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Oil heads for weekly gain as Middle East conflict rages unabated

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Oil heads for weekly gain as Middle East conflict rages unabated
© Reuters. FILE PHOTO: A person puts gas in a vehicle at a gas station in Manhattan, New York City, U.S., August 11, 2022. REUTERS/Andrew Kelly/File Photo

By Robert Harvey

LONDON (Reuters) -Oil prices were on track for over 5% gains week-on-week on Friday, amid persistent tensions in the Middle East after Israel rejected a ceasefire offer from Hamas.

futures slipped 20 cents, or 0.25%, on the day to $81.43 a barrel by 1223 GMT, while U.S. West Texas Intermediate crude futures fell by 9 cents, or 0.12%, to $76.13 a barrel.

Israeli forces continued deadly air strikes on Gaza on Friday, after the bombing of Gaza’s southern border city of Rafah on Thursday helped send oil prices up by around 3% in the previous session.

“It takes two to tango to reach a ceasefire deal in the Middle East and tensions in the region have not gone away,” UBS analyst Giovanni Staunovo said.

Brent futures prices firmed to above $81 a barrel after Israeli Prime Minister Benjamin Netanyahu rejected a proposal to end the war in the Palestinian enclave on Wednesday.

“With the words that, ‘no part of the Gaza Strip would be immune from Israel’s offensive’, it was not hard for oil participants to conclude that without even a passing regard for peace, there was not enough conflict-premium priced in,” PVM analyst John Evans said.

Elsewhere, Ukraine launched drone attacks against two oil refineries in southern Russia on Friday, resulting in a fire at the Ilsky refinery. The Afipsky refinery, also in Krasnodar Krai which borders Crimea on the Black Sea and Azov Sea coast, was the other facility in the attack.

Russia is exporting more crude in February than it planned under an OPEC+ deal, following a combination of drone attacks and technical outages at its refineries.

“Proof still needs to be provided that Russia is able to cut oil exports sufficiently even without weather-related constraints,” Commerzbank (ETR:) analyst Carsten Fritsch said on Friday in reference to the country’s OPEC+ cut quota.

Meanwhile, the U.S. Treasury Department on Thursday sanctioned another three entities based in the United Arab Emirates (UAE) and one tanker registered by Liberia for violating a cap placed on the price of Russian oil by a coalition of Western nations.

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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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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