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Commodities

Oil prices settle lower but notch fourth-weekly gain on demand optimism

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Investing.com — Oil prices notched a fourth-weekly despite settling lower Friday, as traders cheered signs earlier this week that usual pick in summer energy demand is underway at time when weather-related supply disruptions remain in focus.  

At 14:30 ET (18:30 GMT), fell 1% to $86.54 a barrel, while fell 0.9% to $83.16 a barrel.

Crude prices were headed for a fourth week of strong gains, amid expectations that oil markets will tighten further in the coming months, although trading volumes were muted on account of the U.S. market holiday on Thursday.

Demand optimism in focus; Rig counts unchanged

U.S. travel demand in particular was a key source of this optimism, as analysts forecast record-high travel activity in the world’s biggest fuel consumer through the independence day week. 

Bets on stronger demand were furthered by data showing a massive drawdown in U.S. over the past week, as fuel retailers prepared for holiday travel. This week is also expected to have seen sharp drawdowns in crude inventories.

On the supply front, meanwhile, the number of oil rigs remained at 479 from a week ago, Baker Hughes reported Friday. That is well below the 622 rig counts that were operating at the end of the last year, signaling no immediate rush from drillers to boost activity. 

“Market sentiment has been supported this week by strong mobility indicators and intensifying geopolitical tension in the Middle East,” analysts at ANZ wrote in a note. 

Persistent concerns over supply disruptions in the Middle East also saw traders attach a bigger risk premium to oil prices, as tensions between Israel and Lebanon’s Hezbollah showed little signs of easing.

OPEC oversupply, weak economic readings cool oil gains

But whether oil prices will push further remained doubtful, especially as recent data showed members of the Organization of Petroleum Exporting Countries had increased production in recent months, increasing the likelihood that markets become less tight later this year.

Concerns over slowing economic growth in major oil consumers the U.S. and China also remained in play, especially following weak readings on non-manufacturing purchasing managers index data. 

Hawkish signals on U.S. interest rates from the Federal Reserve also factored into some market caution, while traders were on edge ahead of key data due later in the day, which is set to provide more cues on the U.S. economy.

Citi revisits its oil forecasts

Geopolitical tensions and extreme weather events remain risks for oil prices in the near term, according to analysts at Citi, in a note, pointing to conflicts in the Middle East and Hurricane Beryl as examples.

However, despite these factors supporting prices in the $80s a barrel currently, Citi sees reasons for a potential softening later in the year.

“Underlying physical market strength looks set to turn softer,” Citi stated, adding that while demand signals are mixed, with some bright spots like higher-than-expected gasoline demand in the US, it remains lower year-over-year.

Citi maintained its 3-month Brent price target of $82 per barrel, but lowered its 6-12 month target to $72 per barrel, citing a potential supply glut post-summer.

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

Commodities

Oil prices steady; traders digest mixed US inventories, weak China data

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Investing.com– Oil prices steadied Thursday as traders digested data showing an unexpected increase in US product inventories, while weak economic data from top importer China weighed.

At 05:25 ET (10:25 GMT), expiring in March gained 0.1% to $76.25 a barrel, while rose 0.1% to $73.37 a barrel. 

The crude benchmarks had slumped more than 1% on Wednesday, but trading ranges, and volumes, are likely to be limited throughout Thursday with the US market closed to honor former President Jimmy Carter, ahead of a state funeral later in the session. 

China inflation muted in December 

Chinese inflation, as measured by the , remained unchanged in December, while the shrank for a 27th consecutive month, data showed on Thursday.

The reading pointed to limited improvement in China’s prolonged disinflationary trend, even as the government doled out its most aggressive round of stimulus measures yet through late-2024.

China is the world’s biggest oil importer, and has been a key source of anxiety for crude markets. Traders fear that weak economic growth in the country will eat into oil demand.

The country is also facing potential economic headwinds from the incoming Donald Trump administration in the US, as Trump has vowed to impose steep trade tariffs on Beijing. 

US oil product inventories rise sharply 

U.S. gasoline and distillate inventories grew substantially more than expected in the week to January 3, government data showed on Wednesday.

inventories grew 6.3 million barrels against expectations of 0.5 mb, while grew 6.1 mb on expectations of 0.5 mb. 

Overall crude also shrank less than expected, at 0.96 mb, against expectations of 1.8 mb.

The build in product inventories marked an eighth straight week of outsized product builds, and spurred concerns that demand in the world’s biggest fuel consumer was cooling.

While cold weather in the country spurred some demand for heating, it also disrupted holiday travel in several areas. 

EIA data also showed that US imports from Canada rose last week to the highest on record, ahead of incoming U.S. president Donald Trump’s plans to levy a 25% tariff on Canadian imports.

