Commodities

Oil prices extend gains towards $95 on tight supply

Published

1 year ago

September 18, 2023

Oil prices extend gains towards $95 on tight supply

By Natalie Grover

LONDON (Reuters) -Global oil benchmark neared $95 a barrel on Monday, with investors focused on the prospect of a widening supply deficit in the fourth quarter after Saudi Arabia and Russia extended supply cuts.

Brent crude futures rose 62 cents to $94.55 a barrel by 1222 GMT while U.S. West Texas Intermediate crude futures were up 72 cents at $91.49.

Brent and WTI have climbed for three consecutive weeks to touch their highest since November and are on track for their biggest quarterly increases since Russia’s invasion of Ukraine in the first quarter of 2022.

Citi on Monday became the latest bank to predict that Brent prices could surpass $100 a barrel this year.

Saudi Arabia and Russia this month extended a combined 1.3 million barrels per day (bpd) of supply cuts to the end of the year.

These curbs could push the market into a 2 million bpd deficit in the fourth quarter and a subsequent drawdown in inventories could leave the market exposed to further price spikes in 2024, ANZ analysts said in a note.

The question is whether the cuts will continue into next year, Investec analyst Callum Macpherson said, “given the risk that higher prices must surely, at some point, stimulate US shale (oil output)”.

Either way, demand concerns remain. China, considered the engine of oil demand growth, is a key risk because of its sluggish post-pandemic economic recovery, though its oil imports have remained robust.

A series of stimulus measures and a summer travel boom helped industrial output and consumer spending to rebound last month and Chinese refineries ramped up output, driven by strong export margins.

“Lack of protracted (economic) progress, nonetheless, will be viewed as a major setback on the demand side,” said Tamas Varga of oil broker PVM.

“What’s striking is that this relentless oil price rally has taken place even amid concerns about lower demand from Europe and China as those economies grapple with a severe slowdown, which demonstrates just how tight the supply side of the equation has become,” said Marios Hadjikyriacos at broker XM.

Eyes will also be on central banks this week, including an interest rate decision from the U.S. Federal Reserve.

There is growing consensus that peak interest rates are not far away as inflationary pressure, in general, has been successfully mitigated, PVM’s Varga said.

“Investors, however, remain puzzled over when central banks will start cutting them,” he said. “The high-for-longer mantra would ultimately have a negative impact on economic growth and would affect oil demand.”

Commodities

Oil prices slip slightly lower; caution ahead of Trump inauguration

Published

15 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

15 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

15 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.