Oil Slips Over 1% on Bets that Crude Supply Growth Will Exceed Demand

The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, US, November 22, 2019. REUTERS/Angus Mordant/File Photo
The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, US, November 22, 2019. REUTERS/Angus Mordant/File Photo
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Oil Slips Over 1% on Bets that Crude Supply Growth Will Exceed Demand

The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, US, November 22, 2019. REUTERS/Angus Mordant/File Photo
The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, US, November 22, 2019. REUTERS/Angus Mordant/File Photo

Oil prices fell for a third day straight on Wednesday on growing expectations that supply growth will outpace demand growth next year, even though the Omicron coronavirus variant is not seen curbing mobility as sharply as earlier COVID-19 variants.

US West Texas Intermediate (WTI) crude futures fell $1.05, or 1.5%, to $69.68 a barrel by 0734 GMT, after losing 56 cents in the previous session.

Brent crude futures fell 91 cents, or 1.2%, to $72.79 a barrel, after losing 69 cents on Tuesday.

Brent's prompt monthly spread was unchanged at 7 cents after flipping into contango briefly on Tuesday.

The International Energy Agency (IEA) on Tuesday said a surge in COVID-19 cases with the emergence of the Omicron variant will dent global demand for oil at the same time that crude output is set to increase, especially in the United States, with supply set to exceed demand through at least the end of next year.

In contrast, the Organization of the Petroleum Exporting (OPEC) on Monday raised its world oil demand forecast for the first quarter of 2022.

"The IEA's bearish view on the market was in stark contrast to OPEC's more positive view when it released its monthly outlook earlier this week. The divide suggests volatility is likely to remain high in the short term," ANZ commodity analysts said in a note.

Energy consultancy FGE said it has a more optimistic outlook than the IEA as the consultancy expects a smaller surplus of 400,000 barrels per day, based on a comparatively lower demand risk from Omicron, against IEA's forecast of 1.7 million bpd in the first quarter.

Also weighing on the market is a firming US dollar, which makes commodities priced in the greenback more expensive for other countries, Reuters reported. Markets are awaiting the outcome of a key US Federal Reserve policy meeting on Wednesday for signs of when the central bank may raise interest rates.

In another bearish indicator, industry data showed that US crude inventories last week did not decline as much as expected. American Petroleum Institute data showed US crude stocks fell by 815,000 barrels in the week ended Dec. 10, according to market sources, compared with a 2.1 million barrel drop that 10 analysts polled by Reuters had expected.

However, distillate stocks fell by 1 million barrels, compared with analysts' forecasts for an increase of 700,000 barrels, and gasoline stocks rose by 426,000 barrels, which was a smaller build than expected. Weekly data from the US Energy Information Administration is due later on Wednesday.



Gold Prices Climb on Safe-Haven Demand; US Payrolls Data in Focus

Gold bullion displayed in a store in the German city of Pforzheim (dpa)
Gold bullion displayed in a store in the German city of Pforzheim (dpa)
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Gold Prices Climb on Safe-Haven Demand; US Payrolls Data in Focus

Gold bullion displayed in a store in the German city of Pforzheim (dpa)
Gold bullion displayed in a store in the German city of Pforzheim (dpa)

Gold prices climbed on Friday, supported by safe-haven demand arising from the Middle East conflict, while spotlight shifted towards US payrolls report to gauge the trajectory of the Federal Reserve's policy path.
Spot gold was up 0.3% at $2,662.50 per ounce, as of 0325 GMT, after climbing to an all-time high of $2,685.42 on Sept. 26. Bullion has gained 0.2 for the week.
US gold futures edged 0.1% higher to $2,682.10.
The dollar eased 0.1%, pulling back from over a one-month high, making greenback-priced bullion less expensive for other currency holders, reported Reuters.
Geopolitical tensions, particularly concerning Israel and Iran, are supporting gold prices and unless these risks subside, prices are likely to remain near record levels, said Ajay Kedia, director at Kedia Commodities, Mumbai.
The US is discussing strikes on Iran's oil facilities as retaliation for Tehran's missile attack on Israel, President Joe Biden said, while Israel's military hit Beirut with new air strikes in its battle against Lebanese armed group Hezbollah.
Bullion is considered a safe investment during times of political and financial uncertainty, and thrives in a low-rate environment.
The US nonfarm payroll data is due at 1230 GMT. New York Fed President John Williams and Chicago Fed President Austan are also scheduled to speak later in the day.
If the NFP report comes in strong, it will be positive for the dollar and then gold prices will see some profit-booking, Kedia added.
Traders see a 69% chance of a 25-basis-point Fed rate cut in November, according to CME FedWatch Tool.
BMI said in a note it expects gold prices to trade within the range of $2,500 to $2,800 in the coming months.
Spot silver rose 0.4% to $32.17 per ounce and has gained about 1.8% so far this week.
Platinum climbed 1.1% to $1,001.79 and palladium advanced 1.4% to $1,013.46.