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 Hastens Retreat as Dollar Rallies on Trump Victory

FILED - 16 March 2023, Bavaria, Munich: Gold bars and gold coins of different sizes lie in a safe on a table at the precious metal dealer Pro Aurum. Photo: Sven Hoppe/dpa
FILED - 16 March 2023, Bavaria, Munich: Gold bars and gold coins of different sizes lie in a safe on a table at the precious metal dealer Pro Aurum. Photo: Sven Hoppe/dpa
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Gold Hastens Retreat as Dollar Rallies on Trump Victory

FILED - 16 March 2023, Bavaria, Munich: Gold bars and gold coins of different sizes lie in a safe on a table at the precious metal dealer Pro Aurum. Photo: Sven Hoppe/dpa
FILED - 16 March 2023, Bavaria, Munich: Gold bars and gold coins of different sizes lie in a safe on a table at the precious metal dealer Pro Aurum. Photo: Sven Hoppe/dpa

Gold prices slid more than 3% to a three-week low on Wednesday as investors piled into the US dollar after Republican Donald Trump was elected US president.

Market participants were also looking ahead to the Federal Reserve's interest rate decision on Thursday for further clues on the bank's easing cycle that had helped gold's stunning rally to successive record highs this year.

Spot gold slipped 2.9% to $2,662.99 per ounce, as of 10:10 a.m. ET (1510 GMT), after hitting a three-week low of $2,652.19. The metal was on track to post its biggest daily loss in five months, Reuters reported.

US gold futures shed 3% to $2,668.2.

"A clear presidential victory when the market has been pricing in a contested result, removal of an element of risk, Trump-trades include the dollar's strengthening this morning and the combination of the two has brought gold lower," said StoneX analyst Rhona O'Connell.

Donald Trump recaptured the White House by securing more than the 270 Electoral College votes needed to win the presidency, Edison Research projected.

Investors believe Trump's presidency will bolster the dollar, causing the Federal Reserve pause in its easing cycle if inflation takes off after expected new tariffs.

The dollar index hit a four-month high, making bullion more expensive for overseas buyers.

"Gold will be torn between the risk of rising inflation, potentially slowing the pace of US rate cuts, as tariffs are rolled out," said Ole Hansen, head of commodity strategy at Saxo Bank.

"The FOMC will likely still cut on Thursday but the subsequent language will be studied closely for signs of a pause."

Investors widely expect the Fed to announce a quarter-point rate cut after 50 bps reduction in September.

Commodities from oil and gas to metals and grains dropped as the dollar rallied.

Spot silver fell 4.9% to $31.03 per ounce. Platinum shed 2.8% to $971.7 and palladium was down 3.7% to $1,035.5. All three metals hit their lowest levels in three-weeks.