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Oil prices drop as Fed cuts are outweighed by robust supply
The price of oil fell on Friday, as fears about large supply and decreasing demand overshadowed expectations that the first interest rate cut by the U.S. Federal Reserve this year would lead to more consumption. Brent crude futures fell 97 cents or 1.44% to $66.47 per barrel at 10:42 AM CDT (1542 GMT), whereas U.S. West Texas intermediate futures dropped 72 cents or 1.13% to $62.85. Both benchmarks are still on course for a second weekly gain. Andrew Lipow of Lipow Oil Associates said, "Oil supply continues to be robust and OPEC has reduced its oil production cutbacks." "We have not seen any impact on Russian crude exports." The Fed reduced its policy rate on Wednesday by a quarter-point and said that it would continue to do so as a response to signs of weakness within the job market. Low borrowing costs usually boost oil demand and drive prices higher. Phillip Nova analyst Priyanka Sackdeva said, "The market is caught between contradicting signals." Sachdeva stated that all energy agencies including the U.S. Energy Information Administration have expressed concern over a weakening of demand. This has tempered expectations for significant price increases in the near term. Lipow pointed out the continued decline in refinery demand. He said that "the refinery turnaround will further reduce the demand." Turnarounds are the term used to describe the shutdown of production units at refineries in spring and autumn for major overhauls. The increase in U.S. stockpiles of distillate was higher than expected, and pushed up prices. The latest economic data has also raised concerns. While the U.S. job market is softening, single-family homebuilding fell to a multiyear low in august, a result of an oversupply of new homes that have not been sold. According to PVM Oil Associate analyst Tamas Variga, an uneven recovery in the U.S. economy is one factor that's holding down oil prices. He said that the corporate sector was benefiting from the ongoing deregulation while consumers were beginning to feel the pressure of import tariffs. Both the housing and labour markets showed signs of weakness. (Reporting from Erwin Seba, Stephanie Kelly, and Sudarshan Varadhan in London. Additional reporting by Sudarshan, David Goodman, Jan Harvey, and David Gregorio.
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Hezbollah's chief of staff makes overtures to Saudi Arabia in order to front against Israel
Naim Qassem, the Hezbollah leader, urged Saudi Arabia on Friday to "turn a new page" and put aside past disputes in order to create a united front against Israel. This comes after years of hostility which strained Riyadh’s ties to Lebanon. Saudi Arabia and the other Gulf States designated Shi'ite Hezbollah as a terrorist organization in 2016. Riyadh, Washington, and Hezbollah rivals in Lebanon have been pressing the Lebanese Government to disarm Hezbollah, which has been severely weakened since last year's conflict with Israel. Qassem, in a Friday televised speech, said that regional power should view Israel and not Hezbollah as the primary threat to the Middle East, and suggested "mending relationships" with Riyadh. Qassem stated: "We assure that the weapons of resistance (Hezbollah), are aimed at the Israeli enemy and not Lebanon, Saudi Arabia or any other entity or place in the world." He said that dialogue will "freeze disagreements from the past at least during this extraordinary phase so that we can face Israel and curb it" and that pressing Hezbollah is "a net gain for Israel." Saudi Arabia spent billions of dollars in Lebanon in 2006, helping to rebuild the south following a war between Hezbollah & Israel. But the group grew more powerful with the help of Iran. In 2021, the relationship deteriorated dramatically when Sunni Saudi Arabia expelled the Lebanese Ambassador, recalled their own envoy, and banned Lebanese Imports. In a statement published in Saudi state-run media, it was claimed that Hezbollah controlled Lebanon's decision making processes. Hassan Nasrallah, then Hezbollah secretary general, called Saudi Arabian crown prince Mohammad bin Salman "a terrorist" and criticised Saudi Arabia's role against Yemen repeatedly. In recent months, the political landscape in the Middle East has changed dramatically. Israel destroyed Hezbollah in 2014 and killed Nasrallah. Rebels then toppled Bashar al Assad, the group's Syrian partner. Reporting by Laila Basam and Maya Gebeily, Writing by Enas alashray, Editing by Alex Richardson and Aidan Lewis
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Sources: RPT-Commodity traders Mercuria is betting on a boom with its foray into Uranium.
