Bulls on the charge after Fed signals smaller hikes

By Marc Jones

LONDON (Reuters) – The bulls were enjoying the good life on Thursday after the world’s most influential central banker, Jerome Powell, signalled this year’s frantic pace of U.S. interest rate hikes could be about to slow.

It was a textbook “risk on” pattern, with both Europe’s STOXX 600 and MSCI’s main world stocks index hitting their highest since August and the previously unstoppable dollar huddled at a three-month low.

Rallying bond markets sent borrowing costs lower almost everywhere too and though Wall Street looked set for a flat start later , higher oil and metals prices suggested even commodities markets now see hope for the spluttering world economy.

“It absolutely makes sense,” said Unigestion senior portfolio manager Olivier Marciot, saying it was a case of “it’s not so bad any more, so it’s good.”

“We have the confirmation that we are not having central banks being ever more hawkish and the confirmation that inflation is starting to slow.”

There has now been a more than 17% recovery in European and world stocks and a 7.5% fall in the dollar since the Fed first started to hint at a shift in its view in mid October.

Fed Chair Powell said on Wednesday the U.S. central bank could scale back the pace of interest rates hikes from the recent 75 basis points “as soon as December”, though he still cautioned the fight against inflation was far from over.

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said in comments that had lifted Wall Street’s S&P 500 3%.

Allied with fresh signs that China is looking to relax COVID restriction where it can, Asian stocks jumped 1.35% overnight.

They posted their biggest monthly gain since 1998 in November as hopes for a Fed pivot towards slower rate hikes gathered steam after four consecutive 75-bp increases. But the index was still down about 17.5% on the year.

European markets, meanwhile, largely brushed off German data showing ongoing weak demand in its powerhouse manufacturing sector, helped instead by signs of fewer material shortages perhaps.

The euro was up 0.35% at $1.0445, having traded as high as $1.0463 earlier.

Britain’s pound, which has raced back to form over the last couple of months, was up over 1% at $1.2187, while a surge from the yen meant the dollar index – which measures the currency against six major peers – dipped a further 0.5%.

“Obviously the speech (by Powell) was less hawkish than feared,” said Rodrigo Catril, senior FX strategist at National Australia Bank. “The yen is leading the charge, and that makes sense when you look at the big, big move in long-term U.S. rates.”

Graphic: Stocks rebound https://fingfx.thomsonreuters.com/gfx/mkt/lgpdkwbxkvo/Pasted%20image%201669900096733.png

BORROWING COSTS

Markets are currently pricing in a 91% probability that the Fed will increase rates by 50 bps on Dec. 14, and only a 9% chance of another 75-bp hike.

Expectations have also grown around the world that China, while still trying to contain infections, could look to re-open at some point next year once it achieves better vaccination rates among its elderly.

China’s factory activity shrank in November as widespread curbs disrupted manufacturers’ output, a private sector survey showed on Thursday, weighing on employment and economic growth in the third quarter.

It didn’t stop U.S. investment bank JPMorgan though forecasting a 9-10% jump in Chinese stocks by the end of next year if confidence begins to return. They have already climbed nearly over 10% over the last 4-6 weeks.

The yield on 10-year Treasury notes was last down over 10 bps to 3.592%, while the two-year U.S. yield, which typically moves in step with interest rate expectations, was down at 4.332%.

Germany’s 10 yield, the benchmark for the euro area, plugged below 1.80%. The two-year yield fell 10.5 bps to 2.039%.

Jefferies interest rate strategist Mohit Kumar said: “The market had built in expectations of a hawkish Powell, and he definitely did not deliver.”

In commodity markets, gold prices climbed to a two-week high of $1,779.39 an ounce, while oil edged up, supported by signs that OPEC+ may cut supply further at a meeting on Sunday.

Brent crude was up 44 cents, or 0.5%, to $87.41 a barrel by 0930 GMT, while U.S. West Texas Intermediate crude futures added 55 cents, or 0.7%, to $81.10.

(Additional reporting by Samuel Indyk and Alun Jogn in London; Editing by Mark Potter and Nick Macfie)

Oil buoyed by OPEC+ output speculation and easing China COVID curbs

By Alex Lawler

LONDON (Reuters) -Oil rose about $1 a barrel on Thursday, supported by the potential for OPEC+ to cut supply further and as easing COVID curbs in China raised the likelihood of higher demand from the world’s top crude importer.

Crude also gained support from dollar weakness prompted by euro zone factory data and the Federal Reserve Chair saying the pace of U.S. interest rate hikes could be scaled back.

A weaker dollar makes oil cheaper for other currency holders and tends to support risk assets.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, meets on Dec. 4. Though sources said on Wednesday that a policy change is unlikely, some feel that a further cut cannot be ruled out.

“I believe the OPEC+ meeting forces shorts to cover, but the consensus is unchanged quota levels,” said Tamas Varga, of oil broker PVM.

“Perceived easing of Chinese COVID restrictions, favourable factory data from the euro zone and the resultant dollar weakness provide continuous price support.”

Brent crude was up 94 cents, or 1.1%, at $87.91 a barrel by 1250 GMT while U.S. West Texas Intermediate crude futures added $1.18, or 1.5%, to $81.73.

The apparent shift in China’s zero-COVID strategy raises optimism over a Chinese oil demand recovery. The cities of Guangzhou and Chongqing announced an easing of COVID curbs on Wednesday.

“The signals coming from China also look very positive,” said Craig Erlam of brokerage OANDA. “Any modest softening in its COVID-zero policy will and should be welcomed.”

Both oil benchmarks have posted three consecutive weekly declines,lthough the market has rebounded strongly this week after hitting its lowest in nearly a year on Monday. Brent touched $80.61, its lowest since Jan. 4.

