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Commodities

Oil prices fall as Iran-Israel fears cool, economic jitters persist

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Investing.com– Oil prices fell Monday, extending losses from the prior week amid growing hopes that the Iran-Israel conflict will not escalate further, limiting the potential disruption of supplies from the key oil-rich region. 

At 08:20 ET (12:20 GMT), fell 1% to $86.41 a barrel, while dropped 1% to $81.40.

Both contracts fell more than 3% each last week as fears of a demand slowdown, amid weak global economic conditions, somewhat offset escalating tensions in the Middle East. 

Iran-Israel escalation bets dwindle after Friday strike 

Bets that a conflict between Iran and Israel will grow have somewhat dwindled in recent sessions, even as Israel was linked to missile strikes against Iran on Friday.

Iran largely downplayed the impact of the Israeli strikes, and flagged no immediate plans for retaliation. 

This lack of immediate retaliation was a key driver of bets that the conflict will not worsen. While oil prices had surged to nearly $91 a barrel in the immediate aftermath of the Israeli strikes, they swiftly curbed most of their gains later in Friday’s session. 

“The market is obviously of the view that spare OPEC production capacity will come into play in the event of any supply shocks, or that ongoing tension is unlikely to lead to significant supply losses,” said analysts at ING, in a note..

But continued tensions in the Middle East, especially as a Israel-Hamas truce appeared unlikely, still kept some concerns over supply disruptions in play. 

Media reports on Monday indicated that rockets were fired at a U.S.-led coalition base in Syria, while Israeli strikes in Gaza continued. 

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Middle East tensions have been the biggest driver of oil price gains in recent months. 

Rate fears, demand concerns weigh on oil prices

Oil prices also faced pressure from a recent surge in the dollar, as traders swiftly scaled back bets on early interest rate cuts by the Federal Reserve. This notion was furthered chiefly by stronger-than-expected U.S. inflation readings for March.

Markets also feared that higher-for-longer U.S. interest rates and sticky inflation will damped economic growth this year, in turn chipping away at global oil demand.

Recent data showing a bigger-than-expected build in U.S. furthered these concerns, while also raising questions over just how tight oil markets will be in the coming months. 

U.S. oil production has remained at record highs in recent months, somewhat offsetting expectations of tighter supplies on production cuts from other producers, specifically the Organization of Petroleum Exporting Countries.

The latest data from shows that U.S. drillers increased their oil rig count by five over the course of last week to 511.

“This is the highest number of active oil rigs since September last year when we saw WTI trading above $90/bbl several times,” added ING.

(Amber Warrick contributed to this article.)

Commodities

Analysts are out with their updated copper prices forecast for 2024 

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Following the recent rally, the spotlight is on , and analysts have been busy assessing their forecasts for copper prices, reflecting a complex set of factors from supply constraints and geopolitical factors to evolving demand trends in various sectors.

Copper prices rally

While copper prices slumped on Wednesday, the metal has experienced a significant rally over the past couple of months, with prices hitting record highs on Monday this week. 

Copper, which is a vital industrial metal whose price movements have significant implications for global markets and industries, hit an intraday record of  $5.1990 a pound or $11,460 a tonne. This year, copper is up 27%. 

The rally was fueled in part by traders betting on a soft supply of the metal in the coming months as miners’ production cuts began to take effect. 

Copper prices forecast for 2024

Despite the rally, analysts at Citi believe the price of copper is set to consolidate over the next three to six months.

The bank’s forecast for a stabilisation in prices comes with LME prices currently trading close to their zero to three-month point price target of $10,500 a ton after reaching their six to 12-month target of $11k a ton last week.

Citi believes “investors have been right to push copper up from $8-8.5k/t to $10.5k/t over the past 3-4 months.”

However, they explained they think machines are likely a large share of the ~$30bn of copper fund length additions this year. 

“In the coming months, some of this length is likely to turn over to consumer hedgers, along with macro and commodity-specific hedge funds, for whom we consider sub-$10k/t as inexpensive,” said Citi.”Indeed, physical indicators (such as visible inventories, spreads and premiums) aren’t going to look great for some time as China semi-fabricators de-stock refined metal and as global scrap dealers de-stock scrap.”

The current price levels are seen as sufficient to avoid huge deficits in the copper market this year as the scrap market responds.

Meanwhile, JPMorgan analysts believe pricing expectations are overshooting the fundamentals while copper stocks are currently trading at fair value. 

“Copper has been on a tear thus far this year, rising 27% YTD amid what we view as relatively overdone refined supply-side concerns,” said JPMorgan. “This has translated into strong re-rating for copper-levered stocks FCX (+20% YTD) and TECK (+24%) with near-term investor sentiment now seemingly more bearish relative to the start of the year.”

