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Oil posts weekly losses as US data dents hopes for near-term rate cuts

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Oil posts weekly losses as US data dents hopes for near-term rate cuts
© Reuters. FILE PHOTO: The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann/File Photo

By Laila Kearney

NEW YORK (Reuters) -Oil prices fell by about 2% on Friday and posted weekly losses after U.S. jobs data shrank the odds of imminent interest rate cuts in the world’s largest economy, which could dampen crude demand.

Faltering growth in China and the possibility of some easing of tensions in the Middle East also reduced prices.

futures settled at $77.33 a barrel, shedding $1.37, or 1.7%. U.S. West Texas Intermediate crude futures settled at $72.28 a barrel, falling $1.54, or 2%.

Both benchmarks lost roughly 7% on the week.

High interest rates, which tend to dampen economic growth and oil demand, in major economies like the United States and the euro zone appear to be here to stay in the near term.

Data on Friday showed U.S. employers added far more jobs in January than expected, reducing the chances of near-term Federal Reserve rate cuts. The dollar jumped against all major currencies as a result.

“Prices were chugging along little changed prior to the report, but a huge beat on jobs created is kicking the can down the road for interest rate cuts,” said Matt Smith, analyst at Kpler.

Also keeping oil prices lower was an outage at BP (NYSE:)’s 435,000 barrel-per-day oil refinery in Whiting, Indiana, following a power loss that disrupted operations on Thursday, said Bob Yawger of Mizuho.

Power at the refinery had been restored by midday on Friday, but sources said BP had not yet set a date for restarting the plant.

“You end up with barrels with no place to go that could be shoved into storage,” Yawger said.

STEADY RIG COUNT

Energy services firm Baker Hughes said the U.S. oil rig count, an early indicator of future supply, held steady at 499 this week. Money managers raised their combined futures and options oil position in New York and London by 18,082 contracts to 117,226 in the week to Jan. 30, the U.S. Commodity Futures Trading Commission said.

Across the Atlantic, a European Central Bank policymaker also suggested it was too early to cut interest rates in the euro zone.

Concern over China’s economic recovery persisted, with the International Monetary Fund forecasting that the country’s economic growth would slow to 4.6% in 2024 and decline further in the medium term to about 3.5% in 2028.

The weekly loss for oil prices was already in motion after unsubstantiated reports of a ceasefire between Israel and Hamas caused prices to settle more than 2% lower on Thursday.

Mediators are awaiting a response from Hamas to a proposal drafted last week with Israeli and U.S. spy chiefs and passed on by Egypt and Qatar for the war’s first extended ceasefire.

A pause could ease political risk looming over Gulf and Red Sea shipping lanes, which are key for global energy flows.

On Thursday, sources said the Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, had kept its output policy unchanged. The group will decide in March whether to extend the voluntary oil production cuts that are in place for the first quarter, the sources said.

OPEC+ has output cuts of 2.2 million bpd in place for the first quarter, as announced in November.

Commodities

Canadian wildfire reaches Jasper, firefighters battle to protect oil pipeline

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(Reuters) -A wildfire reached the Canadian town of Jasper, Alberta on Wednesday, one of hundreds ravaging the western provinces of Alberta and British Columbia, as firefighters battled to save key facilities such as the Trans Mountain Pipeline, authorities said.

Wildfires burning uncontrolled across the region include 433 in British Columbia and 176 in Alberta, more than a dozen of them in the area of Fort McMurray, an oil sands hub.

The pipeline, which can carry 890,000 barrels per day (bpd) of oil from Edmonton to Vancouver, runs through a national park in the Canadian Rockies near the picturesque tourist town, from which about 25,000 people were forced to evacuate on Tuesday.

“Firefighters … are working to save as many structures as possible and protect critical infrastructure, including the wastewater treatment plant, communications facilities, the Trans Mountain Pipeline,” Parks Canada said in a post on Facebook (NASDAQ:).

The pipeline operator did not immediately respond to a Reuters request for comment, but said earlier it was safely operating the pipeline and had deployed sprinkler protection as a preventive measure.

In the day’s last update, Jasper National Park said it could not report on the extent of damage to specific locations or neighbourhoods, and that it would provide further updates on Thursday.

Canadian Prime Minister Justin Trudeau said his government approved Alberta’s request for federal assistance.

“We’re deploying Canadian Armed Forces resources, evacuations support, and more emergency wildfire resources to the province immediately – and we’re coordinating firefighting and airlift assistance. Alberta, we’re with you.”

The town, and the park, which draws more than two million tourists a year, were evacuated on Monday night, at a time when officials estimated there were 15,000 visitors in the park.