The prospect of a lower price cap on Russian oil is also lending support, analysts said. European Union countries are edging towards a deal on the price cap ahead of a Dec. 5 deadline.

A slide in U.S. crude inventories in weekly data also underpinned the price rally. [EIA/S]

(Additional reporting by Jeslyn Lerh in SingaporeEditing by Kirsten Donovan and David Goodman)

Oil Price Fundamental Daily Forecast – Optimism Over China’s Easing of COVID Curbs Offset by OPEC+ Uncertainty

Mixed fundamentals are helping to push U.S. West Texas Intermediate and international-benchmark Brent crude oil futures lower on Thursday. Uncertainty ahead of Sunday’s OPEC+ meeting is being blamed for the selling although losses are being limited by easing COVID restrictions in China.

At 06:49 GMT, January WTI crude oil futures are trading $80.14, down $0.41 or -0.51% and February Brent crude oil is at $86.41, down $0.56 or -0.64%. On Wednesday, the United States Oil Fund ETF (USO) settled at $70.21, up $1.87 or +2.74%.

Other potentially bullish factors are a tight U.S. supply situation and a weaker U.S. Dollar. The wildcard that traders are watching is the European sanctions on Russian oil. I think there is uncertainty over how it is going to work. This could only add to the volatility of a thinly traded market.

OPEC+ to Meet Virtually

OPEC+ is scheduled to meet virtually on Dec. 4. Earlier in the week, there were rumors that the group was considering cutting output due to expectations of lower demand and the lack of clarity over the impact of the looming Russian oil-price cap on the market.

However, traders now feel that since the meeting is being held virtually, there is very little chance of a major policy change. If they do make a surprise cut then look for a volatile spike to the upside.

China Eases Zero-COVID Strategy

Optimism over Chinese oil demand recovery was lifted on Wednesday when the cities of Guangzhou and Chongqing announced the easing of COVID curbs. This took place a day after demonstrators in southern Guangzhou clashed with police amid a string of protests against the world’s toughest coronavirus restrictions.

US Crude Stockpiles Plunge as Output Climbs to Highest Since March 2020

Crude inventories fell by 12.6 million barrels in the week to Nov. 25 to 419.1 million barrels, the Energy Information Administration said on Wednesday, compared with expectations in a Reuters poll for a 2.8 million-barrel drop.

The drop was attributed to refiners who continued to boost activity to counter low U.S. inventories headed into the winter heating season.

Short-Term Outlook

The early price action suggests uncertainty and impending volatility. Traders seem to be waiting for a catalyst. The next catalyst could be more easing of COVID curbs by China, a surprise output cut from OPEC+ or clarity over the impact of the cap on Russian oil. A steep drop by the U.S. Dollar could also be considered a bullish catalyst.

The bullish factors seem to be adding up but buyers appear to be reluctant to take an aggressive position in front of the OPEC+ decision.

For a look at all of today’s economic events, check out our economic calendar.

Marketmind: Stop making sense

A look at the day ahead in European and global markets from Ankur Banerjee:

With a Fed pivot coming in to view, thanks to Jerome Powell, and optimism about China’s reopening prospects, investors have rediscovered their risk appetite, pouring into equities and sending safe-haven U.S. dollar lower.

All it took was for Fed Chair Powell to suggest that the central bank could slow the pace of its interest hikes when it next meets in two weeks, without giving any new hawkish hints.

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said.

Job done?

Perhaps not, but markets are moving ahead with an assumption we’re nearly there.

European futures indicate stocks in the region will spike higher, tracking Asian equities, which were tracking Wall Street. The dollar remains in descent mode, while U.S Treasuries are rallying.

Also helping investor sentiment were signs from China that the country was softening its stance on COVID-19 restrictions as several cities in the world’s second-largest economy lift district lockdowns even as cases rise.

The market seems to shrug off China’s factory activity, which shrank in November, and the risk that the path out of COVID controls is long and messy. Lockdowns in China along with slowing demand have weighed on factory output across Asia.

Meanwhile, the lone “dove” among major central banks, the Bank of Japan, will aim to keep interest rates ultra-low until wage growth gets a boost, board member Asahi Noguchi said in a speech to business leaders. “To promote wage growth, the BOJ needs to patiently maintain its current monetary easing.”

Key developments that could influence markets on Thursday:

Economic events: Germany Oct retail sales; Nov PMI’s globally final 

Speakers: Fed Reserve Bank of Dallas President Lorie Logan

Earnings: Dollar General, Kroger

Bond auctions: UK, Japan, Spain, France sell bonds  

(Reporting by Ankur Banerjee; Editing by Sam Holmes)

U.S. urges caution on low-quoted Russian oil prices as EU debates price cap

By David Lawder

NEW YORK (Reuters) – The Biden administration broke its silence on Wednesday on European Union deliberations over a $65-70 per barrel Russian oil price cap on Wednesday, warning far-lower prices cited for some Russian Urals crude shipments should be approached with caution.

A U.S. official told Reuters that recently quoted Urals prices in the $52-a-barrel range do not represent broader pricing in a very opaque market.

The official cited outside estimates showing that over the last two months, the Urals discount to benchmark Brent crude has recently been close to $23 a barrel, falling as low as $17 a barrel. With Brent trading at $85.36 a barrel on Wednesday, a $23 discount implies a Urals price of around $62, much closer to the proposed cap level.

The U.S. Treasury has remained silent over the past week as European Union diplomats have struggled to reach consensus on a price cap level initially proposed in the $65-70 a barrel range.

Some countries including Poland, Lithuania and Estonia have pushed for a far lower $30-a-barrel price limit, arguing this is closer to Russia’s cost of production and that the West needs to squeeze Moscow’s revenues harder.

