immediately respond to a Reuters request for comment, but said earlier it was safely operating the pipeline and had deployed sprinkler protection as a preventive measure.

In the day’s last update, Jasper National Park said it could not report on the extent of damage to specific locations or neighbourhoods, and that it would provide further updates on Thursday.

Canadian Prime Minister Justin Trudeau said his government approved Alberta’s request for federal assistance.

“We’re deploying Canadian Armed Forces resources, evacuations support, and more emergency wildfire resources to the province immediately – and we’re coordinating firefighting and airlift assistance. Alberta, we’re with you.”

The town, and the park, which draws more than two million tourists a year, were evacuated on Monday night, at a time when officials estimated there were 15,000 visitors in the park.

© Reuters. Smoke rises from the Lower Campbell Creek wildfire (K51472) wildfire northwest of Beaverdell, British Columbia, Canada July 24, 2024.   BC Wildfire Service/Handout via REUTERS.

Deteriorating air quality forced firefighters and others lacking breathing equipment to evacuate to the town of Hinton, about 100 km (62 miles) away, park authorities said on Facebook on Wednesday evening.

Officials of Parks Canada earlier said they expected rain to arrive overnight.

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Commodities

Gold prices slide as safe haven plays favor yen; Copper losses deepen

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Investing.com– Gold prices fell in Asian trade on Thursday, seeing little safe haven demand despite increasing risk-off sentiment as traders rode a sharp appreciation in the Japanese yen. 

A rout in broader commodity markets also raged on, with copper prices extended a sinking to a near four-month low amid persistent concerns over top importer China. Weak readings on manufacturing activity from the U.S., Germany and Japan also soured copper’s outlook. 

slid 0.9% to $2,376.11 an ounce, while expiring in August tumbled 1.7% to $2,375.40 an ounce by 00:52 ET (04:52 GMT). 

Gold prices retreat as safe haven plays, rate hike bets favor yen 

The yellow metal saw little safe haven demand even as global markets experienced a sharp drop in risk appetite, with traders pivoting into the Japanese yen. The yen’s pair, which gauges the number of yen needed to buy one dollar, sank to an over two-month low on Thursday. 

The yen benefited from an unwinding in short positions over the past week, following suspected currency market intervention by Tokyo. But speculation over a potential interest rate hike by the next week also benefited the yen, especially as recent data signaled some resilience in the Japanese economy. 

Gold and metal markets took little advantage of a drop in the dollar, which retreated before a slew of key U.S. economic readings in the coming days. data for the second quarter is due later on Thursday, while data- the Federal Reserve’s preferred inflation gauge- is due on Friday. 

Other precious metals also retreated. slid 1.1% to $949.60 an ounce, while tumbled 4.2% to $28.098 an ounce, unwinding a bulk of their recent rally.

Copper losses deepen amid demand jitters 

Among industrial metals, copper prices fell further on Thursday, facing increased selling pressure amid concerns over a slowdown in global demand. 

Benchmark on the London Metal Exchange slid 1.6% to $8,960.50 a tonne- breaking below $9,000 for the first time since early-April. One-month fell 0.6% to $4.0540 a pound.

Both contracts were nursing steep losses in recent sessions, amid growing concerns over demand in top importer China, following a string of underwhelming economic readings from the country.

Concerns over a demand slowdown were furthered by weak manufacturing activity data from the U.S., Japan and Germany, which showed industrial activity was on the backfoot.

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Oil down $1 as muted Chinese consumption outweighs inventory draws

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By Noah Browning

(Reuters) -Oil prices fell on Thursday as demand signals from lacklustre Chinese consumption outweighed the previous day’s data showing large draws on U.S. inventories.

futures for September fell $1.01, or 1.2%, to $80.70 a barrel by 1117 GMT. U.S. West Texas Intermediate crude for September slid $1.2, or 1%, to $76.67.

Both benchmarks rose on Wednesday, snapping consecutive sessions of declines after the Energy Information Administration said inventories fell by more than expected to 3.7 million barrels last week. [EIA/S]

U.S. gasoline stocks dropped by 5.6 million barrels, against analyst expectations of a 400,000 draw.

“Despite draws in U.S. crude and gasoline stocks, investors remained wary about weakening demand in China and expectations of advancing ceasefire talks between Israel and Hamas added to pressure,” said Hiroyuki Kikukawa, president of NS Trading, owned by Nissan (OTC:) Securities.

China’s oil imports and refinery runs this year have trended lower than in 2023 on weaker fuel demand amid sluggish economic growth, government data shows.

“Growing concerns over the strength of oil demand in the short to medium term have acquired a strong grip on market sentiment,” said Vandana Hari, founder of oil market analysis provider Vanda (NASDAQ:) Insight.

In the Middle East, efforts to reach a ceasefire deal to end the war in Gaza between Israel and militant group Hamas have gained momentum over the past month. A breakthrough could erode lingering threats to supply and send prices lower.

The U.S. Federal Reserve, meanwhile, is expected to cut interest rates only twice this year, in September and December, according to a Reuters poll of economists, with resilient U.S. consumer demand prompting a cautious approach despite easing inflation.

© Reuters. FILE PHOTO: An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS/File Photo

Lower interest rates should spur economic growth, leading to more oil consumption.

In Canada, hundreds of wildfires are burning in the western provinces of British Columbia and Alberta, including in the area of oil sands hub Fort McMurray.

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