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Commodities

Oil posts first weekly gain in three; Chinese data helps vs. hawkish Fed

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Crude prices posted their first weekly gain in three, helped by higher refinery demand and a rate cut in China, the world’s number one destination for oil.

Offsetting some of the optimism among oil longs was the continuous reminder by officials at the Federal Reserve that the central bank wasn’t done with its own rate hikes despite a pause in June.

Fed projections this week signaled two more hikes of a quarter percentage point each before the year-end. Other major central banks are tightening as well, with the Bank of England eyeing a quarter-point increase of its own, after the European Central Bank ramped up rates to 22-year highs on Thursday.

“We’re going to be going from Fed speaker to Fed speaker, and data point to data point,” Phil Flynn, analyst at Price Futures Group and a prominent oil bull, said in comments carried by Reuters on Friday.

New York-traded WTI crude settled up $1.16, or 1.6%, at $71.78 per barrel. Week-to-date, the U.S. crude benchmark was up 2.3% after a 3.5% tumble over two prior weeks.

London-traded Brent settled up 94 cents, or 1.2%, at $76.61. For the week, the global crude benchmark was up 2.4%, after a 3% slump over two prior weeks.

It has been a swing of a time — literally — for oil which began the week with a 4% drop on Monday, driven by recession concerns. It then witnessed a 3% rebound Tuesday, aided by a Chinese rate cut.

By Wednesday, oil slid 2% on a massive jump in U.S. crude inventories and a hawkish stance adopted by the Fed despite its hold on June rates. The next day, crude prices were up more than 3% on bullish Chinese refinery data, before drifting again in Friday’s trade.

Some expect oil prices to see support later in the year from production cuts announced by Saudi Arabia. Analysts at UBS said on Thursday they expect a supply deficit of around 1.5 million barrels daily in June and more than 2M in July.

“These are small positives but it could be enough to stop crude from making fresh lows for the year,” said Craig Erlam, analyst at online trading platform OANDA.

Brent’s low thus far for 2023 has been $70.12, against WTI’s $63.70.

The optimism of oil longs does not appear to fully factor in Russia’s unsupervised sales of oil, mostly done at or near the $60-a-barrel cap set by the G7 in accordance with sanctions imposed against Moscow over the Ukraine invasion.

Russia’s state energy giant Rosneft is close to striking long-term deals to sell substantial supplies of oil, a sign that Moscow can continue to count on petroleum exports to fund its war on Ukraine, the Wall Street Journal reported on Thursday.

Notwithstanding that, Russia’s Energy Minister Nikolai Shulginov said on Friday it was “realistic” to expect crude prices to return to around $80 per barrel, citing falling Russian oil and gas condensate production to around 20M tonnes (400,000 barrels per day) this year as one reason. Moscow’s forecasts on oil have largely been greeted with more than an ounce of skepticism by the market.

Commodities

Oil set for weekly gain on signs of improving demand

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By Shariq Khan

NEW YORK (Reuters) – Oil prices rose in Asian trading hours on Friday, with global benchmark Brent set for its first weekly increase in three weeks on signs of improving global demand and slowing inflation in top oil consumer the United States.

prices rose 21 cents, or 0.3%, to $83.48 a barrel by 0018 GMT. U.S. West Texas Intermediate (WTI) crude futures rose 18 cents, or 0.2%, to $79.41 a barrel.

Brent futures are set to rise about 1% on a weekly basis, and WTI futures are set to gain 1.4%.

Recent declines in oil and refined products inventories at major global trading hubs have created optimism over oil demand growth, reversing a trend of rising stockpiles that had weighed heavily on prices in prior weeks. Through Thursday, Brent crude futures were down around 10% from this year’s peak of $92.18 a barrel on April 12.

U.S. oil and fuel inventories fell last week, while Singapore’s middle distillate fuel stocks dropped to a near three-month low this week. In Europe’s Amsterdam-Rotterdam-Antwerp trading hub, gasoline stocks were down 7.5% in the week to Thursday, data from consultancy Insights Global showed.

Recent economic indicators from the United States have fed into the optimism over global demand. U.S. consumer prices rose less than expected in April, data showed on Wednesday, boosting expectations of lower interest rates in the country.

Those expectations were further bolstered by data on Thursday that showed a stabilizing U.S. job market.

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Lower interest rates could help soften the U.S. dollar, which would make oil cheaper for investors holding other currencies and drive demand.