But the U.S. official’s comments, which signal growing concern over the EU deliberations, come just five days before a European Union embargo on Russian crude imports is set to be phased in.

Lower quoted market prices could erode support for a cap in the $60-70 range. The U.S. official cited concerns over using prices that represent a subset of Russian oil sales.

At issue are recent prices quoted by Argus Media and S&P Platt’s in the past week of around $52 at key Black Sea and Baltic export terminals and cited by Bloomberg.

The U.S. official said such prices do not include transportation and other costs associated with Russian crudes. A price cap of $65 a barrel on Russian crude would represent a meaningful price reduction from recent prices, citing an estimated average of $78 per barrel since March 2022.

The Treasury has been promoting the price cap idea to European allies since the spring of 2022, as they considered and agreed on their phased ban on Russian oil imports to punish Moscow for its invasion of Ukraine.

The cap was conceived as a way to limit Moscow’s oil revenues while keeping Russian crude on the global market to avoid a massive spike in oil prices.

The price cap will be enforced by denying insurance, shipping and other maritime services provided by G7 democracies and Australia to shipments priced above the cap.

Russia said last week it would not supply oil and gas to countries supporting the cap, but will make a final decision once it analyses final figures.

(Additional reporting by Andrea Shalal; Editing by Lincoln Feast.)

Stocks rally, yields and dollar fall as Powell signals slower hikes

By Sinéad Carew

NEW YORK (Reuters) – Wall Street equities closed sharply higher on Wednesday while U.S. Treasury yields declined and the dollar sank after Federal Reserve Chair Jerome Powell said the central bank could slow the pace of interest rate hikes “as soon as December,” even as he cautioned that inflation was still too high.

While roughly in line with previous comments, Powell’s words were a relief for investors who had feared more hawkishness. Still, Powell warned that the fight against inflation was far from over and that key questions remained unanswered, including how high rates will ultimately need to rise, and for how long.

After waiting “with bated breath” for any clarification on Fed tightening, Wednesday’s comments provided relief to the market, according to Chuck Carlson, Chief Executive Officer at Horizon Investment Services in Hammond, Indiana.

“And anything that gives hope to the idea the Fed is becoming less hawkish is viewed as a positive for stocks, at least on a short-term basis,” said Carlson.

The S&P had fallen in the previous three sessions with strategists attributing the caution to pre-speech jitters. After Wednesday’s rally it was still down 14.4% year-to-date.

The Dow Jones Industrial Average rose 737.24 points, or 2.18%, to 34,589.77, the S&P 500 gained 122.48 points, or 3.09%, to 4,080.11 and the Nasdaq Composite added 484.22 points, or 4.41%, to 11,468.00.

All three of Wall Street’s major averages showed their second monthly advance in a row with a 5.4% gain for the S&P, compared with a 5.7% monthly gain for the Dow and the Nasdaq’s 4.4% increase.

MSCI’s gauge of stocks across the globe gained 2.47% and showed a gain of 7.9% for November, its strongest monthly advance since November 2020.

U.S. Treasury yields retreated across the board after trading higher for most of the session before Federal Reserve Chair Jerome Powell struck a more dovish tone than the market expected, implying slower rate hikes as soon as December.

“Generally, the market seems to have priced in the worst of it already, and just sort of getting the event volatility out of play is sort of helping risk assets,” said John Luke Tyner, fixed income portfolio manager at Aptus Capital Advisors in Fairhope, Alabama.

Benchmark 10-year notes were down 12.6 basis points to 3.622%, from 3.748% late on Monday. The 30-year bond was last down 4.7 basis points to yield 3.7546%, from 3.802%. The 2-year note was last was down 13.6 basis points to yield 4.337%, from 4.473%.

The dollar also lost ground in response to Powell’s comments and was on track for its biggest monthly percentage decline against the euro since Sept. 2010.

Powell’s mention of slowing rate hikes “gave permission for stocks to take off and the dollar to turn lower,” said Joe Perry, senior market analyst at FOREX.COM in New York.

The dollar index fell 0.795%, with the euro up 0.75% to $1.0404.

The Japanese yen strengthened 0.47% versus the greenback at 138.07 per dollar, while Sterling was last trading at $1.2048, up 0.79% on the day.

Oil prices rallied to settle up by over $2 per barrel on signs of tighter supply, a weaker dollar and optimism over a Chinese demand recovery. Capping gains, though, was the OPEC+ decision to hold its Dec. 4 meeting virtually that signals little likelihood of a policy change, a source with direct knowledge of the matter told Reuters on Wednesday.

U.S. crude settled up 3% at $80.55 per barrel while Brent finished at $85.43, up 2.8% on the day.

Gold prices rose as the non-yielding asset showing its biggest monthly gain since July 2020.

Spot gold added 1.1% to $1,768.65 an ounce. U.S. gold futures gained 1.20% to $1,769.40 an ounce.

(Reporting by Sinéad Carew, Stephen Culp, Gertrude Chavez-Dreyfuss, and Karen Brettell in New York, and Dhara Ranasinghe, Marc Jones and Amanda Cooper in London; Additional reporting by Kane Wu in Hong Kong; Editing by Chizu Nomiyama, Elaine Hardcastle and Nick Zieminski)

Crude Oil Price Update – Late Surge Fueled by Drop in Dollar after Powell Signals Smaller Rate Hikes

U.S. West Texas Intermediate crude oil futures are up sharply late in the session on Wednesday, boosted by signs of tighter supply and a plunge in the U.S. Dollar. Some traders are citing optimism over a Chinese demand recovery as another reason for the price rise although unrest over COVID restrictions could tarnish this outlook.

Capping gains, the OPEC+ decision to hold its Dec. 4 meeting virtually signals little likelihood of a policy change, a source with direct knowledge of the matter told Reuters on Wednesday.

