Commodities

Oil little changed as IEA surplus forecast offsets rate cut optimism

Published

1 month 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

Oil prices slip slightly lower; caution ahead of Trump inauguration

Published

8 hours ago

January 20, 2025

Investing.com– Oil prices slipped slightly lower Monday, as optimism over tighter supplies, amid stricter US sanctions against Russia, was offset by caution before President-elect Donald Trump’s inauguration.

At 07:15 ET (12:15 GMT), expiring in March dropped 0.2% to $80.61 a barrel, while fell 0.1% to $77.31 a barrel.

Crude prices retreated slightly after recording four weeks of strong gains, as traders awaited news from Washington, with volumes limited by the US holiday.

Trump inauguration in focus for tariffs, energy cues

Markets were now focused squarely on Trump’s inauguration later on Monday, with the President-elect having promised increased trade tariffs on top oil importer China.

Trump also reiterated plans to increase US energy production during a Sunday rally, promising to lift regulations on the domestic energy sector.

Higher US production- which already stood close to record highs of over 13 million barrels per day in 2024- could potentially offset the impact of recent sanctions against Russia by keeping global crude supplies underpinned.

Trump has also vowed to dole out expansionary policies during his term- a trend that could underpin demand in the world’s biggest oil importer. US oil demand was a mixed bag in recent months. While cold weather did spur increased demand for heating fuels, it disrupted travel across large swathes of the country during the travel-heavy year-end holidays.

“There is a fair amount of uncertainty across markets coming into this week given the inauguration of President Trump and the raft of executive orders he reportedly is planning to sign. This combined with it being a US holiday today, means that some market participants may have decided to take some risk off the table,” analysts at ING said, in a note.

Oil markets weigh demand, supply outlook

Traders were speculating over a somewhat mixed outlook for oil supply and demand. While recent US sanctions on Russia could limit global supplies, this could be offset by demand remaining soft, especially if Trump imposes steep trade duties on China.

China is the world’s biggest oil importer, and has seen a steady decline in its appetite for crude amid persistent economic weakness.

“Output data from China on Friday shows that refineries increased the amount of they processed by 1.3% year-on-year in December,” said ING. “However, for full-year 2024, refinery activity still fell by 3.6% YoY, reflecting weaker domestic demand. Output and trade numbers suggest that apparent oil demand in December came in at a little more than 13.9m b/d, down from 14m b/d the previous month, but up 0.6% YoY.”

The People’s Bank of China kept its benchmark loan prime rate unchanged, as widely expected, on Monday.

Beijing is expected to ramp up its stimulus measures in the face of trade headwinds under Trump. Recent data also showed China’s economy improved after Beijing doled out its most aggressive round of stimulus measures in late-2024.

Recent gains in oil have also been curtailed by easing tensions in the Middle East, as Hamas and Israel exchanged hostages and prisoners over the weekend under a recently signed ceasefire, which also saw traders attach a smaller risk premium to oil.

(Ambar Warrick contributed to this article.)

Commodities

Oil prices hold steady as market awaits Trump announcements

Published

8 hours ago

January 20, 2025

By Arunima Kumar

(Reuters) -Oil prices were steady on Monday as traders awaited U.S. President-elect Donald Trump’s inauguration in the hope of some clarity on his policy agenda, including plans to end the Russia-Ukraine war.

futures dropped 37 cents, or 0.46%, to $80.42 a barrel by 1004 GMT. U.S. West Texas Intermediate (WTI) crude futures were down 24 cents, or 0.31%, at $77.64.

The more active U.S. WTI crude March contract fell 36 cents to $77.03.

The focus is what executive orders Donald Trump will sign over the next 24 hours, said UBS analyst Giovanni Staunovo.

Charalampos Pissouros at broker XM, meanwhile, said that oil prices were trading a little lower on expectations that Trump will relax energy-related sanctions against Russia in exchange for an end to the war in Ukraine

Trump, who will be inaugurated later on Monday, is widely expected to make a flurry of policy announcements in the first hours of his second term, including an end to a moratorium on U.S. liquefied (LNG) export licences as part of a wider strategy to strengthen the economy.

The Brent and WTI benchmarks advanced more than 1% last week for a fourth consecutive weekly gain after the Biden administration sanctioned more than 100 tankers and two Russian oil producers.

That led to a scramble by top buyers China and India for prompt oil cargoes and a rush for ship supply as dealers of Russian and Iranian oil sought unsanctioned tankers for oil shipment.

While the new sanctions could cut supply from Russia by nearly 1 million barrels per day (bpd), recent price gains could be short lived depending on Trump’s actions, ANZ analysts said in a client note.

Trump has promised to help to end the Russia-Ukraine war quickly, which could involve relaxing some curbs to enable an accord, they said.

Easing tension in the Middle East also kept a lid on oil prices. Hamas and Israel exchanged hostages and prisoners on Sunday that marked the first day of a ceasefire after 15 months of war.

Commodities

Copper market sees half chance of 10% US tariff by first quarter-end, Goldman says

Published

8 hours ago

January 20, 2025

(Reuters) – Goldman Sachs on Monday said the market is pricing in odds of about 50% that there will be a 10% U.S. tariff on the metal by the end of the first quarter of this year.

Analysts at the U.S. investment bank said in a client note that the estimate is similar to their own 50% subjective probability of a 10% effective tariff on copper by year-end.

Three-month copper on the London Metal Exchange eased 0.3% to $9,167 a metric ton as at 0706 GMT after reaching a one-month peak last week. [MET/L]

President-elect Donald Trump returns to the White House later in the global day with an inauguration speech which traders will parse for policies to be enacted on day one. Trump has talked of tariffs of as much as 10% on global imports as well as 60% on Chinese goods and a 25% import surcharge on Canadian and Mexican products.

Goldman also noted that the oil market is pricing in a nearly 40% chance of a 25% U.S. tariff on Canadian goods including oil, versus the bank’s 15% subjective probability of a 25% effective tariff by the end of the year.

futures traded around $80.69 a barrel, while the more active U.S. West Texas Intermediate crude April contract was steady at $77.36. [O/R]

The investment bank assigned a 10% chance to a 10% effective tariff on gold being introduced within the next 12 months. It said bullion’s status as a financial asset makes it likely to be exempt from broad-based tariffs.

prices were up 0.3% at $2,708.77 per ounce while U.S. were little changed at $2,749.70. [GOL/]

The amount of gold stocks in COMEX-approved warehouses has jumped by one-third in the past six weeks as market players sought deliveries to hedge against the possibility of tariffs.