Three sources familiar with the matter said that Mercuria is the first major commodity company to start physical trading of uranium. It joins banks Natixis, Citibank and others as the expected nuclear energy boom fuels the interest in this niche market. Sources said that Mercuria started trading uranium earlier this year. Two sources confirmed that Citibank and Natixis both launched uranium trades this year. The information provided by the three sources is confidential, so they asked that their names not be disclosed. Citi and Natixis (part of French financial group BPCE) declined to comment. Three new banks will be competing with Goldman Sachs, Macquarie and other major players in the $15 billion market. Analysts and consultants expect institutions to benefit from the wave of new nuclear plants planned that will require financing and fuel supply. The World Nuclear Association predicts that the demand for nuclear fuel will double by 2040 as governments strive to achieve zero-carbon targets, and technology companies scramble for energy to support AI. Mercuria of Geneva, which is a major player in the energy market, has been expanding its metals business in recent years using cash from high oil prices. Louis Csango, who has worked for Goldman Sachs since the 1970s and is well-versed in uranium, was hired by the group in December to lead its uranium operations and work on gas and power. The traders said that it makes sense for Mercuria, which has a power desk already, to use the information about utilities in both areas. Bram Vanderelst, a trading manager at Curzon Uranium - one of the largest firms in the industry - said that there was a lot interest not only from traditional European trade houses, but also from banks from the U.S. He refused to name names. Goldman Sachs, Macquarie and some hedge funds have increased their activity in the sector in recent years. HISTORICALLY HIGH URANIUM PRICES SEEN RISING Uranium has a small market in comparison to other commodities like oil, copper, and aluminium, which are traded by Mercuria or commodity banks. According to UxC, the total global utility demand for Uranium Oxide Concentrate (U3O8) was around 175 million pounds in 2012. Of that, 47 million pounds or 27% were traded on the spot markets. Yellowcake or U3O8 is a fine powder that is packaged in steel drums and is created when uranium is chemically processed. Jonathan Hinze is the president of UxC. He said, "If there's a doubled market in nuclear power and uranium I am sure that traders will have more opportunities." He added, "It is not a market that you can break into quickly. It may take a few more years before you get your footing on the market." The price of uranium at the spot market has doubled in the last five years, to $77 per pound. However, it is still down on the peak of $106 reached in February 2024 - the highest since November 2007. Citi analyst Arkady Gvorkyan expects spot prices to reach $100 per pound in the next year, as miners might not be able keep up with demand. In the last 20 years supply has always lagged behind demand but secondary supplies have balanced the market. "This era is ending relatively quickly," he said.
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Sources say that Brazil will be the first country to invest in the global forest fund
Three people familiar with the plans said that Brazil would be the first to announce an investment into the Tropical Forests Forever Facility. This multilateral funding mechanism was proposed by Brazil to support the conservation of endangered forest globally. The President Luiz inacio Lula da So will announce the investment at the U.N. on Tuesday in New York. This is a move to unlock more contributions both from wealthy and developing countries, who have been at odds over funding global climate policies. The Brazilian government believes that the TFFF could be the main deliverable for the U.N. Climate Summit known as COP30, which it will host at the Amazonian town of Belem this November. The Brazilian government has not confirmed the amount of investment it plans to make, but according to two government sources who asked to remain anonymous to discuss their private discussions, the figure will be "considerable", and is meant to serve as a benchmark to other countries. Reports at the time state that Chinese Finance Minister Lan Fong told Fernando Haddad, his Brazilian counterpart, in July, that China would contribute to the fund. He did not specify how much. China's investment would be a significant shift in climate financing, which relies on the wealthy nations that are most responsible for global heating. According to those involved in the negotiations, the TFFF also has received some initial support from countries such as the United Kingdom and France, Germany, Norway Singapore and the United Arab Emirates. "MONEY WHERE MY MOUTH IS" The TFFF is envisioned by policymakers as a $125-billion fund that combines contributions from the private and sovereign sectors. It will be managed like an endowment, with countries receiving annual stipends based upon how much of their rainforests remain. According to preliminary estimates, Brazil will need the governments and major philanthropies contributing $25 billion in order to achieve this lofty goal. This would then attract an additional $100 billion of private investment. Three sources say that diplomats from countries interested in investing have told Brazil recently that Brazil's initial contribution will help them to prepare their own announcements. Brazil wants to demonstrate that it trusts the proposal it has made enough to "put money where their mouth is" as one source put it. Brazil is the country which will receive the highest payouts because it is the home of the largest tropical forest on earth. The Finance Ministry is still in final discussions with Lula who will be traveling to New York Sunday. Sources said that the decision to invest has already been taken. (Reporting and writing by Lisandra paraguassu, Manuela Andreoni, Editing by Brad Haynes & Mark Porter).