At 20:38 GMT, January WTI crude oil is at $80.62, up $2.42 or +3.09%. The United States Oil Fund ETF (USO) is at $70.26, up $1.92 or +2.81%.

On the support side, prices were underpinned after the U.S. Energy Information Administration (EIA) reported that U.S. crude stocks plunged by nearly 13 million barrels, the most since 2019, in the week ended Nov. 25.

The weaker U.S. Dollar is also bullish for crude oil. The greenback fell late in the session after Fed Chairman Jerome Powell signaled a slower pace for rate hikes. Foreign demand tends to rise when the greenback declines because crude oil is a dollar-denominated commodity.

Daily January WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher following Monday’s closing price reversal bottom.

A trade through $73.60 will reaffirm the downtrend. A move through $92.53 will change the main trend to up.

The minor trend is also down. A trade through $82.36 will change the minor trend to up. This will confirm the shift in momentum.

On the downside, the market is trading on the strong side of a long-term retracement zone at $78.72 to $72.31, making it support.

On the upside, the nearest resistance is a pair of 50% levels at $83.07 and $84.43.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at $78.72 is likely to determine the direction of the January WTI crude oil futures contract into the close on Wednesday.

Bullish Scenario

A sustained move over $78.72 will indicate the presence of buyers. If this created enough upside momentum late in the session then look for a surge into the resistance cluster at $83.07 – $84.43.

Bearish Scenario

A sustained move under $78.72 will signal the presence of sellers. This could trigger a quick break into a minor pivot at $77.49. If this fails then look for a retest of the main bottom at $73.60.

For a look at all of today’s economic events, check out our economic calendar.

Oil settles up $2 on tighter supply; OPEC+ talks limit gains

By Laura Sanicola

(Reuters) -Oil prices settled up by over $2 per barrel on Wednesday on signs of tighter supply, a weaker dollar and optimism over a Chinese demand recovery.

Capping gains, the OPEC+ decision to hold its Dec. 4 meeting virtually signals little likelihood of a policy change, a source with direct knowledge of the matter told Reuters on Wednesday.

Brent crude futures settled up $2.40, or 2.8% to $85.43 per barrel while U.S. West Texas Intermediate (WTI) crude futures settled up $2.35, or 3.01%, to $80.55.

Support followed expectations of tighter crude supply.

U.S. crude oil stocks plunged by nearly 13 million barrels, the most since 2019, in the week ended Nov. 25, according to the Energy Information Administration. [EIA/S]

But heating oil demand fell for the second consecutive week heading into winter, curbing price support.

“Running all that crude oil through the refinery, you’re going to process a lot of distillate … there is some reason for concern here,” said Bob Yawger, director of energy futures at Mizuho.

Likewise, U.S. oil output climbed 2.4% to 12.27 million barrels per day (bpd) in September, government figures showed on Wednesday, the highest since the onset of the COVID-19 pandemic.

The International Energy Agency expects Russian crude production to be curtailed by some 2 million barrels of oil per day by the end of the first quarter next year, its chief Fatih Birol told Reuters on Tuesday.

Russia would not supply oil to countries imposing a price cap, Russia’s foreign ministry spokesperson Maria Zakharova said.

On the demand side, further support came from optimism over a demand recovery in China, the world’s largest crude buyer.

China reported fewer COVID-19 infections than on Tuesday, while the market speculated that weekend protests could prompt an easing in travel restrictions.

Guangzhou, a southern city, relaxed COVID prevention rules in several districts on Wednesday.

A fall in the U.S. dollar was also bullish for prices. A weaker greenback makes dollar-denominated oil contracts cheaper for holders of other currencies, and boosts demand.

Fed Chair Jerome Powell is scheduled to speak about the economy and labour market on Wednesday, with investors looking for clues about when the Fed will slow the pace of its aggressive interest rate hikes.

(Reporting by Laura Sanicola; Additional reporting by Rowena Edwards in London and Trixie Yap in Singapore; Editing by Louise Heavens, Lisa Shumaker and Nick Zieminski)

Russian Oil Price Cap Negotiations Enter The Final Stage

Key Insights

  • EU countries are trying to reach a deal on the Russian oil price cap. 
  • The latest reports indicate that the price cap may be set at $60.
  • Neste data shows that Russia’s oil discount to Brent has been mostly stable in recent weeks. 

Russian Oil Price Cap May Be Set At $60

EU countries continue negotiations on the Russian oil price cap deal. Time is running out as the deal should be reached before December 5, when the EU sanctions on Russian oil will be implemented.

Yesterday, reports indicated that Poland and the Baltic countries, which are pushing for an aggressive price cap, had limited success, and EU discussed a price cap of $62 per barrel.

Today’s reports show that the potential price cap has moved to the $60 level. According to the reports, the deal may be reached if other demands are met. For example, Poland and the Baltic countries want a new package of EU sanctions on Russia.

Meanwhile, Greece wants to make sure that its shipping industry is not hit by the price cap scheme. Greece fears that non-EU countries will take its market share and transport Russian oil.

Russia’s Urals Discount To Brent Is Not Growing, According to Neste Data

Neste shows that Russia’s Urals discount to Brent oil has been in the $23 $25 range in recent weeks. According to the data, the discount is not growing despite recent reports that indicated that Urals price declined to $52 per barrel ahead of the price cap.

The oil price cap negotiations have been challenging as two groups within the EU had opposing views. It looks that the majority of the EU countries will be happy with a $60 $70 price cap, but the decision should be unanimous, so everyone has to agree with the proposed scheme.

At this point, the challenging negotiations had little impact on oil markets, which were focused on the recent developments in China. Oil traders believe that the price cap scheme would not disrupt the market, and Russian oil exports would not suffer a serious blow.

