Commodities
Tight supply, inflation concerns keep oil investors on fence
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© Reuters. FILE PHOTO: An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Picture taken on November 12, 2021. Mandatory credit Kyodo/via REUTERS/File Photo
By Natalie Grover
LONDON (Reuters) – Oil prices steadied on Thursday as investors weighed supply concerns against growing expectations that key Western economies will maintain high interest rates to tackle stubborn inflation.
By 1111 GMT, futures were down 37 cents to $96.18 a barrel after rising to their highest level since last November earlier in the session. The November contract expires on Friday.
The December Brent contract was down 35 cents at $94.01 a barrel.
U.S. West Texas Intermediate crude futures (WTI) were 24 cents lower at $93.44 a barrel, after rising above $95 earlier in the session for the first time since August 2022.
The spike in crude prices earlier in the session reflected scarce supply and inventory declines, analysts said.
But as Brent prices approach $100 a barrel, concerns are mounting that central bankers will be forced to persist with high interest rates to curb inflation fuelled in part by the high cost of energy.
“Investors know that higher oil prices are going to hurt the economy as economic activity will drop – not to mention the fear of (interest) rates staying higher for longer,” said Naeem Aslam of Zaye Capital Markets.
stocks fell by 2.2 million barrels last week to 416.3 million barrels, government data showed, far eclipsing the 320,000-barrel drop analysts expected in a Reuters poll.
Crude stocks at the Cushing, Oklahoma, storage hub that is the delivery point for U.S. crude futures fell by 943,000 barrels in the week to less than 22 million barrels, the lowest since July 2022, data showed.
Stockpiles at Cushing have been falling to near historic lows due to strong refining and export demand, prompting concerns about quality of the remaining oil at the hub and whether it will fall below minimum operating levels.
The crude draws follow combined voluntary cuts of 1.3 million barrels a day to the end of the year by Saudi Arabia and Russia, part of the group known as OPEC+ made up of the Organization of the Petroleum Exporting Countries (OPEC) and allies.
Russia’s ban on fuel exports will not be lifted soon and will remain in place until the domestic market stabilises, the state-run TASS news agency reported on Thursday, citing Russian Energy Minister Nikolai Shulginov.
Russia has not discussed with OPEC+ a possible crude oil supply increase to compensate for its fuel export ban, the Kremlin added on Thursday.
Commodities
Oil prices settle lower after weak August jobs report adds to demand concerns
![](https://letizo.com/wp-content/uploads/2024/09/oil-prices-settle-lower-after-weak-august-jobs-report-addsto-demand-concerns_66dc53fb8f210.jpeg)
Investing.com — Oil prices settled lower Friday, ending the week with a loss as weaker U.S. nonfarm payrolls stoked concerns about an economic-led slowdown in crude demand.
At 2:30 p.m. ET (1430 GMT), the futures (WTI) traded fell 2.1% to settle at $67.67 a barrel, while contract fell 2.2% to $71.06 per barrel.
U.S. economic slowdown worries resurface after weak jobs report
The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve’s next policy decisions.
Nonfarm payrolls came in at 142,000 last month, up from a downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, up from the initial July mark of 114,000.
Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut — rather than a shallower 25 basis-point reduction — increased.
Concerns about the demand come just a day after OPEC+ said it had agreed to postpone a planned increase in oil production for October and November.
U.S., Europe working on Iran sanctions
Geopolitical tensions ratcheted up on Friday after the U.S. and Europe they were working on sanctions to impose on Iran after the Tehran sent missiles to Russia.
The U.S. had previously warned Iran about transferring missiles to Russia, saying it would represent a major escalation in Iran’s support of Russia’s war against Ukraine.
Commodities
Goldman Sachs expects OPEC+ production increases to start in December
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(Reuters) – Goldman Sachs adjusted its expectations for OPEC+ oil production saying it now expects three months of production increases starting from December instead of October, the bank said in a note on Friday.
OPEC+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding it could further pause or reverse the hikes if needed.
However Goldman Sachs maintained its range of $70-85 per barrel and a December 2025 Brent forecast at $74 per barrel.
The investment bank expects the effects of a modest reduction in OPEC+ supply in the upcoming months to be counterbalanced by easing effects from the current softness in China’s demand and faster-than-expected recovery of Libya’s supply.
“We still see the risks to our $70-85 range as skewed to the downside given high spare capacity, and downside risks to demand from weakness in China and potential trade tensions,” Goldman Sachs said.
Brent crude futures were down $1.63, or 2.24%, to $71.06 a barrel on Friday, their lowest level since December 2021. U.S. West Texas Intermediate crude futures fell $1.48 on Friday, or 2.14%, to $67.67, their lowest since June 2023. [O/R]
Commodities
Citi, Bank of America see oil prices potentially going to $60
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Investing.com — Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.
While recent supply disruptions in Libya and a delayed production cut unwinding by OPEC+ have offered short-term support for Brent prices in the $70-72 range, Citi views this as temporary.
“At the time of writing, markets have not reacted to the OPEC+ decision, with Brent around flat to the 4 September close. Still, the Libyan situation could take months rather than a week to resolve, strategists wrote.
They highlight the likelihood of a strong market surplus emerging next year, pushing prices lower.
“We recommend selling on a bounce toward ~$80 Brent, as we look ahead to moves down to the $60 range in 2025 as a sizeable market surplus emerges,” the note states.
OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025. This decision comes in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil supplies and broader economic concerns in the U.S. and China.
Separately, Bank of America’s Commodities Research team has revised down its price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.
The team cites concerns about growing global oil inventories despite assuming OPEC+ will delay planned production increases. They note that weaker demand growth, combined with record OPEC+ spare capacity exceeding 5 million barrels per day, has dimmed the outlook for oil prices.
“In effect, we now see Brent oil prices moving from the top toward the middle of our unchanged $60-80/bbl medium-term range faster than previously warned,” BofA strategists said. This surplus in capacity, along with slower demand, also reduces the risk of price spikes from potential geopolitical disruptions.
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