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Valterra CEO predicts global supply of platinum to shrink by 15-20% in the next decade
Valterra Platinum CEO Craig Miller stated on Thursday that global primary platinum group metals production could drop by up to 20% by the decade's end, causing a growing supply deficit. Miller stated that the demand for platinum, palladium, and rhodium from automakers who use them in catalytic convertors has remained strong, due to higher sales both of conventional and hybrid cars, and because energy transition is taking longer than expected. He also said that the demand for jewellery was strong. South African mining firms, which supply more than 70% the world's total platinum, have reduced unprofitable production in the last two years due to the collapse of metal prices, despite warnings about the terminal decline of the industry. Although the recent platinum rally brought relief to miners, it still falls below levels required to support new production. Miller, after taking reporters on a tour through Valterra's converters and processing facilities, told them that the recycling costs are still too high. He stated that the company expects primary supply to decline between "15 and 20 percent" by the decade's end due to the lack of investment made in new mines, and the failure to extend the life of existing assets. Miller stated that "you'd have to see the PGM price basket increase another 50% over where it is now, and maintain it at that level in order to encourage new greenfield production to come online and earn a kind of 10% return," Miller explained. He added that the energy transition will not be as expected, and "we could see ICE vehicles (petrol) or hybrid vehicles for a much longer time". "Hybrids have higher PGM loadings in comparison to ICE vehicles." (Reporting and editing by Jan Harvey; Nqobile Dudla, reporting)
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Sources: Mercuria, a commodity trader, is betting on a boom by foraying into uranium.
Three sources familiar with the matter said that Mercuria is the first major commodity company to start physical trading of uranium. It joins banks Natixis, Citibank and others as the expected nuclear energy boom fuels the interest in this niche market. Sources said that Mercuria started trading uranium earlier this year. Two sources confirmed that Citibank and Natixis both launched uranium trades this year. The information provided by the three sources is confidential, so they asked that their names not be disclosed. Citi and Natixis (part of French financial group BPCE) declined to comment. Three new banks will be competing with Goldman Sachs, Macquarie and other major players in the $15 billion market. Analysts and consultants expect institutions to benefit from the wave of new nuclear plants planned that will require financing and fuel supply. The World Nuclear Association predicts that the demand for nuclear fuel will double by 2040 as governments strive to achieve zero-carbon targets, and technology companies scramble for energy to support AI. Mercuria of Geneva, which is a major player in the energy market, has been expanding its metals business in recent years using cash from high oil prices. Louis Csango, who has worked for Goldman Sachs since the 1970s and is well-versed in uranium, was hired by the group in December to lead its uranium operations and work on gas and power. The traders said that it makes sense for Mercuria, which has a power desk already, to use the information about utilities in both areas. Bram Vanderelst, a trading manager at Curzon Uranium - one of the largest firms in the industry - said that there was a lot interest not only from traditional European trade houses, but also from banks from the U.S. He refused to name names. Goldman Sachs, Macquarie and some hedge funds have increased their activity in recent times. HISTORICALLY HIGH URANIUM PRICES SEEN RISING Uranium has a small market in comparison to other commodities like oil, copper, and aluminium, which are traded by Mercuria or commodity banks. According to UxC, the total global utility demand for Uranium Oxide Concentrate (U3O8) last year was around 175 million pounds, with 47 million or 27 percent traded on spot markets. Yellowcake or U3O8 is a fine powder that is packaged in steel drums and is created when uranium ore undergoes chemical processing. Jonathan Hinze is the president of UxC. He said, "I'm certain that there will be greater opportunities for traders if the market in nuclear power and uranium doubles." He added, "It is not a market that you can break into quickly. It may take a few more years before you get your footing on the market." The price of uranium at the spot market has doubled in the last five years, to $77 per pound. However, it is still down on the peak of $106 reached in February 2024 - the highest since November 2007. Citi analyst Arkady Gvorkyan expects spot prices to reach $100 per pound in the next year, as miners might not be able keep up with demand. In the last 20 years supply has always lagged behind demand but secondary supplies have balanced the market. "This era is ending relatively quickly," he said.
