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OPEC sticks to oil demand growth view citing resilient economy

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OPEC sticks to oil demand growth view citing resilient economy
© Reuters. FILE PHOTO: The OPEC logo pictured ahead of an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria, September 28, 2016. REUTERS/Ramzi Boudina/File Photo

By Alex Lawler

LONDON (Reuters) -OPEC on Tuesday stuck to its forecasts for robust growth in global oil demand in 2023 and 2024 citing signs that major economies are faring better than expected despite headwinds such as high interest rates and elevated inflation.

World oil demand will rise by 2.25 million barrels per day (bpd) in 2024, compared with growth of 2.44 million bpd in 2023, the Organization of the Petroleum Exporting Countries said in a monthly report. Both forecasts were unchanged from last month.

A lifting of pandemic lockdowns in China has helped oil demand rise in 2023. OPEC has maintained a relatively upbeat view on 2024, seeing stronger demand growth than other forecasters such as the International Energy Agency.

“The ongoing global economic growth is forecast to drive oil demand, especially given the recovery in tourism, air travel and steady driving mobility,” OPEC said in the report. “Pre-COVID-19 levels of total global oil demand will be surpassed in 2023.”

OPEC and its allies, known as OPEC+, began limiting supplies in 2022 to bolster the market. Global benchmark breached $90 a barrel last week for the first time in 2023 after Saudi Arabia and Russia extended voluntary cuts until the end of the year.

Brent crude prices rose as high as $91.64 a barrel after the report was released, hitting a fresh 2023 high.

OPEC held its forecast for world economic growth this year at 2.7% and kept next year’s figure at 2.6% citing a resilient first half and a steady global growth trend that had continued into the third quarter.

“Emerging Asia, particularly India, Brazil and Russia, could further surprise to the upside,” OPEC said.

“Moreover, if the U.S. continues to keep its current momentum, growth could turn out to be higher than expected.”

The OPEC report also showed OPEC oil production rose in August driven by a recovery in Iran’s production despite U.S. sanctions remaining in place on Tehran and Saudi Arabia’s voluntary cuts, as well as an increase in Nigeria.

OPEC output rose by 113,000 bpd in August to 27.45 million bpd, the report said. A Reuters survey earlier found production had increased last month largely because of Iran.

Iran is exempt from OPEC and OPEC+ production cuts because of the sanctions and Nigeria has faced internal challenges that have limited output.

Commodities

Oil set for weekly gain on signs of improving demand

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By Shariq Khan

NEW YORK (Reuters) – Oil prices rose in Asian trading hours on Friday, with global benchmark Brent set for its first weekly increase in three weeks on signs of improving global demand and slowing inflation in top oil consumer the United States.

prices rose 21 cents, or 0.3%, to $83.48 a barrel by 0018 GMT. U.S. West Texas Intermediate (WTI) crude futures rose 18 cents, or 0.2%, to $79.41 a barrel.

Brent futures are set to rise about 1% on a weekly basis, and WTI futures are set to gain 1.4%.

Recent declines in oil and refined products inventories at major global trading hubs have created optimism over oil demand growth, reversing a trend of rising stockpiles that had weighed heavily on prices in prior weeks. Through Thursday, Brent crude futures were down around 10% from this year’s peak of $92.18 a barrel on April 12.

U.S. oil and fuel inventories fell last week, while Singapore’s middle distillate fuel stocks dropped to a near three-month low this week. In Europe’s Amsterdam-Rotterdam-Antwerp trading hub, gasoline stocks were down 7.5% in the week to Thursday, data from consultancy Insights Global showed.

Recent economic indicators from the United States have fed into the optimism over global demand. U.S. consumer prices rose less than expected in April, data showed on Wednesday, boosting expectations of lower interest rates in the country.

Those expectations were further bolstered by data on Thursday that showed a stabilizing U.S. job market.

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Lower interest rates could help soften the U.S. dollar, which would make oil cheaper for investors holding other currencies and drive demand.

“Financial markets now have placed the most bets on a September interest rate cut by the Federal Reserve, which would continue to temper the dollar strength and shift that strength over to commodities and equities,” StoneX oil analyst Alex Hodes said on Thursday.

