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Commodities

Oil prices settle higher to wrap up weekly gain as economic data lift demand hopes

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Investing.com — Oil prices settled higher Friday, wrapping up the week with a win as signs of slowing U.S. inflation boosted rate cut hopes just as China rolled out more stimulus, giving a big boost to hopes for firmer demand.

At 14:30 ET (19:30 GMT), rose 0.8% to $83.92 a barrel and gained 0.9% to $79.57 a barrel.

Both contracts ended the week with gains of between 0.9% and nearly 1%, with a bulk of gains coming after U.S. readings came in softer than expected.

Weekly gains likely

The April CPI reading battered the and increased expectations that the Federal Reserve could begin trimming rates as soon as September, with looser monetary conditions boding well for crude demand.

But this notion was somewhat offset by a string of Fed officials warning that the central bank needed more convincing that inflation was coming down, before it could begin trimming rates.

Baker Hughes rig count up

Oilfield services firm Baker Hughes reported Friday its weekly U.S. rig count rose by one to 497.

The positive end to the week for oil prices comes ahead of CFTC positioning data slated for release later in the day that will signal how healthy appetite is for bullish bets on oil.

Oil markets see mixed cues

Crude markets were also grappling with mixed cues on demand this week. A bigger-than-expected draw in U.S. pushed up optimism over improving demand as the travel-heavy summer season approaches.

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But this was offset by the International Energy Agency slightly trimming its annual demand forecast, citing uncertainty over the global economy amid sticky inflation and potentially high for longer rates.

On the other hand, the Organization of Petroleum Exporting Countries maintained its demand forecast for 2024, citing an eventual economic recovery in China and potentially lower interest rates later in the year.

The OPEC is also expected to maintain its current pace of production cuts beyond end-June, presenting a tighter outlook for supply.

“Oil inventories falling by less than we had expected in recent weeks and U.S. interest rates staying higher for longer are likely to have an impact on OPEC+’s policy of being proactive, preemptive, and precautionary,” said analysts at UBS, in a note dated May 14.

“We now expect the eight member states with voluntary production cuts to extend them by at least three months ahead of the ordinary meeting at the beginning of June.”

More China cues on tap

China said it will begin a massive, $1 trillion bond issuance this week- Beijing’s first major act of fiscal stimulus as it struggles to shore up a sluggish economic recovery.

Chinese grew more than expected in April, indicating that a recovery in the country’s massive manufacturing sector remained on track amid increased government support.

But signs of weak consumption in the country persisted, as growth in largely missed expectations in April, while China’s new home prices fell at the fastest monthly pace in over nine years.

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China is widely expected to hold benchmark lending rates steady on Monday, although expectations are growing for a cut in the mortgage reference rate as the authorities scramble to boost housing.

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

Commodities

Oil prices steadies despite weak China GDP, stronger dollar

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Investing.com– Oil prices steadied Monday despite underwhelming growth data from China presenting a weak outlook for demand. 

At 09:20 ET (13:20 GMT), slipped marginally to $85.02 a barrel, while dropped slightly to $81.00 a barrel. 

Chinese GDP underwhelms 

Concerns over waning oil demand in top importer China were furthered Monday by the release of gross domestic product data showing the economy grew less than expected in the second quarter.

grew 4.7% year-on-year, less than a rise of 5.1% expected and slowing from the 5.3% seen in the prior quarter.

The world’s second-largest economy registered its weakest growth since the first quarter of 2023, with the softer reading largely driven by laggard consumer spending, which slowed in the face of heightened economic uncertainty. 

While the country still remained on track to meet its 5% annual GDP target, Monday’s data showed that it faced increased economic headwinds. This could bode poorly for crude demand in the world’s biggest oil importer. 

Additionally, China’s imports fell 2.3% in the first half of this year to 11.05 million barrels a day, amid disappointing fuel demand.

“Given that China is expected to make up the majority of oil demand growth this year, it is not surprising signs of weakness in Chinese demand are a concern,” said analysts at ING, in a note.

Focus is now squarely on the Third Plenum of the Chinese Communist Party, set to begin from this week, for more cues on the economy. 

The event is a meeting of top Chinese officials, and could potentially yield more stimulus measures to support the economy.

Dollar gains after Trump shooting 

Also weighing was the rise in the against a basket of currencies on Monday, seeing some safe haven demand after a shooting at a Trump rally in Butler, Pennsylvania on Saturday.

A stronger dollar makes commodities, like oil, which are denominated in the greenback, more expensive for foreign buyers.  

Trump’s ear was grazed by a bullet, but he was otherwise unharmed. He is likely to make an appearance at the 2024 Republican convention later this week, and is widely expected to be officially nominated as the Republican candidate for the 2024 presidential elections. 

Analysts speculated that the shooting could improve Trump’s prospects for a victory over Joe Biden in the race. 

But the move also ramped up uncertainty over the U.S. political climate, largely offsetting optimism over lower interest rates in the country. 

The volatile situation in the Middle East also continues to provide a geopolitical premium for oil.

(Ambar Warrick contributed to this article.)