Traders should be prepared for strong moves after the EU announces the details of the price cap scheme, although it remains to be seen whether consensus will be reached ahead of the weekend.

For a look at all of today’s economic events, check out our economic calendar.

OPEC oil output drops in November after cut pledged -survey

By Alex Lawler

LONDON (Reuters) – OPEC oil output has fallen in November, led by top exporter Saudi Arabia and other Gulf members, after the wider OPEC+ alliance pledged steep output cuts to support the market amid a worsening economic outlook, a Reuters survey found on Wednesday.

The Organization of the Petroleum Exporting Countries (OPEC)pumped 29.01 million barrels per day (bpd) this month, the survey found, down 710,000 bpd from October. In September, OPEC output had been the highest since 2020.

OPEC and its allies, known as OPEC+, have been boosting output for most of 2022 as demand recovered. For November, with oil prices weakening amid concern of recession, the group made its largest cut since the early days of the COVID-19 pandemic in 2020.

Their decision for November called for a 2 million bpd cut in the OPEC+ output target, of which about 1.27 million bpd was meant to come from the 10 participating OPEC countries.

Output has been undershooting targeted amounts as many producers – notably Angola and Nigeria – lack the capacity to pump more due to insufficient investment and, in the case of Nigeria, crude theft.

Output from the 10 members fell by 720,000 bpd month-on-month, the survey found, leaving actual production 800,000 bpd below the group’s November output target. The shortfall in October was 1.36 million bpd.

As a result of production being below target, OPEC over-delivered on its pledged cuts with a compliance rate of 163% in November, the survey found.

OPEC+ meets virtually on Sunday to review its output policy and is not expected to make any changes.

SAUDI CUT

In November, Saudi Arabia has cut output by 500,000 bpd versus October, the survey found, virtually all of the pledged amount. The United Arab Emirates and Kuwait made the next largest curbs.

Algeria cut about half of the pledged amount and Iraq, OPEC’s second-largest producer which has been calling for its quota to be increased, barely lowered output in November, according to the survey.

Angola and Nigeria each boosted output in November but both are pumping far below their quotas, the survey found. Nigeria posted OPEC’s largest increase, helped by higher exports of Forcados crude.

There was little change in production in Libya, Iran and Venezuela, all of which are exempt from OPEC output cuts.

The Reuters survey aims to track supply to the market. It is based on shipping data provided by external sources, Refinitiv Eikon flows data, information from tanker trackers such as Petro-Logistics, and information provided by sources at oil companies, OPEC and consultants.

(Editing by Alexander Smith)

TAL approves pipeline upgrade to help Czechs ditch Russian crude

PRAGUE (Reuters) – Owners of the Transalpine Pipeline (TAL) shipping crude from the Mediterranean to central Europe approved a plan on Wednesday to upgrade the link, which is key for the Czech Republic to wean itself off Russian oil, the Czech Finance Ministry said.

The Czechs, who need about 7-8 million tonnes of oil annually, take Russian oil through the Druzhba pipeline as well as other blends through TAL, which leads from Italy to Germany and hooks up to the IKL pipeline from Germany to the Czech Republic.

But limited TAL capacity means that the country cannot replace Druzhba supplies completely for the time being. The Czech Republic is one of three countries that negotiated an exception from the looming EU embargo on Russian crude.

“The TAL+ modification of the pipeline will be completed in 2025 and the Czech Republic will thus be fully prepared for the possibility of a complete halt of Russian oil supplies,” the Czech Finance Ministry, which holds a 5% stake in TAL, said in a statement.

TAL shareholders, led by Austria’s OMV with a 32% stake and also including several oil majors, approved the TAL+ project which will increase the speed of the oil flow in the pipeline, allowing the Czech capacity allocation to increase by 4 million tonnes per year, the ministry said.

The project will cost 1.2-1.6 billion crowns ($50.8 million-67.7 million) and last about 25 months, it said.

($1 = 23.6250 Czech crowns)

(Reporting by Jan Lopatka; Editing by Kirsten Donovan)

Economic headwinds set to push oil below $100 in 2023: Reuters poll

(Corrects 2023 price forecast for Brent to $93.65 from $95.56 in paragraph 2; also corrects forecast for U.S. crude to $95.56 from $95.47 for 2022 and to $87.80 from $87.40 for 2023 in paragraph 3)

By Seher Dareen

(Reuters) – Brent oil prices will hold above the $100 level for the rest of 2022 as an impending EU ban on Russian oil sparks uncertainty over supply, but will tick lower next year as economic concerns prevail, a Reuters poll showed on Wednesday.

A survey of 38 economists and analysts forecast benchmark Brent crude would average $100.50 a barrel this year, and $93.65 in 2023, slightly lower than October’s $101.10 and $95.74 consensus, respectively.

U.S. crude was forecast to average $95.56 a barrel in 2022 and $87.80 next year.

Brent traded around $84 a barrel on Wednesday, having shed over 15% since early November, dragged down by concerns over demand from top consumer China as it grapples with COVID lockdowns and protests.

The oil market faces three major questions, said Frank Schallenberger, head of commodity research at LBBW.

“What happens to Russian supply when the EU ban becomes effective? How much will demand growth go down because of weaker economic perspectives? And how fast will OPEC+ lower oil output?”

The EU ban, on Russian oil is set to kick in on Dec. 5 along with a plan by G7 nations to enforce a low price for Russian oil sales.

But with the overall plan still being debated by EU leaders, analysts were divided on its likely impact, and forecast a resultant supply shortfall of anywhere between 500,000 barrels per day (bpd) to 2 million bpd, with some saying Russia could find alternative routes to move its crude.