© Reuters. Smoke rises from the Lower Campbell Creek wildfire (K51472) wildfire northwest of Beaverdell, British Columbia, Canada July 24, 2024.   BC Wildfire Service/Handout via REUTERS.

Deteriorating air quality forced firefighters and others lacking breathing equipment to evacuate to the town of Hinton, about 100 km (62 miles) away, park authorities said on Facebook on Wednesday evening.

Officials of Parks Canada earlier said they expected rain to arrive overnight.

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Gold prices slide as safe haven plays favor yen; Copper losses deepen

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Investing.com– Gold prices fell in Asian trade on Thursday, seeing little safe haven demand despite increasing risk-off sentiment as traders rode a sharp appreciation in the Japanese yen. 

A rout in broader commodity markets also raged on, with copper prices extended a sinking to a near four-month low amid persistent concerns over top importer China. Weak readings on manufacturing activity from the U.S., Germany and Japan also soured copper’s outlook. 

slid 0.9% to $2,376.11 an ounce, while expiring in August tumbled 1.7% to $2,375.40 an ounce by 00:52 ET (04:52 GMT). 

Gold prices retreat as safe haven plays, rate hike bets favor yen 

The yellow metal saw little safe haven demand even as global markets experienced a sharp drop in risk appetite, with traders pivoting into the Japanese yen. The yen’s pair, which gauges the number of yen needed to buy one dollar, sank to an over two-month low on Thursday. 

The yen benefited from an unwinding in short positions over the past week, following suspected currency market intervention by Tokyo. But speculation over a potential interest rate hike by the next week also benefited the yen, especially as recent data signaled some resilience in the Japanese economy. 

Gold and metal markets took little advantage of a drop in the dollar, which retreated before a slew of key U.S. economic readings in the coming days. data for the second quarter is due later on Thursday, while data- the Federal Reserve’s preferred inflation gauge- is due on Friday. 

Other precious metals also retreated. slid 1.1% to $949.60 an ounce, while tumbled 4.2% to $28.098 an ounce, unwinding a bulk of their recent rally.

Copper losses deepen amid demand jitters 

Among industrial metals, copper prices fell further on Thursday, facing increased selling pressure amid concerns over a slowdown in global demand. 

Benchmark on the London Metal Exchange slid 1.6% to $8,960.50 a tonne- breaking below $9,000 for the first time since early-April. One-month fell 0.6% to $4.0540 a pound.

Both contracts were nursing steep losses in recent sessions, amid growing concerns over demand in top importer China, following a string of underwhelming economic readings from the country.

Concerns over a demand slowdown were furthered by weak manufacturing activity data from the U.S., Japan and Germany, which showed industrial activity was on the backfoot.

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Oil down $1 as muted Chinese consumption outweighs inventory draws

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By Noah Browning

(Reuters) -Oil prices fell on Thursday as demand signals from lacklustre Chinese consumption outweighed the previous day’s data showing large draws on U.S. inventories.

futures for September fell $1.01, or 1.2%, to $80.70 a barrel by 1117 GMT. U.S. West Texas Intermediate crude for September slid $1.2, or 1%, to $76.67.

Both benchmarks rose on Wednesday, snapping consecutive sessions of declines after the Energy Information Administration said inventories fell by more than expected to 3.7 million barrels last week. [EIA/S]

U.S. gasoline stocks dropped by 5.6 million barrels, against analyst expectations of a 400,000 draw.

“Despite draws in U.S. crude and gasoline stocks, investors remained wary about weakening demand in China and expectations of advancing ceasefire talks between Israel and Hamas added to pressure,” said Hiroyuki Kikukawa, president of NS Trading, owned by Nissan (OTC:) Securities.

China’s oil imports and refinery runs this year have trended lower than in 2023 on weaker fuel demand amid sluggish economic growth, government data shows.

“Growing concerns over the strength of oil demand in the short to medium term have acquired a strong grip on market sentiment,” said Vandana Hari, founder of oil market analysis provider Vanda (NASDAQ:) Insight.

In the Middle East, efforts to reach a ceasefire deal to end the war in Gaza between Israel and militant group Hamas have gained momentum over the past month. A breakthrough could erode lingering threats to supply and send prices lower.

The U.S. Federal Reserve, meanwhile, is expected to cut interest rates only twice this year, in September and December, according to a Reuters poll of economists, with resilient U.S. consumer demand prompting a cautious approach despite easing inflation.

© 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/File Photo

Lower interest rates should spur economic growth, leading to more oil consumption.

In Canada, hundreds of wildfires are burning in the western provinces of British Columbia and Alberta, including in the area of oil sands hub Fort McMurray.

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