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Commodities

Oil prices lower on demand jitters, hopes for Gaza truce; OPEC+ meeting eyed

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Investing.com– Oil prices slipped to weekly loss after settling lower Friday, as fresh hopes on a Gaza ceasefire and ongoing demand concerns weighed on sentiment ahead of the weekend’s meeting of top crude producers.

At 14:08 ET (18:08 GMT),  fell 0.3% to $81.62 a barrel, while fell 1.2% to $76.99 a barrel.

Hamas-Israel truce back in focus

Israel agreed to a deal that would lead to a “lasting” ceasefire in the Gaza Strip, US President Joe Biden said Friday, referring to a three-phase ceasefire proposal. 

The first phase, lasting six weeks, calls for complete ceasefire, and the withdrawal of Israeli forces from all populated areas of Gaza. The second phase seeks to end hostilities in Gaza permanently as well as the withdrawal of Israeli forces from the territory and would see the release of all remaining living hostages in Gaza. The final phase of the deal, meanwhile, involves a reconstruction plan for Gaza.

It remains to seen, however, whether Hamas will accept the proposal.

The news eased Middle East tensions, helping to further cool bets on a oil supply-risk premium in the region. 

China PMIs disappoint, add to demand fears

Purchasing managers index data showed on Friday that Chinese manufacturing activity unexpectedly shrank in May, while non-manufacturing activity grew at a slower-than-expected pace.

The readings indicated that Chinese business activity was cooling after a brief rebound over the past two months, and ramped up concerns over sluggish demand in the world’s biggest oil importer.

The data also indicated that bumper stimulus measures from Beijing had so far provided only limited support for the Chinese economy, and that more supportive measures were needed.

Baker Hughes rig count falls 

The number of oil rigs operating in the U.S. fell to 496 from 497, according to data Friday from energy services firm Baker Hughes.  

The fall in rig count comes as concerns about weaker demand resurfaced following data Thursday pointing to weaker gasoline demand.   

U.S. saw a bigger-than-expected draw in the week to May 24 – at nearly 4.2 million barrels against expectations of 1.6 mb.

But grew 2 mb, more than expectations for a build of 1 mb, while grew 2.5 mb against expectations for a build of 0.4 mb. 

The builds in the product inventories raised concerns that demand in the world’s biggest fuel consumer was sluggish going into the travel-heavy summer season. 

Dollar flat as inflation data meet expectations 

The dollar was steady, doing little to help spark a bid in crude, as showing the core personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, rose 2.8% in April, unchanged from a month earlier, matching investor expectations. 

Fears of high-for-longer U.S. interest rates have been a key weight on oil prices in recent sessions, amid growing concerns that high rates will dent economic activity in the coming months, stymying oil demand. 

OPEC+ meets over weekend

Also in the spotlight is an upcoming meeting of the Organization of Petroleum Exporting Countries and allies, known at OPEC+, with the cartel set to discuss future production levels. 

The group is currently cutting output by 5.86 million barrels per day, equal to about 5.7% of global demand.

The meeting will now be live rather than virtual adding to optimism that the group will likely agree to extend production curbs. 

OPEC+ is working on a complex deal to be agreed at its meeting on Sunday that would allow the group to extend some of its deep oil production cuts into 2025, Reuters reported, citing sources.

(Peter Nurse, Ambar Warrick contributed to this article.)

Commodities

BofA: Gold could hit $3,000/oz over the next 12-18 months

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Bank of America analysts predict a potential surge in gold prices, with estimates reaching $3,000 per ounce within the next 12-18 months. However, they acknowledge current market flows don’t necessarily support this price point.

BofA explains that reaching $3,000 hinges on increased non-commercial demand. They believe a Federal Reserve rate cut could trigger this, leading to inflows into physically backed gold ETFs and higher trading volumes.

Central bank purchases are another key factor. “Ongoing central bank purchases are also important, and a push to reduce the share of USD in foreign exchange portfolios will likely prompt more central bank gold buying,” BofA says.

This shift is driven by gold’s status as a long-term value store, hedge against inflation, and effective portfolio diversifier.

BofA’s model considers various factors, including mine output, recycled gold, and jewelry demand. However, to estimate a balanced market price, they also need to factor in investment demand. Currently, non-commercial purchases support an average price of $2,200 per ounce year-to-date. A significant increase could push prices towards $3,000.

The report highlights a recent World Gold Council survey indicating central banks’ intention to purchase more gold. This aligns with the growing concerns around US Treasury market fragility, potentially prompting further diversification into gold by both central banks and private investors.