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Commodities

Goldman Sachs discusses what’s next for natural gas prices

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Over the past three weeks, US prices have surged 30% to above $2.50 per million British thermal units (mm/BTU), fueled by production declines and increased feedgas demand for liquified natural gas (LNG) exports.

Moreover, recent producer cuts, maintenance events, and Freeport LNG’s normalization of gas demand post-outage have contributed to this rise. Cheniere’s announcement of no heavy maintenance for its liquefaction trains this year also supports higher prices.

In a Thursday note, Goldman Sachs strategists said the return of gas prices above $2/mmBtu aligns with their expectations, as production curtailments “would ultimately lead to lower storage congestion risks for this summer.”

“That said, we see only limited further upside from current levels, with stronger gas prices risking a return of congestion concerns,” they added.

Goldman notes that prices above $2/mmBtu reduce gas competitiveness compared to coal, with a $0.50/mmBtu increase potentially cutting gas demand by 1 billion cubic feet per day (Bcf/d), especially in shoulder months.

Moreover, higher prices may prompt the restart of previously shut-in wells. EQT (ST:), the largest producer in the Appalachia region, indicated it would resume production if prices sustainably exceed $1.50/mmBtu. And while Appalachia prices haven’t risen as much as NYMEX, the local hub has averaged $1.44/mmBtu month-to-date, up 10¢ from last month, strategists highlighted.

Elsewhere, European gas prices have also risen this summer, though less sharply than in the US.

Title Transfer Facility (TTF) prices increased 18% over the past three months to around 30 euros per megawatt-hour (MWh), holding steady in May.

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However, unlike the US market, this rally lacks fundamental support, with Northwest (NW) European gas storage at record-high levels, Goldman strategists pointed out.

“To be sure, NW European LNG imports have remained weak relative to last year – and are likely to get weaker in the coming weeks owing to a seasonal decline in global LNG production, exacerbated by outages at Australia’s Gorgon export project,” they said.

“Going forward, we expect healthy non-European demand for LNG to continue to incentivize a decline in European LNG imports vs last year,” they continued.

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Gold prices trim some weekly gains on tempered rate cut hopes

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Investing.com– Gold prices fell slightly on Friday, trimming some of their gains for the week as comments from a slew of Federal Reserve officials offered a more sobering outlook on interest rate cuts. 

The yellow metal had risen to nearly $2,400 an ounce this week in the immediate aftermath of some soft U.S. economic readings. But it pulled back from these levels on Thursday and Friday.

steadied at $2,377.40 an ounce, while expiring in June fell slightly to $2,381.10 an ounce by 00:19 ET (04:19 GMT). 

Gold retreats as Fed officials downplay rate cuts, but weekly gains due

The yellow metal fell on Thursday after a string of Fed officials cautioned against bets on immediate reductions in interest rates. 

Several members of the central bank’s rate setting committee said the central bank will need much more convincing that inflation was coming down beyond a marginally soft inflation reading for April. 

This saw traders begin pricing out some expectations for a rate cut in September. The and also rebounded from earlier losses this week. 

Still, some softer-than-expected readings put gold on course for a 0.7% weekly gain. 

The yellow metal was also in sight of a record high of above $2,430 an ounce, although it appeared unlikely the level would be met in the near-term. 

Other precious metals retreated on Friday, but were set for bumper weekly gains. fell 0.2% but were trading up 6.2% for the week, while fell 0.4% but were up 4.5% this week. 

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Copper mixed amid middling China cues

Among industrial metals, one-month copper futures tumbled from two-year highs tracking middling economic data. But three-month copper futures pushed higher and were set for a stellar week as markets bet on tighter supplies and an eventual demand recovery in the coming months. 

on the London Metal Exchange rose 0.6% to $10,445.0 a ton, while rose 0.3% to $4.8935 a pound. 

Data from China on Friday painted a mixed picture of the economy. While grew more than expected, growth slowed and shrank at an accelerated pace. Growth in Chinese also slowed.

The readings presented a muddled outlook for the world’s biggest copper importer, as it rolled out more stimulus measures to shore up growth.

Three-month copper futures gained on the prospect of a demand recovery, and were up nearly 4% this week. They were also at two-year highs. 

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