Commodities
Oil prices edge higher as markets weigh Syria tensions, demand woes
Investing.com– Oil prices rose slightly in Asian trade on Monday as traders weighed an increased risk premium on heightened geopolitical tensions in Syria, although concerns over weakening demand persisted.
Concerns over softer demand saw crude clock losses last week, although these were tempered by heightened tensions between Israel and Lebanon keeping some risk premium in play. The situation in Syria- where rebels overthrew the Bashar al-Assad regime- is expected to add to this trend.
But weak inflation data from China showed continued signs of economic strain in the world’s biggest oil importer, limiting gains in crude and keeping concerns over slow demand largely in play.
expiring in February rose 0.3% to $71.34 a barrel, while rose 0.3% to $67.20 a barrel by 20:38 ET (01:38 GMT).
Oil prices took little support from the OPEC+ agreeing to extend its ongoing supply cuts until at least April 2025. The cartel is set to release its monthly report on Wednesday.
Syria tensions keep oil risk premium in play
Syrian rebel forces seized the capital Damascus after 13 years of civil war, as reports said President Bashar al-Assad had fled to Russia.
Al-Assad’s sudden ouster- by a group partly backed by Turkey and with deep ties to the Sunni Islamic sect- limits Iran’s foothold in the Middle East, and could also cost Russia a naval base in the Mediterranean.
But traders were now watching to see just what a regime change will entail for Syria and the Middle East, especially in the area of oil production. While Syria’s output was almost entirely eroded by a long-running civil war, production could increase under a more moderate government.
On the other hand, Iran’s softer hold on the Middle East could embolden the incoming Donald Trump administration in the U.S. to impose harsher restrictions on the country, limiting supplies.
Still, Syria’s situation adds to ongoing geopolitical tensions caused by the Israel-Hamas war. Reports said Israeli forces had also entered Syria.
Demand woes persist as China CPI underwhelms
But despite an increased risk premium, gains in oil prices were limited by persistent concerns over slowing demand.
Soft from China added to the mix, as private spending in the country showed little signs of improving despite aggressive stimulus measures.
Beyond China, uncertainty over long-term U.S. interest rates and policies under the Trump administration also weighed.
The OPEC’s decision to extend supply cuts was perceived negatively by oil markets, given that it signaled dwindling faith that demand will improve.
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.
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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.
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.
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