“The EU ban will mean that an uneasy balance will characterise the market from the first quarter, which will be supportive of prices in the 80s or even higher,” said Matthew Sherwood, lead commodities analyst at EIU.

Most market watchers agreed that the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, would keep to current output cut levels on Dec. 4, although additional reductions could be considered.

A small number of respondents predicted that the oil market could be more balanced in the second half of 2023.

Demand was seen growing by 1.8-2.1 million bpd in 2022 and by 1-2 million bpd next year, led by Asia.

But while prices will moderate in 2023 because of an economic slowdown, “we don’t expect oil prices to fall off the cliff as supplies are tight and OPEC+ has pre-empted with additional voluntary production cuts, and some Russian oil production will also be impacted by the EU ban,” said DBS Bank lead energy analyst Suvro Sarkar.

(This story has been corrected to change 2023 price forecast for Brent to $93.65 from $95.56 in paragraph 2; and also to change forecast for U.S. crude to $95.56 from $95.47 for 2022 and to $87.80 from $87.40 for 2023 in paragraph 3)

(Reporting by Seher Dareen in Bengaluru; editing by Arpan Varghese, Noah Browning and Barbara Lewis)

Coterra Energy to pay $16.29 million for Pennsylvania water contamination plea

(Reuters) – U.S. shale producer Coterra Energy pleaded no contest for contaminating well water in Dimock, Pennsylvania, and will pay $16.29 million to construct a new means of water supply to its residents, the state attorney general said on Tuesday.

The Houston-based company, formerly known as Cabot Oil and Gas, will also make 75 years of water bills payments for the impacted residents, who were exposed to drinking water polluted with metals and high levels of methane.

“Under this historic settlement, Coterra will now pay to build a new public water line that will provide clean, reliable drinking water for generations to come,” said Attorney General Josh Shapiro.

Coterra took full responsibility for the environmental crimes committed, Shapiro said, adding that the agreement brought justice to the residents of Dimock, “who for years had been ignored.”

The attorney general charged Coterra in 2020 after a grand jury investigation showed that drilling unconventional gas wells by the company had been responsible for methane pollution in the local water supply.

Dimock was at the heart of the Marcellus Shale gas fracking boom that began in 2007. Residents complained that Cabot’s drilling caused methane gas to seep into their wells, to the extent that the contaminated water even caught fire.

Coterra did not immediately respond to a request for comment.

(Reporting by Swati Verma in Bengaluru; Editing by Bradley Perrett)

WTI Oil Stays Above $80 After EIA Report

Key Insights

  • Crude inventories declined by 12.6 million barrels from the previous week. 
  • Natural gas moved below the $7.00 level as rail strike risks declined. 
  • Copper rallied as traders bet that China would relax its zero-COVID policy after recent protests. 

WTI Oil Pulled Back From Highs But Stayed Above The Key $80 Level

WTI oil continues to trade above the $80 level after the release of the EIA Weekly Petroleum Status Report.

The report indicated that crude inventories declined by 12.6 million barrels from the previous week, compared to analyst consensus of 2.76 million. It should be noted that crude oil imports declined by 1 million bpd from the previous week.

Total motor gasoline inventories increased by 2.8 million barrels, while distillate fuel inventories grew by 3.5 million barrels. Domestic oil production remained unchanged at 12.1 million bpd.

The sharp drop in crude inventories was driven by the fall in crude oil imports, while gasoline and distillate fuel inventories increased significantly. In the near term, traders will stay focused on the upcoming OPEC+ meeting and the Russian oil price cap story.

Natural Gas Retreats As U.S. Lawmakers Are Ready To Prevent The Strike

Natural gas pulled back below the $7.00 level as traders reacted to the decreasing risk of a rail strike.

The U.S. lawmakers plan to pass legislation that would avert the strike, which is bearish for natural gas markets. At this point, it looks that natural gas has a good chance to gain additional downside momentum in the near term.

Gold Pulls Back From Session Highs As Dollar Rebounds

Gold has recently made another attempt to settle above the $1760 level but lost momentum and pulled back towards $1750 as the U.S. dollar rebounded from session lows.

Gold

If gold settles below the $1750 level, it will move towards the next support level, which is located near the 20 EMA at $1730. A move below this level will open the way to the test of the support at the 50 EMA at $1715.

On the upside, gold needs to settle above the resistance at $1765 to gain additional upside momentum. The next resistance level for gold is located at $1775. A successful test of this level will push gold towards November highs at $1785.

Other precious metals are moving higher as traders hope that China will gradually ease its strict zero-COVID policy. Silver made an attempt to settle above the $22.00 level. Platinum moved towards $1050, while palladium rebounded towards the $1850 level.

Copper Tries To Settle Above $3.75

Copper rallied towards the $3.75 level as traders bet that China’s demand would increase when the country relaxes its anti-coronavirus measures. If copper settles above $3.75, it will head towards the next resistance at $3.80.

For a look at all of today’s economic events, check out our economic calendar.

Gazprom rejects Uniper’s claims for billions in compensation over undelivered gas

(Reuters) -The export arm of Russia’s Gazprom on Wednesday denied it was in breach of contract regarding gas supplies to Germany’s Uniper , after Uniper launched arbitration proceedings in a bid to claim back billions of extra costs over undelivered gas supplies.

Gas has been at the centre of a geopolitical row between Russia and Europe since Moscow invaded Ukraine in February. The West has accused Russia of cutting supplies, trying to freeze Europe and stoke a cost of living crisis in a bid to undermine its support for Ukraine.

Gazprom stopped supplying gas to Germany at the end of August, when it shut down the Nord Stream 1 pipeline that was previously the main gas link between Russia and Germany.

