Commodities

Oil little changed as IEA surplus forecast offsets rate cut optimism

Published

1 week ago

December 12, 2024

By Anna Hirtenstein

LONDON (Reuters) – Oil prices were little changed on Thursday as a forecast for ample supply in the oil market offset optimism stemming from rising expectations of a U.S. interest rate cut.

futures were down 8 cents at $73.44 a barrel at 1303 GMT. U.S. West Texas Intermediate crude futures were up 3 cents to $70.32. Both benchmarks rose by more than $1 on Wednesday.

The International Energy Agency said it expected the oil market to be comfortably supplied next year, even as it revised its demand outlook for next year up slightly. OPEC cut its demand growth forecast for 2024 for the fifth straight month on Wednesday and by the largest amount yet.

“They still call for a massively oversupplied market, but this has declined slightly with their demand revision,” said Giovanni Staunovo, commodity analyst at UBS. “The market is waiting for more news on fiscal measures around the world, I wouldn’t expect big price moves in the near term.”

In the U.S., inflation rose slightly, in line with economists’ expectations. Investors are broadly expecting another rate cut from the Federal Reserve, spurring some optimism about economic growth and energy demand.

“The inflation report creates a lot of comfort. It could have been better, but it seems to be low enough for the Fed to reduce rates at the next meeting,” said Bjarne Schieldrop, chief commodities analyst at SEB.

In the world’s top oil consumer, the United States, gasoline and distillate inventories rose by more than expected last week, according to data from the Energy Information Administration.

Weak demand, particularly in top importer China, and non-OPEC+ supply growth were two factors behind the move. However, investors anticipate a rise in Chinese demand, after Beijing unveiled plans this week to adopt an “appropriately loose” monetary policy in 2025, which could spur oil demand.

Global oil demand rose at a slower-than-expected rate this month, but has remained resilient, analysts at JPMorgan said in a note on Thursday.

“Growth (in oil demand) over the past week has been tempered by a slight reduction in jet fuel consumption across much of the world,” the note read.

Chinese crude imports also grew annually for the first time in seven months in November, up more than 14% from a year earlier.

The market will now watch for cues on interest rate cuts by the Fed next week.

Oil prices rose on Wednesday after European Union ambassadors agreed to a 15th package of sanctions on Russia over its war against Ukraine. They targeted the “shadow fleet” of ships that has aided Russia in bypassing the $60 per barrel price cap imposed by the G7 on Russian seaborne in 2022.

The Kremlin said that reports of a possible tightening of U.S. sanctions on Russian oil suggested the administration of President Joe Biden wanted to leave a difficult legacy for U.S.-Russia relations.

Treasury Secretary Janet Yellen said on Wednesday that the U.S. was continuing to look for creative ways to reduce Russia’s oil revenue, adding that lower global demand for oil created an opportunity for more sanctions.

Commodities

Copper prices dip over 1% following Federal Reserve’s fewer rate cuts signal

Published

6 hours ago

December 19, 2024

Investing.com — Copper prices are down more than 1% after the Federal Reserve hinted at fewer rate cuts for the upcoming year.

The shift to a more hawkish stance by the Fed has resulted in an increase in bond yields, a surge in the strength of the dollar to 25-month highs, and a spike in volatility. This shift has also led to a sharp decline in key commodity currencies.

Market participants have expressed concern that there isn’t much on the annual calendar to halt this downward trend. The three-month London Metal Exchange (LME) contract has registered a 1.5% decrease, trading at $8,912 a ton.

In addition to the Federal Reserve’s stance, looming U.S. tariffs on Chinese goods and uncertainties surrounding China’s domestic demand outlook continue to pressure the market.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Commodities

Gold prices rebound from Fed-driven rout, hawkish comments cloud outlook

Published

6 hours ago

December 19, 2024

Investing.com– Gold prices rebounded from a one-month low on Thursday as the Federal Reserve lowered interest rates as expected, although the central bank’s hawkish stance on future rate cuts clouded the outlook for bullion.

