Commodities
Oil prices inch lower as Fed, China fears dent outlook
© Reuters.
Investing.com– Oil prices fell slightly in Asian trade on Tuesday amid growing fears that higher-for-longer U.S. interest rates will weigh on demand, while renewed concerns over China’s economy also dented sentiment.
Strength in the put a damper on oil prices, as hawkish signals from the Federal Reserve saw the greenback scale a 10-month peak, pushing up crude costs for international buyers.
Markets also grew increasingly wary of more increases in U.S. rates, which are expected to weigh on economic activity this year and potentially hurt crude demand. The Fed had recently warned that higher energy costs, in the wake of surging oil prices, will likely buoy inflation and further the need for higher rates.
In addition to Fed-related headwinds, oil markets were also grappling with renewed fears of an economic slowdown in China, the world’s largest oil importer, as analysts soured further on its growth prospects this year.
The negative trends saw traders question whether oil prices had the capacity for more gains, especially after they surged to 10-month highs earlier in September.
fell slightly to $91.69 a barrel, while fell 0.1% to $89.58 a barrel by 21:04 ET (01:04 GMT).
China fears persist amid GDP downgrades, PMIs awaited
A string of major brokerages and investment banks- most recently S&P Global and HSBC- downgraded their outlook for Chinese economic growth this year, with analysts warning that gross domestic product could only grow 4.8% in 2023- lower than the government’s 5% forecast.
The downgrades come just a few days before key Chinese (PMI) data for September, which is expected to show continued weakness in business activity.
While PMI readings for August had shown some improvement in manufacturing activity, service sector growth declined through the month.
Fears of a meltdown in the China’s massive property market also came to fore this week after embattled developer China Evergrande Group (HK:) warned that it was unable to issue new debt.
While China’s oil imports have remained largely robust this year, the country’s appetite for fuel has struggled to reach pre-COVID levels. Beijing also set higher fuel export quotas for the year, indicating that local demand remained weak.
On the supply front, expectations of tighter fuel markets in the northern hemisphere were slightly dented after Russia said its planned fuel export ban will be somewhat less severe than initially expected.
But oil markets are still expected to tighten substantially this year, following deep production cuts in Saudi Arabia and Russia. U.S. rig counts were also seen dropping to a 1-½ year low last week, while recent data showed a consistent decline in .
JPMorgan analysts expect oil prices to trend between $90 and $100 in the coming year.
Investing.com– Gold prices rose slightly in Asian trade on Thursday, but were nursing a tumble from record highs as anxiety over the U.S. election and a shifting outlook for interest rates favored the dollar.
But despite Wednesday’s losses, the yellow metal was still trading higher for the week, with heightened safe haven expected to keep gold prices underpinned in the coming days.
rose 0.3% to $2,724.70 an ounce, while expiring in December rose 0.3% to $2,737.15 an ounce by 00:23 ET (04:23 GMT). Spot prices hit a record high of $2,758.53 an ounce earlier this week.
Gold remains underpinned by safe haven demand
The yellow metal still retained most of its gains this week as safe haven demand remained high in the face of a tight U.S. presidential election and heightened tensions in the Middle East.
Israeli officials presented harsh rhetoric against Iran on Wednesday, raising concerns that an Israeli strike against Tehran will cause a dire escalation in the war. Israel also kept up its offensives against Hamas and Hezbollah.
In the U.S., Republican nominee Donald Trump was seen gaining an edge over Vice President Kamala Harris in the upcoming election, which is less than two weeks away.
But markets still expect a hotly contested race, keeping uncertainty high over the future of U.S. politics.
Increased safe haven demand kept traders largely biased towards gold and other precious metals, also helping them weather strength in the dollar, as the greenback benefited from growing expectations that interest rates will fall at a slower pace.
Other precious metals were positive on Thursday and were also sitting on gains this week. rose 0.7% to $1,037.80 an ounce, while rose 0.6% to $34.050 an ounce.
Copper prices rise with PMIs in focus
Among industrial metals, copper prices rose on Thursday with focus turning to upcoming purchasing managers index readings from the and .
Benchmark on the London Metal Exchange rose 0.7% to $9,581.50 a ton, while December rose 0.7% to $4.3637 a pound.
Both contracts were nursing losses this week as traders held out for more cues on stimulus in top importer China. A meeting of the country’s National People’s Congress is set to take place later this month, with the government expected to then decide on plans for more fiscal spending.