“Financial markets now have placed the most bets on a September interest rate cut by the Federal Reserve, which would continue to temper the dollar strength and shift that strength over to commodities and equities,” StoneX oil analyst Alex Hodes said on Thursday.

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Commodities

Goldman Sachs discusses what’s next for natural gas prices

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Over the past three weeks, US prices have surged 30% to above $2.50 per million British thermal units (mm/BTU), fueled by production declines and increased feedgas demand for liquified natural gas (LNG) exports.

Moreover, recent producer cuts, maintenance events, and Freeport LNG’s normalization of gas demand post-outage have contributed to this rise. Cheniere’s announcement of no heavy maintenance for its liquefaction trains this year also supports higher prices.

In a Thursday note, Goldman Sachs strategists said the return of gas prices above $2/mmBtu aligns with their expectations, as production curtailments “would ultimately lead to lower storage congestion risks for this summer.”

“That said, we see only limited further upside from current levels, with stronger gas prices risking a return of congestion concerns,” they added.

Goldman notes that prices above $2/mmBtu reduce gas competitiveness compared to coal, with a $0.50/mmBtu increase potentially cutting gas demand by 1 billion cubic feet per day (Bcf/d), especially in shoulder months.

Moreover, higher prices may prompt the restart of previously shut-in wells. EQT (ST:), the largest producer in the Appalachia region, indicated it would resume production if prices sustainably exceed $1.50/mmBtu. And while Appalachia prices haven’t risen as much as NYMEX, the local hub has averaged $1.44/mmBtu month-to-date, up 10¢ from last month, strategists highlighted.

Elsewhere, European gas prices have also risen this summer, though less sharply than in the US.

Title Transfer Facility (TTF) prices increased 18% over the past three months to around 30 euros per megawatt-hour (MWh), holding steady in May.

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However, unlike the US market, this rally lacks fundamental support, with Northwest (NW) European gas storage at record-high levels, Goldman strategists pointed out.

“To be sure, NW European LNG imports have remained weak relative to last year – and are likely to get weaker in the coming weeks owing to a seasonal decline in global LNG production, exacerbated by outages at Australia’s Gorgon export project,” they said.

“Going forward, we expect healthy non-European demand for LNG to continue to incentivize a decline in European LNG imports vs last year,” they continued.

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Gold prices trim some weekly gains on tempered rate cut hopes

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Investing.com– Gold prices fell slightly on Friday, trimming some of their gains for the week as comments from a slew of Federal Reserve officials offered a more sobering outlook on interest rate cuts. 

The yellow metal had risen to nearly $2,400 an ounce this week in the immediate aftermath of some soft U.S. economic readings. But it pulled back from these levels on Thursday and Friday.

steadied at $2,377.40 an ounce, while expiring in June fell slightly to $2,381.10 an ounce by 00:19 ET (04:19 GMT). 

Gold retreats as Fed officials downplay rate cuts, but weekly gains due

The yellow metal fell on Thursday after a string of Fed officials cautioned against bets on immediate reductions in interest rates. 

Several members of the central bank’s rate setting committee said the central bank will need much more convincing that inflation was coming down beyond a marginally soft inflation reading for April. 

This saw traders begin pricing out some expectations for a rate cut in September. The and also rebounded from earlier losses this week. 

Still, some softer-than-expected readings put gold on course for a 0.7% weekly gain. 

The yellow metal was also in sight of a record high of above $2,430 an ounce, although it appeared unlikely the level would be met in the near-term. 

Other precious metals retreated on Friday, but were set for bumper weekly gains. fell 0.2% but were trading up 6.2% for the week, while fell 0.4% but were up 4.5% this week. 

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Copper mixed amid middling China cues

Among industrial metals, one-month copper futures tumbled from two-year highs tracking middling economic data. But three-month copper futures pushed higher and were set for a stellar week as markets bet on tighter supplies and an eventual demand recovery in the coming months. 

on the London Metal Exchange rose 0.6% to $10,445.0 a ton, while rose 0.3% to $4.8935 a pound. 

Data from China on Friday painted a mixed picture of the economy. While grew more than expected, growth slowed and shrank at an accelerated pace. Growth in Chinese also slowed.

The readings presented a muddled outlook for the world’s biggest copper importer, as it rolled out more stimulus measures to shore up growth.

Three-month copper futures gained on the prospect of a demand recovery, and were up nearly 4% this week. They were also at two-year highs. 

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