Canada has been the top source of U.S. oil imports for many years, and supplied more than half of the total U.S. crude imports in 2023.

Strength in the also weighed on crude prices, as the greenback shot back up to more than two-year highs on hawkish signals from the Federal Reserve. 

A strong dollar pressures oil demand by making crude more expensive for international buyers.

(Ambar Warrick contributed to this article.)

 

 

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Trump’s possible tariffs could put downward pressure on oil prices – RBC

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Investing.com – President-elect Donald Trump’s plan to implement sweeping import tariffs during his second term in the White House is potentially the “most bearish” policy development for the energy sector this year, according to analysts at RBC Capital Markets.

Trump, who is set to come to power in less than two weeks, has vowed to impose tariffs of as much as 10% on global imports into the US and 60% on items coming from China. He has also pledged to slap a 25% surcharge on products from Canada and Mexico.

Economists have flagged that the proposal would not only rattle global trade activity, but also threaten to reignite inflationary pressures and spark possible retaliation.

The uncertainty in markets was heightened on Wednesday after CNN reported that Trump is mulling declaring a national economic emergency in order to provide the legal underpinning for the tariffs. Earlier this week, Trump also denied a separate report that his team was mulling scaling back the levies to cover only critical goods.

In a note to clients on Thursday, analysts at RBC led by Helima Croft said that while the ultimate scope of the tariffs remains unclear, the headline duties on China could soften demand in the country and place downward pressure on oil prices. China is the world’s largest crude importer.

Business leaders with significant ties to China may advise Trump to stay away from instituting strict tariffs on the country, Croft predicted.

“We have also heard a view in Washington that President Trump could be amenable to a deal with China if Beijing offered to make large headline purchases of US goods, such as aircraft or even US [liquefied natural gas] imports,” Croft wrote.

“Beijing could also potentially seek to trade a reduction in Iranian crude imports for a tariff reprieve.”

However, Croft flagged that the overall market effect of the tariffs is still “challenging to forecast” because the Trump administration — unlike a prior round of trade tensions in 2018 — will have to weight the impact of the policies with broader macroeconomic worries “still front of mind for many in Washington”.

(Reuters contributed reporting.)

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Gold prices edge higher; demand boosted by Trump-inspired uncertainty

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Investing.com– Gold prices edged higher Thursday, continuing the recent gains, as heightened uncertainty over a hawkish Federal Reserve and President-elect Donald Trump’s plan for trade tariffs fueled some safe haven demand.

At 06:15 ET (11:15 GMT), {68|Spot gold}} rose 0.4% to $2,683.84 an ounce, while expiring in February rose 0.3% to $2,668.60 an ounce. 

Trading activity is likely to be limited Thursday, with US traders on holiday to honor former President Jimmy Carter, with a state funeral due later in the session.

Safe haven demand on economic uncertainty

Bullion prices benefited from some safe haven demand this week, as uncertainty over Trump’s trade and immigration policies dented risk appetite.

A CNN report said Trump could declare a national economic emergency to legally justify his plans to impose universal trade tariffs.

Concerns over Trump’s policies also came into focus after the of the Fed’s December meeting showed policymakers expressing some concerns over sticky inflation.

Specifically, Fed officials were growing concerned that Trump’s expansionary and protectionist policies could underpin inflation in the long term.

The minutes also largely reiterated the Fed’s plans to cut interest rates at a slower pace in 2025, after the central bank effectively halved its projected rate cuts to two from four in 2025.

Treasury yields shot up after the Fed’s minutes, as did the dollar.

Higher for longer rates bode poorly for non-yielding assets such as metals, given that they increase the opportunity cost of investing in the sector. 

Other precious metals were edged higher Thursday. fell 0.1% to $983.85 an ounce, while rose 0.8% to $30.930 an ounce. 

Copper rises as weak China inflation fuels stimulus hopes

Benchmark on the London Metal Exchange rose 0.7% to $9,093.0 a ton, while March rose 1.2% to $4.3115 a pound.

Chinese were flat in December, while shrank for a 27th consecutive month, indicating little improvement in disinflation.

Inflation remained weak even as Beijing doled out its most aggressive round of stimulus measures through late-2024.

But Thursday’s inflation data fueled increased bets that Beijing will do more to shore up Chinese growth, especially on the fiscal front.

(Ambar Warrick contributed to this article.)

 

 

 

Among industrial metals, copper prices firmed as weak inflation data from top importer China spurred bets on more stimulus measures from Beijing. 

But metal markets remained under pressure from strength in the dollar, which came back in sight of over two-year highs on hawkish signals from the Fed. 

 

 

 

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