LONDON (Reuters) -Oil prices were broadly stable on Thursday as uncertainty around conflict in the Middle East and reports of North Korean troops ready to help Russia in Ukraine kept traders on edge ahead of the U.S. presidential election.
futures were up 29 cents, or 0.4%, at $75.25 a barrel by 1157 GMT. U.S. West Texas Intermediate crude futures rose 33 cents, or 0.5%, to $71.10.
Oil prices have gained about 3% this week after shedding more than 7% last week on a perceived calming of Middle East tensions and concerns of oversupply and weak demand.
“The opposing forces of economic anxiety, loose oil balance and potential war-related supply disruptions will ensure that no clear oil price direction emerges in the immediate future whilst the risk remains skewed to the downside in the medium term,” said Tamas Varga of oil broker PVM.
On Wednesday the U.S. said for the first time that it had seen evidence North Korea has sent 3,000 troops to Russia for possible deployment in Ukraine, a move that could mark significant escalation in Russia’s war against its neighbour.
In the Middle East, an exchange of heavy fire between Israel and Hezbollah heightened supply concerns. Israeli strikes were also reported to have hit the Syrian capital Damascus early on Thursday.
Washington, meanwhile, continues to push for peace between Israel and Iran-backed groups Hezbollah and Hamas before the U.S. presidential election on Nov. 5, which could alter U.S. Middle East and oil policy.
“Trump is leading over (Kamala) Harris based on current data from betting markets and Trump has proposed making the U.S. a major oil supplier,” said OANDA senior market analyst Kelvin Wong, adding that such a move could depress prices.
While betting markets put Trump ahead, other polls show the result is too close to call.
Investing.com– Oil prices rose Thursday after Israel escalated its rhetoric against Iran, raising the possibility of a hit to supply from this oil-rich region.
At 08:25 ET (12:25 GMT), rose 0.6% to $75.44 a barrel, while rose 0.7% to $71.26 a barrel.
Israeli defense minister touts Iran strike
Traders were positioning for an escalation in the Middle East conflict after Israeli Defence Minister Yoav Gallant told air force crews that the world would understand Israel’s strength after striking Iran.
His comments were made amid growing anticipation of a strike against Iran in retaliation for an October 1 attack, which was Tehran’s second major attack on Israel in six months.
Fears of an escalation in the conflict have been a key driver of oil prices in recent months, with traders attaching a risk premium to crude on fears that Israel could attack Iran’s oil and nuclear infrastructure.
Israel also ramped up its offensive against Hamas and Hezbollah this week, prompting retaliation from the two military groups.
The escalation in the conflict comes despite a bigger push from the U.S. to broker peace in the Middle East before the Nov. 5 presidential election.
PMIs in focus
Crude prices were nursing two weeks of steep losses amid heightened concerns over slowing demand.
These concerns were added to after data showed that eurozone business activity remained in contractionary territory, as demand from both home and abroad fell despite firms barely increasing their prices.
The preliminary composite eurozone Purchasing Managers’ Index, compiled by S&P Global, nudged up to 49.7 in October from September’s 49.6 but remained below the 50 mark separating growth from contraction for a second straight month.
Business activity in Germany, Europe’s largest economy, shrank in October but less steeply than in September, while the dominant services sector in France contracted at its sharpest rate in seven months, dragged down by sluggish new orders.
The PMI for Britain, outside the European Union, showed businesses reported their slowest growth in 11 months.
, due later in the session, is expected to be buoyed by strength in the services sector.
Any more signs of resilience in the U.S. economy are likely to further bets on a slower pace of interest rate cuts by the Federal Reserve – a notion that has dented oil markets in recent weeks.
Crude to fall further – Macquarie
prices are on a three-month losing streak and are likely to continue to stumble through year end, analysts at Macquarie said, as weak supply and demand fundamentals will likely continue to take shine of any boost from Middle East geopolitical pressure or stimulus from China.
“[W]e anticipate a decrease in crude price through YE24 as bearish fundamentals outweigh geopolitical factors,” Macquarie analysts said in a recent note.
The supply and demand outlook is at the heart of the weak fundamentals pressuring oil prices. The analysts expect a pick up in growth in the fourth quarter, driven by US production growth and the return of OPEC+ barrels at a time when oil demand growth trends below 1M barrels per day.
U.S. inventory data showed a bigger-than-expected build in , according to official data released on Wednesday.
(Ambar Warrick contributed to this article.)
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