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Commodities

Oil falls on demand fears and doubts over OPEC+ cuts

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Oil falls on demand fears and doubts over OPEC+ cuts
© 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

By Alex Lawler

LONDON (Reuters) – Oil prices extended declines on Monday, pressured by investor scepticism over the latest OPEC+ decision on supply cuts and uncertainty surrounding global fuel demand, though the risk of supply disruptions from the Middle East conflict limited losses.

Monday’s fall adds to a 2% decline last week after the supply cuts announced on Thursday by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together known as OPEC+.

futures were down 45 cents, or 0.6%, at $78.43 a barrel by 1243 GMT. U.S. West Texas Intermediate crude futures fell 43 cents, or 0.6%, to $73.64.

“Crude seems to be under continued pressure from the OPEC+ decision,” said Vandana Hari, founder of oil market analysis provider Vanda (NASDAQ:) Insights.

The OPEC+ cuts were voluntary in nature, raising doubts about whether or not producers would fully implement them. Investors were also unsure about how the cuts would be measured.

“The OPEC+ ‘deal’ last week was unconvincing to say the least,” said Craig Erlam, analyst at brokerage OANDA. “And with markets seemingly anticipating more of an economic slowdown next year, the announcement simply doesn’t go far enough.”

Surveys on Friday showed global manufacturing activity remained weak in November on soft demand, with euro zone factory activity contracting, while there were mixed signs on the strength of China’s economy.

Geopolitical considerations were back in focus as fighting resumed in Gaza, lending some support to prices. Three commercial vessels came under attack in international waters in the southern Red Sea, the U.S. military said on Sunday.

Elsewhere, Western countries have stepped up efforts to enforce the $60 a barrel price cap on seaborne shipments of Russian oil imposed to punish Moscow for its war in Ukraine.

Washington on Friday imposed additional sanctions on three entities and three oil tankers.

Commodities

Gold prices muted as rate fears keep traders to the sidelines

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Gold prices muted as rate fears keep traders to the sidelines
© Reuters.

Investing.com– Gold prices moved in a flat-to-low range on Wednesday, extending their recent run of muted performance as anxiety over higher-for-longer U.S. interest rates persisted ahead of key economic readings.

The yellow metal remained squarely within a $2,000 to $2,050 trading range established over the past month, as any upside in gold was largely limited by a string of Federal Reserve warnings that the bank was in no hurry to begin trimming rates early in 2024. Strength in the , which remained near three-month highs, also pressured gold prices.

Still, gold prices also remained firm above the key $2,000 an ounce support level, indicating that fears of a global economic slowdown and geopolitical tensions in Russia and the Middle East were feeding some safe haven demand for the yellow metal.

steadied at $2,030.69 an ounce, while expiring in April fell 0.2% to $2,039.45 an ounce by 00:20 ET (05:20 GMT). 

PCE inflation, GDP data awaited for more cues

Markets were now awaiting key inflation and economic growth readings for more trading cues.

data- the Fed’s preferred inflation gauge- is due on Thursday, and is expected to show inflation remained sticky in January. Such a scenario gives the Fed more impetus to keep interest rates higher for longer.

Several Fed officials also warned this week that sticky inflation will keep the Fed from lowering interest rates early in 2024. 

Before the inflation data, a second reading on fourth-quarter is due later on Wednesday, and is expected to show some cooling in economic growth.

But the U.S. economy is still expected to remain well ahead of its developed world peers, giving the Fed enough headroom to keep rates higher for longer. 

Higher rates herald more pressure on gold, given that they increase the opportunity cost of buying bullion. Other precious metals also retreated on this notion, with falling 0.5% to $892.05 an ounce, while fell 0.7% to $22.602 an ounce on Wednesday. 

Copper prices dip, China PMIs awaited      

Among industrial metals, expiring in March fell 0.4% to $3.8390 a pound. 

The red metal saw a strong run-up in recent weeks on optimism over more stimulus measures in top importer China.

But this rally will be tested on Friday with the release of closely-watched data from the country, which is expected to provide more cues on the state of business activity through February. 

Readings for January showed little improvement in the economy.

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Commodities

Oil rises more than $1/bbl as OPEC+ mulls extending output cuts

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Oil rises more than $1/bbl as OPEC+ mulls extending output cuts
© Reuters. FILE PHOTO: Oil rig pumpjacks, also known as thirsty birds, extract crude from the Wilmington Field oil deposits area near Long Beach, California July 30, 2013. REUTERS/David McNew//File Photo

By Arathy Somasekhar

HOUSTON (Reuters) – Oil prices rose more than $1 a barrel on Tuesday as sources said OPEC+ is considering extending voluntary oil output cuts into the second quarter to provide additional support.

futures rose $1.12, or 1.4%, to $83.65 a barrel, while U.S. West Texas Intermediate crude futures (WTI) were up $1.29, or 1.7%, at $78.87.

The Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, agreed in November to voluntary cuts totalling about 2.2 million barrels per day (bpd) for the first quarter this year, led by Saudi Arabia rolling over its own voluntary cut.

The producer group could keep the additional cuts in place until the end of the year, two of the sources told Reuters.

“We are going to see some tight supplies down the road,” said Dennis Kissler, senior vice president of trading at BOK Financial.

“OPEC is looking for mid-$80s, may be around $85 a barrel on Brent. If we stay below that, they will curtail production all the way to the year end,” Kissler added.

Also supporting prices on the supply side, Israel and Hamas, as well as Qatari mediators, all sounded notes of caution about progress towards a truce in Gaza, after U.S. President Joe Biden said he believed a ceasefire could be reached in under a week to halt the war for Ramadan.

Yemen’s Houthi spokesperson said the group’s operations in the Red Sea would stop only when Israeli “aggression” against Gaza ends. Houthi missile and drone attacks on international shipping have driven up the cost of transporting energy products and contributed to a tighter market.

In the U.S., crude inventories were expected to have risen about 2.7 million barrels last week, while distillates and gasoline stockpiles were seen falling, a Reuters poll showed.

The American Petroleum Institute will release the industry group’s weekly inventories data at 4:30 p.m. EST (2130 GMT), followed by the government’s report on Wednesday morning.

Meanwhile, the 3-2-1 U.S. refinery crack spread , a proxy for refining margins, rose to their highest in more than five months. The surge suggests increased profitability for refineries amidst robust consumer demand for petroleum products.

Markets expect to see some improvement in Chinese oil demand as improving travel demand over the Lunar New Year holiday outweighed worries of slowing macro-economic indicators.

Russian authorities announced a six-month ban on gasoline exports from March 1 to compensate for rising demand and to allow for refinery maintenance.

Global crude oil markets were expected to be fairly stable this year at around $80 a barrel, Russel Hardy, CEO of oil and gas trader Vitol, said.

Speaking at the Energy Institute conference, Hardy also said global oil demand was expected to peak in the early 2030s.

Both oil benchmarks had settled more than 1% higher on Monday after declines of 2-3% over the previous week as markets factored in a greater likelihood that cuts to interest rates might take longer to come than previously expected.

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Commodities

Oil falls 1% on Fed rate cut caution and stocks build

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Oil falls 1% on Fed rate cut caution and stocks build
© Reuters. Oil, miniatures of oil barrels and U.S. dollar banknote are seen in this illustration taken, June 6, 2023. REUTERS/Dado Ruvic/Illustration/Files

By Paul Carsten

LONDON (Reuters) -Oil prices pulled back on Wednesday as the prospect of delays to U.S. interest rate cuts and a jump in stocks that trounced expectations offset a boost from a potential extension to OPEC+ supply curbs.

futures fell 76 cents, or 0.91%, to $82.89 a barrel by 1227 GMT. U.S. West Texas Intermediate futures (WTI) were down 83 cents, or 1.05%, at $78.04. Both benchmarks had fallen $1 in earlier trading.

Vandana Hari, founder of oil market analysis provider Vanda (NASDAQ:) Insights, attributed the price falls to profit-taking plus a combined response to a surge in U.S. crude stocks and continuing hopes of a Gaza ceasefire deal in coming days.

U.S. crude stocks showed an 8.43 million barrel build in the week ended Feb. 23, according to market sources citing American Petroleum Institute (API) figures on Tuesday. 

That shattered expectations of a 1.8 million barrel build, according to analysts polled by Reuters on Monday.

Federal Reserve Governor Michelle Bowman had signalled on Tuesday that she was in no rush to cut U.S. interest rates, particularly given continuing inflation risks. Higher-for-longer rates could dampen economic growth and suppress demand for oil.

Due Thursday is the January U.S. personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation and a key factor in rate decisions.

“The power of inflationary expectations must not be underestimated,” said Tamas Varga of oil broker PVM in a note on Wednesday. “In case tomorrow’s U.S. PCE reading comes in above expectations, a temporary top might have been found” for oil.

Brent and WTI futures rose more than $1 a barrel on Tuesday after Reuters reported that the Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+) will consider extending voluntary oil output cuts into the second quarter. 

Analysts at ANZ Research said that such a move by OPEC+ would be likely to tighten the market.

Russian authorities on Tuesday announced a six-month ban on gasoline exports from March 1 to compensate for rising demand from consumers and farmers and to allow for planned refinery maintenance.

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