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Commodities

Oil holds its ground as Chinese demand concerns weigh

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By Alex Lawler and Arunima Kumar

LONDON (Reuters) – Oil held its ground on Monday as downward pressure from concern about demand in top importer China offset support from strong demand elsewhere, OPEC+ supply restraint and geopolitical tensions in the Middle East.

The reaction of the wider markets to the attempted assassination of former U.S. President Donald Trump was in focus. The U.S. dollar steadied after gains earlier in the session that had weighed on oil.

futures were down 20 cents, or 0.2%, at $84.83 a barrel by 1220 GMT. U.S. West Texas Intermediate crude lost 14 cents, or 0.2%, to $82.07.

“Chinese data including refinery runs and crude imports are not supportive,” said UBS analyst Giovanni Staunovo. “But demand growth elsewhere is still healthy.”

Crude fell last week after four weeks of gains as hopes of strong U.S. summer demand were countered by concern over demand in China.

Chinese data on Monday added to that concern. The world’s second-largest economy grew by 4.7% in the April to June quarter, official figures showed, the slowest growth since the first quarter of 2023.

On Friday separate figures showed China’s imports fell 2.3% in the first half of this year.

However, the volatile situation in the Middle East continues to provide a geopolitical premium for oil, though ample spare capacity held by Saudi Arabia and other members of OPEC has limited price support, analysts say.

“Geopolitical tensions in the Middle East, including volatile Israel-Hamas clashes and stalled peace talks, could remain a driving factor for oil prices due to concerns over regional stability,” said George Pavel, general manager at Capex.com Middle East.

The oil market is also broadly underpinned by supply cuts from the OPEC+ group of producers. Iraq’s oil ministry said at the weekend that it will compensate for overproduction since the beginning of 2024.

Market sentiment was supported by a U.S inflation report for June that came in below expectations, raising hopes for an interest rate reduction, though challenges persisted as China’s crude imports in June declined, highlighting ongoing market difficulties, Pavel added.

© Reuters. FILE PHOTO: A pumpjack operates at the Vermilion Energy site in Trigueres, France, June 14, 2024. REUTERS/Benoit Tessier/File Photo

Federal Reserve Chair Jerome Powell is due to speak later in the day, and is likely to be asked for his reaction to last week’s subdued inflation reading.

Markets are pricing in a 96% chance the Fed will cut rates in September, up from 72% a week earlier. [FEDWATCH]

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Gold prices edge lower as dollar firms after Trump attack

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Investing.com– Gold prices fell slightly in early Asian trade on Monday, remaining in sight of a record high but seeing few increases in safe haven demand after an alleged assassination attempt on former U.S. President Donald Trump. 

Safe haven buying, in the face of increased U.S. political uncertainty, favored the dollar, with the greenback recovering a measure of recent losses on Monday. Still, the dollar remained weak amid growing bets on U.S. interest rate cuts, which buoyed gold in recent weeks. 

fell 0.2% to $2,407.49 an ounce, while expiring in August fell 0.4% to $2,412.20 an ounce by 20:34 ET (00:34 GMT). 

US political uncertainty grows after Trump attack

Markets were still grappling with an uncertain political outlook for the U.S. after a failed assassination attempt on Trump at a campaign rally in Butler, Pennsylvania on Saturday.

The assailant shot at Trump and hit him in the ear, although the former president was still seen urging supporters to “fight!” 

Heightened political jitters in the wake of the attack were initially expected to support safe haven plays into gold. But such a scenario did not play out as expected, as the dollar benefited from some inflows, while the yellow metal largely retreated after the attack. 

Analysts speculated that the attack improved Trump’s chances of a victory over Democratic frontrunner Joe Biden later this year. A Trump presidency is expected to potentially add to inflation and debt- a scenario that usually results in a stronger dollar. 

The rose about 0.2% against a basket of currencies, although it was nursing steep losses over the past two weeks. 

Traders were somewhat cautious towards gold with the yellow metal trading close to a record high of $4,050 an ounce hit earlier this year. Historically, gold has always fallen sharply after marking brief record highs. 

The yellow metal, along with broader metal markets, benefited greatly from increased speculation over interest rate cuts by the Federal Reserve. Soft consumer price index inflation reading from last week saw traders ramp up bets the Fed will cut rates by 25 basis points in September- a notion that battered the dollar. 

Other precious metals also retreated on Monday, seeing little immediate safe haven demand. 

fell 0.6% to $1,007.65 an ounce, while fell 0.9% to $30.890 an ounce. 

Copper edges lower as China woes mount ahead of GDP data

Among industrial metals, copper prices fell on Monday, extending losses from last week amid persistent concerns over top importer China.

Data on Friday showed China’s imports of the red metal fell in June, raising questions over domestic demand. 

Benchmark on the London Metal Exchange fell 0.4% to $9,841.50 a tonne, while one-month fell 0.4% to $4.5633 a pound. 

Focus is now squarely on key Chinese data for the second quarter, due later on Monday. The reading is expected to show some cooling in growth, which bodes poorly for copper demand.

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