“Pricing sentiment appears to have overshot underlying fundamentals, which are more sound than recent pricing momentum infers, largely driven by resilient China refined supply and seemingly elastic demand,” they add.

The bank also notes that the latest copper forward curve now exceeds both their base case and JPM’s Commodities team’s copper price forecast through the remainder of the year and into next year, suggesting further upside potential should bullish expectations materialize.

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Commodities

Oil creeps back up after three days of losses

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By Paul Carsten

LONDON (Reuters) -Oil prices crept up on Thursday, clawing back some of the previous three days’ losses despite the U.S. Federal Reserve entertaining further tightening of interest rates if inflation remains sticky, a move that could hurt oil demand.

futures were up 51 cents, or 0.6%, at $82.41 a barrel by 1121 GMT. U.S. West Texas Intermediate crude (WTI) futures were also up 51 cents, or 0.7%, at $78.08. Both benchmarks fell more than 1% on Wednesday for their third straight day of losses.

Minutes released on Wednesday from the Federal Reserve’s most recent policy meeting showed the U.S. central bank discussed the potential to raise interest rates in the face of continued stubborn inflation.

“Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate,” the Fed minutes said.

Higher interest rates boost borrowing costs, crunching funds that could boost economic growth and oil demand in the world’s largest oil consuming nation.

Also weighing on the market, stocks rose by 1.8 million barrels last week, according to the Energy Information Administration, compared with an estimated draw of 2.5 million barrels.

Globally, physical crude markets have been pressured by soft refinery demand and ample supply.

“Recent market softness has come on the back of weaker data, including rising oil inventories, tepid demand and refinery margin weakness and the increasing risk of run cuts,” Citi analysts said in a note on Thursday.

Russia said it exceeded its OPEC+ production quota in April for “technical reasons” and will soon present to the Organization of the Petroleum Exporting Countries (OPEC) Secretariat its plan to compensate for the error, the Russian Energy Ministry said late on Wednesday.

OPEC+, which groups together OPEC and allies led by Russia, will meet on June 1 to decide on production cut levels.

© Reuters. FILE PHOTO: A general view of a French oil Esso refinery by night in Fos-sur-Mer, France, May 13, 2024. REUTERS/Manon Cruz/File Photo

“June’s meeting is seen as difficult in being able to tighten the market further and there is a growing consensus that the best the cartel will come up with is a rollover of current voluntary cuts,” said John Evans of oil broker PVM.

“This may show results in the autumn, but for now it will do little to assuage a market lacking in confidence.”

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Commodities

Oil prices rebound; US rate jitters, surprise inventory build weigh

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Investing.com– Oil prices rose Thursday, rebounding after three consecutive losing sessions, although sentiment remains pressured by persistent concerns over high for longer U.S. interest rates as well as an unexpected build in U.S. inventories.

At 09:10 ET (13:10 GMT),  rose 1.1% to $82.77 a barrel, while rose 1.1% to $78.44 a barrel. 

Both benchmarks fell more than 1% on Wednesday for their third straight day of losses. 

US rate jitters grow after Fed minutes, policymaker comments 

The minutes of the Fed’s late-April meeting showed waning confidence among policymakers that inflation was easing as expected, potentially necessitating interest rates remaining at elevated levels for a lengthy period of time.

A string of Fed officials also warned of such a scenario in recent weeks, and that any potential plans for rate cuts will be largely contingent on confidence in inflation coming back within the central bank’s 2% annual target.

Several policymakers also said they were open to raise interest rates further should the need arise, the minutes showed. 

The minutes, along with the comments, boosted the dollar on Wednesday, which in turn pressured oil prices.

The prospect of high U.S. rates also spurred persistent concerns that global economic activity will cool substantially in 2024, pressuring oil demand. 

US inventories see unexpected build 

Fears of sluggish demand and well-supplied markets were furthered by official data on Wednesday showing that U.S. saw an unexpected build in the week to May 17. 

also grew, while saw a smaller-than-expected draw. 

The reading set a dour tone ahead of the Memorial Day holiday weekend, which usually marks the beginning of the travel-heavy summer season, which is expected to boost demand. 

OPEC+ meeting in spotlight 

On the supply front, markets were awaiting a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) in early-June, where the cartel could potentially extend its current run of production cuts.

“The weakness in oil prices increases the likelihood that OPEC+ members fully roll over their additional voluntary supply cuts into the second half of the year,” ING said, in a note.

OPEC+ oil producers are making voluntary output cuts totalling about 2.2 million barrels per day for the first half of 2024, led by Saudi Arabia rolling over an earlier voluntary cut.

These curbs come on top of earlier reductions announced in various steps since late 2022 and bring the total pledged cuts to about 5.86 million barrels per day, equal to just under 6% of daily world demand.

(Ambar Warrick contributed to this article.)

 

 

 

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