The Germany company, which is in the process of being nationalised in a state bailout to survive the energy crisis triggered by the Ukraine war, puts the cost of replacing Russian gas at around 11.6 billion euros ($12.02 billion) to date.

Gazprom said it intended to defend itself against claims.

“Gazprom Export does not recognise any violation of contract or the legality of Uniper’s stated claims for damages,” it said in a statement.

“We are studying the statement and will defend our interests within the legal framework,” it added.

In the first nine months of 2022, Uniper reported a 40 billion euro ($39.3 billion) net loss, the biggest in German corporate history. Part of that was down to higher costs of replacing lost Russian gas supplies on the more expensive spot market.

(Reporting by Reuters; Editing by Mark Trevelyan)

Crude Oil Price Forecast – Crude Oil Markets Continue to Grind Higher

Crude Oil Prices Forecast Video for 01.12.22

WTI Crude Oil Technical Analysis

The West Texas Intermediate Crude Oil market has rallied again during the trading session on Wednesday, as we continue to recover from the massive plunge on Monday. The $76 level now looks to be somewhat important, perhaps extending down to the $75 level. It’s a little early to be calling for a “double bottom” in this market, because quite frankly there are a lot of concerns when it comes to global demand, as we are almost certainly heading into some type of huge recession. At this point, I think it probably is easier to fade signs of exhaustion than it is to try to write any rally to the upside.

Brent Crude Oil Technical Analysis

Brent markets also have rallied to break above the $86 level, and now it looks like we are threatening some type of move towards the $87.50 level. Nonetheless, this is also a market that has to worry about demand, so I think it’s going to be difficult to get overly aggressive, and I do think that it’s probably only a matter time before we see signs of exhaustion going forward. The 50-Day EMA is all the way up to the $91.64 level and is dropping.

In other words, we could rally quite a bit and still not change the overall outlook. If we break down below the hammer from the Monday session in either one of these grades of crude oil, that would be extraordinarily bearish and could send the crude oil markets plunging in that scenario. Keep up your money management in this environment, because we are about to make rather choppy and noisy moves.

For a look at all of today’s economic events, check out our economic calendar.

ADP Reports Private Sector Hiring Increased by Just 127,000 Jobs in November

The ADP Non-Farm Employment Change report showed on Wednesday that private sector employment rose by 127,000 in November. This reading came in lower than the market expectation of 190,000. The October reading was unchanged at 239,000.

In response to the data, Nela Richardson, chief economist at ADP said, “Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains.”

“In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing,” Richardson said.

Instant Analysis

The data supports the notion that the series of aggressive rate hike by the Federal Reserve are working to slow inflation and the labor market, leading investors to price in a 50 basis point rate hike by the Federal Reserve on December 15. This move would bring an end to the Fed’s streak of 75 basis point rate hikes.

Traders will now get the opportunity to react to another labor market report at 15:00 GMT. The JOLTS report is expected to show the number of job openings dropped from 10.72 million to 10.24 million.

At 18:30 GMT, Fed Chairman Jerome Powell is expected to give a speech on the economy and labor markets. Investors are hoping for further insight on the pace of future interest rate hikes and whether policymakers have a pivot strategy. Powell might also discuss the probability of a recession.

Market Reaction

U.S. Treasury yields dipped on the news, driving the U.S. Dollar lower. U.S. stock traders liked the news, adding to earlier gains in the pre-market session.

For a look at all of today’s economic events, check out our economic calendar.

OPEC+ switch to virtual meeting signals policy roll-over ahead of Russian oil price cap – sources

By Maha El Dahan, Alex Lawler and Ahmad Ghaddar

DUBAI/LONDON (Reuters) – The OPEC+ decision to hold its Dec. 4 meeting virtually signals little likelihood of a policy change, sources told Reuters on Wednesday, as the group assesses the impact of the looming Russian oil-price cap on the market.

A virtual meeting puts the focus on the pending European Union deal over the price cap on Russian oil, as well as a Dec. 5 deadline imposed by the bloc for a full embargo on purchases of Moscow’s seaborne crude.

“OPEC+ would rather sit on the bench at this time and assess the outcome of what happens on Monday,” one source with direct knowledge of the matter told Reuters on Wednesday.

The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, also meets as China’s COVID-19 lockdowns weigh on demand and prices. Still, oil on Wednesday gained support from hopes of a Chinese demand recovery.

OPEC+ had been expected to convene in Vienna for only the second time since the pandemic.

OPEC also made a meeting of its own ministers planned for Saturday a virtual gathering, and OPEC+ cancelled a meeting of oil market experts, the Joint Technical Committee, that had been scheduled for Friday, sources said.

“It looks like a simple decision to roll over on Sunday,” an OPEC+ delegate said. Some delegates who had travelled to Vienna for technical meetings this week were making plans to return home ahead of the weekend.

In October, OPEC+ agreed to cut output by 2 million barrels per day (bpd) equal to 2% of global supply, effective until Dec. 2023. The decision caused a clash with the West as the U.S. administration called the decision shortsighted.

Top OPEC exporter Saudi Arabia on Nov. 21 said OPEC+ was sticking with output cuts and could take further measures to balance the market.

Analysts and some OPEC+ delegates have said a further cut on Sunday should not be ruled out, although two delegates on Tuesday put a low probability of this happening.

“Market fundamentals favour another cut, especially given the uncertainty over China’s COVID situation,” said Stephen Brennock of oil broker PVM.

(Reporting by Maha El Dahan; Alex Lawler, Ahmad Ghaddar, Olesya Astakhova and Rowena Edwards; Editing by Kim Coghill and Elaine Hardcastle)

Marketmind: Uneasy Chair

A look at the day ahead in U.S. and global markets from Mike Dolan.