While a Treasury market breakdown isn’t BofA’s base case, they acknowledge it as a potential risk. “Under this scenario, gold may fall initially on broad liquidations but should then gain,” they conclude.

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Commodities

Oil edges higher as demand expectations offset dollar strength

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By Paul Carsten

LONDON (Reuters) -Oil prices firmed slightly on Monday as traders weighed support from expected summer demand and geopolitical tensions against a stronger dollar.

futures were up 22 cents, or 0.3%, at $85.46 a barrel by 1053 GMT. U.S. West Texas Intermediate crude futures were up 19 cents, or 0.2%, at $80.92. Both benchmarks gained about 3% last week for their second consecutive weekly gains.

“The chief underlying reason behind the price strength … is the growing confidence that global oil inventories will inevitably plunge during the summer in the northern hemisphere,” said Tamas Varga of oil broker PVM, referring to seasonal demand for oil products.

Geopolitical risks in the Middle East and a ramp-up in Ukrainian drone attacks on Russian refineries are also underpinning oil prices.

EU countries on Monday agreed a new package of sanctions against Russia over its war in Ukraine, including a ban on reloading Russian liquefied (LNG) in the EU for further shipment to third countries.

However, a strengthening U.S. currency has made dollar-denominated commodities less attractive for holders of other currencies.

“The U.S. dollar … appears to have broken higher following better U.S. PMI data on Friday night and political concerns ahead of the French election,” said IG analyst Tony Sycamore.

The , measuring performance against six major currencies, climbed on Friday and was up slightly on Monday after data showed U.S. business activity at a 26-month high in June.

© Reuters. FILE PHOTO: A view of the Phillips 66 Company's Los Angeles Refinery (foreground), which processes domestic & imported crude oil into gasoline, aviation and diesel fuels, and storage tanks for refined petroleum products at the Kinder Morgan Carson Terminal (background), at sunset in Carson, California, U.S., March 11, 2022. Picture taken March 11, 2022. REUTERS/Bing Guan/File Photo

In Ecuador, state oil company Petroecuador has declared force majeure on deliveries of Napo heavy crude for export after the shutdown of a key pipeline and oil wells owing to heavy rain, sources said on Friday.

In the United States, the number of operating oil rigs fell by three to 485 last week, the lowest since January 2022, Baker Hughes said in a report on Friday.

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Commodities

Gold prices creep higher; strong dollar, inflation jitters weigh

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Investing.com– Gold prices rose slightly in Asian trade on Monday but remained within a tight trading range amid pressure from a stronger dollar, and as traders positioned for key U.S. inflation data this week. 

The yellow metal has hovered largely around the low $2,300 an ounce level for about two weeks, as uncertainty over U.S. interest rates kept traders averse to the yellow metal. 

rose 0.2% to $2,325.52 an ounce, while expiring in August rose 0.3% to $2,337.85 an ounce by 00:04 ET (04:04 GMT). 

Gold pressured by strong dollar, PCE data awaited 

Gold prices were pressured chiefly by strength in the , as the greenback hovered around its strongest levels since early-May. 

Strength in the dollar came as traders priced out expectations of interest rate cuts by the Federal Reserve, especially after strong purchasing managers index data on Friday.

The reading pushed up fears that strength in the U.S. economy will give the Fed more headroom to keep rates high for longer.

Focus now turns largely to upcoming data, due on Friday. The reading is the Fed’s preferred inflation gauge, and is likely to factor into expectations for interest rate cuts. 

The PCE data is expected to show some cooling in inflation, but is expected to remain well above the Fed’s 2% annual target. 

The prospect of high for long interest rates bodes poorly for precious metals, given that it increases the opportunity cost of investing in non-yielding assets. 

Other precious metals retreated on Monday after remaining largely rangebound in recent weeks. fell 0.3% to $1,005.10 an ounce, while fell 0.2% to $29.895 an ounce.

Copper prices muted amid dollar strength, China jitters 

Strength in the dollar also weighed on industrial metal prices, with copper also coming under pressure from fears of  a trade war between China and the European Union.

Benchmark on the London Metal Exchange fell 0.1% to $9,677.50 a tonne, while one-month steadied at $4.4205 a pound.

Sentiment towards China, the world’s biggest copper importer, was battered after the EU imposed tariffs on Chinese imports of electric vehicles. The move drew ire from Beijing, with Chinese officials raising the possibility of retaliatory tariffs and a potential trade war between the two economic giants.

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