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Oil surges nearly 6% after Israel begins ground raids into Gaza

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Oil surges nearly 6% after Israel begins ground raids into Gaza
© Reuters. FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base/File Photo

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices leapt nearly 6% on Friday, with posting its highest weekly gain since February, as investors priced in the possibility that the conflict in the Middle East could widen as Israel began ground raids inside the Gaza Strip.

Israel’s announcement marked a shift from an air war to ground operations to root out Hamas fighters a week after the militant Palestinian group’s deadly rampage in southern Israel.

Brent futures settled up $4.89, or 5.7%, at $90.89 per barrel. U.S. West Texas Intermediate (WTI) crude gained $4.78, or 5.8%, to $87.69 a barrel.

Both benchmarks posted their highest daily percentage gains since April.

Brent also recorded a weekly gain of 7.5%, its biggest such increase since February. WTI climbed 5.9% for the week.

The conflict in the Middle East has had little impact on global oil and gas supplies, and Israel is not a big producer. Investors and market observers, however, are assessing how it could escalate and what it might mean for supplies from nearby countries in the world’s top oil producing region.

Some residents in Gaza were abandoning their homes on Friday to escape from the path of an Israeli onslaught, after Israel ordered more than a million people to leave the northern half of the territory within 24 hours. Hamas told them not to go.

Iran’s Oil Minister Javad Owji said on Friday oil prices are expected to reach $100 per barrel due to the current situation in the Middle East, according to the ministry’s news agency SHANA.

Iran’s Foreign Minister Hossein Amirabdollahian on Friday discussed the Israeli-Hamas conflict with the head of the powerful Tehran-backed Lebanese armed group Hezbollah, which has launched its own cross-border attacks on Israel.

If the U.S. tightens enforcement of sanctions on Iran’s oil exports due to any role it may have in the conflict, then Iran’s oil supply could fall.

Saudi Arabia is putting U.S.-backed plans to normalize ties with Israel on ice, two sources familiar with Riyadh’s thinking said, signalling a rapid rethinking of its foreign policy priorities as the conflict escalates.

That may have implications for supply as Saudi Arabia told the White House it was willing to boost oil production early next year to help secure the deal, the Wall Street Journal reported last week.

Also boosting prices was the U.S. move on Thursday to impose the first sanctions on owners of tankers carrying Russian oil priced above the Group of Seven’s price cap of $60 a barrel, an effort to close loopholes in the mechanism designed to punish Moscow for its invasion of Ukraine.

Russia is the world’s second-largest oil producer and a major exporter, and the tighter U.S. scrutiny of its shipments could curtail supply.

“The oil market is anticipating that the U.S. will more strictly enforce sanctions on both Russia and Iran, and that will lead to a reduction in supplies,” said Andrew Lipow, president of Lipow Oil Associates.

The Organization of the Petroleum Exporting Countries (OPEC) this week kept its forecast for growth in global oil demand, citing signs of a resilient world economy so far this year and expected further demand gains in China, the world’s biggest oil importer.

On the U.S. supply front, drillers this week added four oil rigs in the biggest weekly rise since March, Baker Hughes said. [RIG/U]

Money managers cut their net long futures and options positions in the week to Oct. 10 by 39,556 contracts to 240,204 during the period, the U.S. Commodity Futures Trading Commission (CFTC) said.

Commodities

Oil edges up as summer demand hopes offset downbeat China data

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By Alex Lawler

LONDON (Reuters) -Oil edged higher on Monday as hopes for a boost to demand from the summer driving season in the northern hemisphere offset Chinese data that underscored a bumpy recovery for the world’s biggest crude importer.

Apart from retail sales that beat forecasts due to a holiday boost, the flurry of Chinese data on Monday was largely downbeat. The data followed a survey on Friday showing U.S. consumer sentiment fell to a seven-month low in June.

Global benchmark futures were up 33 cents, or 0.4%, to $82.95 a barrel at 1212 GMT. U.S. West Texas Intermediate crude futures gained 25 cents, or 0.3%, to $78.70.

Last week, both benchmarks posted their first weekly gain in four weeks on elevated confidence that oil inventories are set to plunge as the summer season gets under way in the northern hemisphere amid continued OPEC+ supply cuts.

“The market initially responded negatively to mixed data from China,” said Ole Hansen of Saxo Bank.

“But the outlook for strong fuel demand into the coming quarter and Saudi reassurance about the October hike being subject to prevailing conditions and added focus on quota breakers to bring production down and into line all seems to be supporting.”

Saudi Arabia has said OPEC+’s planned fourth-quarter increase in output can be can paused or reversed if needed. Russia and Iraq, which have been pumping more than their OPEC+ quotas, pledged last week to meet their obligations.

Reports from OPEC and the International Energy Agency last week, although differing on the strength of oil demand growth this year, had supported confidence that inventories would be drawn down in the second half.