Even as disinflation takes hold and recession looms, Federal Reserve Chair Jerome Powell may have to deliver another uncomfortable message of more monetary tightening ahead before the Fed hunkers down for its final meeting of the year.

World markets will be in thrall to Powell’s speech at 1330 Washington time (1830 GMT), not least because it’s one of the final set pieces before the Fed’s self-imposed blackout period ahead of its December 14 policy decision.

But unless he goes very much against the grain of his colleagues, Powell will likely reinforce market expectations of downshift in the size of interest rate rises but point to a terminal rate of 5% or higher next year and push back on hopes of any early easing from there.

While inflation looks past its peak, labour markets remain super tight and Powell speaks before another crucial nationwide employment report on Friday. However, he will get a glimpse on Wednesday of this month’s private sector payrolls from the ADP survey and a readout on closely monitored job openings.

Futures market expectations for peak Fed rates next May ticked back above 5% ahead of the speech, with about 35 basis points of rate cuts from there still priced by yearend. Ten-year Treasury yields were steady at 3.70% and Wall St stock futures were mostly flat after closing in red on Tuesday for the third day running.

While New York Fed chief John Williams indicated this week that rate cuts would not come before 2024, Bank of America economists on Tuesday reckoned a recession hitting by the middle of 2023 may force that cut shortly after.

Many expect Powell to focus today on the longer-term horizon for interest rates, not least as a long-running debate on possibly raising the 2% inflation target has resurfaced in the background this week.

Hopes of peak global inflation were reinforced on Wednesday by data showing euro zone consumer price growth falling back more than forecast to 10% this month from 10.6% in October, lifting euro stocks and bonds and the currency.

The dollar slipped back a touch, especially against China’s yuan.

China and Hong Kong shares extended gains on Wednesday as market participants cheered an easing of COVID-19 measures in Guangzhou city. Southern Guangzhou city relaxed COVID prevention rules in multiple districts – even as protests and clashes with police escalated – offsetting the gloomier factory and service sector business readings for this month

China’s factory activity contracted at a faster pace this month, weighed down by the COVID curbs and softening global demand.

Key developments that may provide direction to U.S. markets later on Wednesday:

* US Nov ADP private sector payrolls and Oct JOLTS data on job openings, Q3 GDP revision, Oct international trade, retail and business investores, pending home sales

* US Federal Reserve Chair Jerome Powell speaks in Washington. Fed Board Governors Michelle Bowman and Lisa Cook both speak.

* US Federal Reserve releases Beige Book on economic conditions

* US corporate earnings: Salesforce, Synopsys, Hormel Foods

* U.S. President Joe Biden welcomes French President Emmanuel Macron for state visit to the United States

Graphic: What Wall Street thinks of the Fed’s messaging https://graphics.reuters.com/USA-FED/POWELL/lbpgnwkodvq/chart.png

Graphic: Analysts lower Brent and WTI forecasts for 2023 https://graphics.reuters.com/OIL-PRICES/POLL/klvygkogrvg/chart.png

Graphic: China’s factory activity falls in November https://graphics.reuters.com/CHINA-ECONOMY/PMI/zgpobmlqavd/chart.png

Graphic: Euro zone inflation drops https://graphics.reuters.com/GLOBAL-MARKET/byprljdmmpe/chart.png

(By Mike Dolan, editing by Alexandra Hudson mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)

Saudi Arabia to host China-Arab summit during Xi visit, sources say

By Aziz El Yaakoubi and Julie Zhu

RIYADH/HONG KONG (Reuters) – Saudi Arabia plans to host a Chinese-Arab summit on Dec. 9 attended by Chinese President Xi Jinping during his visit to the kingdom, three Arab diplomats in the region familiar with the plans said on Wednesday.

Xi is scheduled to arrive in Riyadh on Dec. 7, two of the diplomats and a fourth source with direct knowledge of the visit said, on a trip that comes at a sensitive time for Saudi-U.S. relations that have been strained by a dispute over energy supplies and concerns over growing Chinese influence in the Middle East.

Invitations have gone out to leaders in the Middle East and North Africa for the Chinese-Arab gathering, the diplomats said.

The Saudi government communications office did not immediately respond to a request for comment about Xi’s visit or summit timing. The Chinese foreign ministry did not immediately respond to a query on Xi’s trip.

The Chinese delegation is expected to sign dozens of agreements and memoranda of understanding with Gulf nations and other Arab states covering energy, security and investments, the diplomats said without elaborating.

Saudi minister of state for foreign affairs Adel Al-Jubeir earlier this month told Reuters that strengthening trade ties and regional security would be priorities in the visit, which is also expected to include a China-Gulf summit alongside the wider Arab gathering.

“The level of representation depends on each country with many Arab leaders expected to attend, others would send at least their foreign ministers,” one of the Arab diplomats told Reuters.

Xi’s trip comes against the backdrop of Washington’s strained ties with both Beijing and Riyadh over differences on human rights and Russia’s invasion of Ukraine, and as Western countries face rising economic competition from China, which they say uses its economic might as diplomatic leverage.

Gulf Arab states have in the past few years been strengthening links with China and Russia at a time of growing regional doubts about the commitment of key security partner the United States to the region.

Saudi Arabia and the United Arab Emirates have resisted U.S. pressure to “choose sides” when it comes to their ties with China, a major trade partner, and Russia, a fellow member of the OPEC+ oil producer alliance.

U.S. President Joe Biden’s administration was angered by the OPEC+ decision in October to cut output targets despite U.S. objections, further fraying long-standing ties with Saudi Arabia that Biden had tried to mend during a thorny visit to the kingdom in July.

(Reporting by Aziz El Yaakoubi in Riyadh and Julie Zhu in Hong Kong; Additional reporting by Yew Lun Tian; Editing by Ghaida Ghantous and Nick Macfie)