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Commodities

Oil prices set for strong weekly gains; surplus concerns remain

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Investing.com– Oil prices rose Friday, on track for hefty weekly gains, on optimism around top importer China’s fresh stimulus measures as well as the potential for additional sanctions on Russia.

At 08:15 ET (13:15 GMT),  traded 0.4% higher to $73.71 a barrel, and gained 0.4% to $70.29 a barrel.

Both contracts were on course for gains of over 4% this week, the first weekly rise since the end of November.

China stimulus cheer keeps oil prices supported

China announced plans to boost its budget deficit, increase debt issuance, and ease monetary policy to sustain economic growth amid anticipated trade tensions with the U.S., as highlighted in a state media readout from the Central Economic Work Conference held on Dec. 11-12.

Analysts interpret this shift in tone as a signal that China is prepared to take on greater debt to prioritize economic growth over managing financial risks in the short term. These measures aim to stimulate industrial activity, infrastructure development, and consumer spending, which can increase energy consumption, particularly for oil.

On top of this, US Treasury Secretary Janet Yellen stated that a weaker global oil market could present a chance for additional action against Russia’s energy sector, as the U.S. continues to work to hinder Moscow’s ability to wage war against Ukraine. 

“A more comfortable oil market provides the opportunity to tighten sanctions on Russia. However, while they might want to target some Russian oil export volumes, they do not wish to cut off the bulk of these flows as this would push the market into a deep deficit, pushing prices significantly higher,” said analysts at ING, in a note. 

IEA oversupply outlook drags oil prices

The International Energy Agency (IEA) slightly raised its demand forecast for next year on Thursday, but maintained its projection that the oil market will remain adequately supplied.

Market sentiment has also been influenced by broader economic concerns, including weaker-than-expected demand growth in China, traditionally a key driver for global oil consumption. The IEA noted that China’s oil demand has been contracting, further underscoring the expected oversupply scenario.

The Organization of the Petroleum Exporting Countries, known as OPEC, had lowered its forecasts for oil demand growth in 2024 and 2025, on Wednesday, its fifth consecutive downward revision. The cartel had also recently extended its run of supply cuts.

Despite the bearish supply forecast, refinery runs are picking up in December, and seasonal factors may lend temporary support to prices, according to IEA. However, traders remain cautious about the outlook as rising supply and tepid demand recovery weigh on the balance sheets​.

(Ayushman Ojha contributed to this article.)

Commodities

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

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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.

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Commodities

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

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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.

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Commodities

Oil slips on demand concerns after Fed signals slower rate cuts

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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.

© Reuters. FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford//File Photo

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.

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