Still, BofA analysts said in a report that while the market consensus is for higher oil prices in the third quarter, there is a risk to prices if weak supply and demand balances persist.

© Reuters. FILE PHOTO: A view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel/File Photo

“It is not yet clear whether balances will firm enough in the third quarter to tip the market from a large apparent surplus into a deficit that can lift prices,” BofA analysts including Francisco Blanch wrote.

On the geopolitical front, concerns of a wider Middle East war lingered after the Israeli military said on Sunday that intensified cross-border fire from Lebanon’s Hezbollah movement into Israel could trigger serious escalation.

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Record copper prices likely to pause U.S. scrap shipments to China

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By Pratima Desai and Julian Luk

LONDON (Reuters) – China’s scrap imports have soared due to shortages of concentrate that is processed into refined metal used in the power and construction industries, but record high prices mean U.S. shipments are likely to pause.

Smelters in top copper consumer China have faced concentrate shortages since last year when First Quantum (NASDAQ:) lost the right to operate its Cobre mine in Panama, which accounted for 1% of global mined supply in 2022.

China’s copper waste and scrap imports overall climbed 25% to 783,004 tonnes in the first four months of this year compared to the same period in 2023, according to Trade Data Monitor (TDM).

TDM data also shows China’s scrap imports from the United States jumped 37% to 153,059 tonnes in January to April this year from the same period last year.

Copper scrap from the U.S. is priced at a discount to the CME price, which hit a record $5.1985 a lb or $11,460 a tonne on May 20 due to parties which had sold futures being forced to buy them back or roll over positions.

“Chinese buyers are deferring U.S. copper scrap shipments,” a source at a Chinese trading firm said, adding that China’s top scrap supplier was the United States.

The source said some Chinese buyers were looking to price U.S. scrap against copper on the London Metal Exchange (LME), trading at a discount to CME prices.

Deteriorating production at other mines, many in Latin America, has exacerbated concentrate shortages and Chinese smelters have imported more copper scrap to feed their furnaces and protect their margins.

China is home to half of the world’s copper smelters and the largest buyer of raw materials including concentrates and scrap.

Scrap typically accounts for about 9 million tonnes or roughly 30% of global copper supplies annually.

“Due to concentrate tightness copper smelters are processing more scrap and blister,” said Macquarie analyst Alice Fox.

© Reuters. FILE PHOTO: A worker loads copper cathodes into a warehouse near Yangshan Deep Water Port, south of Shanghai March 23, 2012. REUTERS/Carlos Barria/ File Photo

“Given the cost of physical collection and processing – during periods of significant price movement, scrap tonnages on a contained copper basis can move by up to one million tonnes per annum, effectively rebalancing the market during periods of high or low prices.”

Macquarie expects the gap between copper supply and demand to widen to 1.6 million tonnes in 2030 from a deficit around 86,000 tonnes this year.

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Crude oil edges higher; tone constructive despite weak Chinese data

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Investing.com — Oil prices edged higher Monday, continuing the previous week’s upbeat note despite some bumpy data out of China, the world’s biggest importer. 

By 08:35 ET (12.35 GMT), the futures traded 0.5% higher at $78.41 a barrel and the contract climbed 0.4% to $82.97 a barrel. 

Gains follow a winning week

The crude benchmarks recorded a winning week last week, their first in four weeks, buoyed by expectations that the Northern Hemisphere summer vacation season will boost fuel demand this summer. 

The monthly reports by both the and the , released last week, had pointed to inventories being drawn down in the second half of the year, even as they differed about the level of demand growth.

China data largely disappoints

That said, this positive tone has been tested by uneven economic data out of China, pointing to a stuttering recovery in the second largest economy in the world.

came in ahead of expectations in May, helped by a holiday boost, but May grew 5.6% from a year earlier, slowing from the 6.7% pace in April and below expectations for a 6.0% increase.

Additionally, crude oil refinery output in China fell 1.8% year-on-year in May, primarily due to planned/unplanned maintenance outages and curtailed processing rates on account of higher crude oil prices and lower margins. 

Middle East tensions provide support

Providing a degree of support were the continued concerns of a wider Middle East war, after the Israeli military said on Sunday that intensified cross-border fire from Lebanon’s Hezbollah movement into Israel could trigger serious escalation.

Additionally, weekly data from showed that U.S. oil rigs fell by four rigs for a third straight week over the last week, with the total oil rig count reaching 488 for the week ended 14 June 2024. 

“This is the lowest number of active oil rigs since the first week of January 2022, and is down by 64 rigs from a year ago,” analysts at ING said, in a note, pointing to weaker supply going forward.

There is little on the energy calendar this week – just the usual weekly U.S. inventory reports from the and the .

Traders are also likely to pay attention to speeches from a number of Federal Reserve officials as they try to judge the likely path of U.S. interest rates this year, given the likely impact of this on activity in the world’s largest economy.

 

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