Commodities

Oil prices fall on supply glut fears despite OPEC+ output cut extension

Published

2 weeks ago

December 7, 2024

By Laila Kearney

NEW YORK (Reuters) -Oil prices fell by more than 1% on Friday and cemented weekly losses as analysts projected a supply surplus next year on weak demand despite an OPEC+ decision to delay output hikes and extend deep production cuts to the end of 2026.

futures settled at $71.12 a barrel, shedding 97 cents, or 1.4%. U.S. West Texas Intermediate crude futures settled at $67.20 a barrel, falling $1.10, or 1.6%.

For the week, Brent prices lost more than 2.5%, while WTI saw a drop of 1.2%.

A rising number oil and gas rigs deployed in the United States this week, pointing to rising production from the world’s biggest crude producer, also pushed prices lower.

On Thursday, the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.

Weak global oil demand and the prospect of OPEC+ ramping up production as soon as prices rise have weighed on trading, said Bob Yawger, director of energy futures at Mizuho (NYSE:) in New York.

“They’re just waiting for better pricing and once they get that, they’re going to start jumping in again,” Yawger said.

OPEC+, which is responsible for about half of the world’s oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand – especially from top crude importer China – and rising output elsewhere have forced it to postpone the plan several times.

“While OPEC+’s decision to hold off strengthens fundamentals in the near term, it could be seen as an implicit admission that demand is sluggish,” analysts at HSBC Global Research said.

Bank of America forecast that increasing oil surpluses will drive the price of Brent to an average $65 a barrel in 2025, while oil demand growth will rebound to 1 million barrels per day (bpd) next year, the bank said in a note on Friday.

HSBC, meanwhile, now expects a smaller oil market surplus of 0.2 million bpd, from 0.5 million bpd previously, it said in a note.

Brent has largely stayed in a tight range of $70-$75 per barrel in the past month, as investors weighed weak demand signals in China and heightened geopolitical risk in the Middle East.

“The general narrative is that the market is stuck in its rather narrow range. While immediate developments might push it out of this range on the upside briefly, the medium-term view remains rather pessimistic,” PVM analyst Tamas Varga said.

Also pressuring prices was the U.S. rig count, which grew for the first time in eight weeks, energy services firm Baker Hughes (NASDAQ:) said on Friday in its closely followed report.

Baker Hughes said oil rigs rose five to 482 this week, their highest level since mid-October, while gas rigs rose by two to 102, the highest since early November.

Despite this week’s rig increase, Baker Hughes said the total count was still down 37, or 6% below this time last year.

A mixed U.S. jobs report, which showed a strong rebound in hiring but also a slight rise in the unemployment rate, extended oil’s losses.

Commodities

Copper prices dip over 1% following Federal Reserve’s fewer rate cuts signal

Published

4 hours ago

December 19, 2024

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.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Commodities

Gold prices rebound from Fed-driven rout, hawkish comments cloud outlook

Published

4 hours ago

December 19, 2024

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.

Commodities

Oil slips on demand concerns after Fed signals slower rate cuts

Published

4 hours ago

December 19, 2024

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.