Gold prices had dropped more than 2% overnight after the Fed’s policy meeting indicated fewer rate cuts in 2025, as sticky inflation remained a major concern.

jumped as much as 1.3% to $2,618.11, while expiring in February dropped 1.2% to $2,620.79 an ounce by 22:51 ET (03:51 GMT).

Spot gold rebounds, but outlook dim amid slower rate cuts

The Fed reduced by 25 basis points but signaled it will adopt a slower pace for future cuts.

Lower interest rates bode well for gold prices as the opportunity cost of holding gold decreases, making it more attractive compared to interest-bearing assets like bonds.

However, gold futures fell sharply as the rates are expected to remain higher for a longer period after Wednesday’s cut. Markets have ruled out chances of a cut in January and now expect just two more cuts in 2025, against their earlier expectations of four.

Fed Chair Jerome Powell said further reductions depend on progress in curbing persistent inflation, reflecting policymakers’ adjustments to potential economic shifts under the incoming Donald Trump administration.

The Federal Reserve’s hawkish stance was aimed at curbing inflation, but it also signals confidence in the resilience of the U.S. economy. This risk-on sentiment can reduce the demand for safe-haven assets, further dampening bullion’s prospects.

With fewer cuts expected in 2025, the is expected to strengthen further. The greenback surged to an over two-year high on Wednesday.

Additionally, the maintained its interest rates on Thursday, as policymakers remained cautious over Japan’s economic outlook and the path of inflation.

Among other precious metals, rose 0.7% to $928.90 an ounce, while slumped 2.7% to $29.922 an ounce.

Copper falls on as dollar hits 2-yr high

Among industrial metals, copper prices extended declines on Thursday after the Fed’s hawkish stance bolstered the dollar. The red metal took limited support from reports of more fiscal spending in top importer China over the coming year.

The rose 0.1% in Asian trade on Thursday and was at an over two-year high after the Fed meeting.

Benchmark on the London Metal Exchange fell 1.4% to $8,921.50 a ton, while one-month were largely unchanged at $4.089 a pound.

Commodities

Oil slips on demand concerns after Fed signals slower rate cuts

Published

6 hours ago

December 19, 2024

By Colleen Howe, Trixie Yap and Anna Hirtenstein

(Reuters) -Oil prices fell on Thursday after the U.S. Federal Reserve signalled it would slow the pace of interest rate cuts in 2025, which could hurt economic growth, reduce fuel demand and strengthen the dollar.

futures declined by 29 cents to $73.10 a barrel by 1249 GMT. U.S. West Texas Intermediate crude lost 16 cents to $70.42.

The declines gave back Wednesday’s gains on a drop in stocks and the Fed’s expected rate cut of 25 basis points.

Prices weakened after U.S. central bankers issued projections pointing to two quarter-point cuts in 2025 on concern over rising inflation. That was half a point less than they had flagged in September.

“The bottom line for oil is the longer the Fed stays on pause, the stronger the U.S. dollar. This tends to generate headwinds for commodities like oil,” said Harry Tchilinguirian at Onyx Capital Group.

A stronger dollar makes dollar-priced commodities more expensive while higher interest rates weigh on economic growth, potentially reducing demand for oil.

Chinese refining giant Sinopec (OTC:), meanwhile, expects China’s oil consumption to peak by 2027, it said on Thursday.

“The demand-supply balance going into 2025 continues to look unfavourable and predictions of more than 1.0 million bpd demand growth in 2025 look stretched in our opinion. Even if OPEC+ continues to withhold production, the market may still be in surplus,” said Suvro Sarkar, DBS Bank energy sector team leader.

Though demand in the first half of December rose year on year, volumes remained lower than expected by some analysts.

JP Morgan analysts said that global oil demand growth for December so far was 700,000 barrels per day (bpd) less than it had expected, adding that global demand this year has risen by 200,000 bpd less than it had forecast in November 2023.

Official data from the Energy Information Administration on Wednesday showed U.S. crude stocks fell by 934,000 barrels in the week to Dec. 13. Analysts polled by Reuters had expected a drawdown of 1.6 million barrels. [EIA/S]

While the decline was less than expected, the market found support from last week’s rise in U.S. crude exports by 1.8 million bpd to 4.89 million bpd.