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Gold prices rise as Fed policy is in the spotlight
The gold price rose on Friday, heading for a fifth consecutive weekly gain. Market attention was focused on the next U.S. rate cuts after the Federal Reserve announced its first rate reduction of the year. Gold spot was up 0.3% to $3,653.86 an ounce at 9:17 AM EDT (1317 GMT). So far, prices are up by 0.3% this week. U.S. Gold Futures for December Delivery gained 0.2% to $ 3,686.60. The U.S. Central Bank cut its key rate by 25 basis point on Wednesday, but warned about persistent inflation and cast doubts over the pace of future easing. After the decision, spot prices of gold reached a record high price of $3,707.40, before falling in volatile trading. "Gold is still strong and we are just experiencing a temporary pause following the Fed." Bob Haberkorn, RJO Futures' market strategist, said that the bullish trend is still intact and new highs are inevitable. Neel Kahkari, president of the Fed Bank of Minneapolis, said that job market risks justified this week's cut in rates and are likely to warrant further reductions during the next two central bank meetings. Gold's opportunity cost is reduced by lower interest rates. Gold tends to do well in periods of uncertainty, and it has gained 39% since January. Chinese state media reported that Donald Trump and Xi Jinping had spoken by phone Friday to try and resolve tensions, and maintain TikTok's operation in the U.S. Silver spot rose 0.9%, to $42.18 an ounce, and platinum gained 0.6%, to $1,391.73. Palladium fell 0.3% to $1,146.98. It is headed for a loss of the week. Haberkorn said, "I'm seeing that many investors now turn to platinum and sterling as they are cheaper than gold." Ashitha Shivaprasad reports from Bengaluru. (Editing by Jane Merriman).
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Canada's retail sales in July dropped 0.8% but are expected to rebound in August
Canada's retail sales dropped in July, as expected, according to data released by the National Statistics Agency on Friday. Consumers spent less money on clothing and groceries. Statista Canada reported that retail sales in July fell 0.8%, to C$69.6 Billion ($50.36 Billion), giving up the majority of previous months' gains. StatsCan reported that June retail sales rose by a revised 1,6%. An advanced indicator indicates that retail sales are likely to grow at 1% this August. Retail sales, including domestic sales of furniture, food and gasoline, and many other items are considered a early indicator of gross national product growth, and contribute approximately 40% of total consumer spending. Retail sales are closely monitored by economists and analysts to determine the state of the economy. The third quarter GDP could be strong and avoid contraction if August retail sales numbers are healthy. Two consecutive quarters of contractions indicate that an economy is in recession. Shelly Kaushik is a senior economist with BMO Capital Markets. She said, "While July retail sales were weak, August's performance suggests Canadian consumers did not stay down for very long." She said that despite ongoing trade uncertainty, and a further deterioration in the labor markets, the economy appears to be on course for a modest recover to begin the third quarter. StatsCan reported that retail sales in July decreased in eight out of nine subsectors (representing 72.2%) and in volume terms, by 0.8%. Motor vehicle and parts dealers, the largest contributors to retail sales at over 27%, saw a 0.2% increase in sales. This was the only industry that saw growth in July. Retail sales, excluding motor vehicles and parts (a closely tracked metric), were down by 1.2%. This was a far cry from the analysts' expectations. Analysts polled had predicted retail sales would be down by 0.8% and sales excluding motor vehicle and parts were expected to fall by 0.7%. Clothing and accessories saw the biggest drop in sales, with a 2.9% decline. The drop in sales at grocery stores and supermarkets followed. StatsCan reported that this category dropped by 2.5%.
Russell: China and India's reaction to Trump's Russia oil-tariff threat is crucial.
The threat by U.S. president Donald Trump to impose secondary duties of 25 to 50 percent on buyers of Russian crude is so outrageous and bold that it may achieve his stated goal of a ceasefire between Ukraine and Russia.
What is important now is how the other key players react to the latest move of this mercurial, inconsistent U.S. president.
Do Russian President Vladimir Putin and Indian Prime Minister NarendraModi, as well as Chinese President Xi Jinping, believe that Trump is going to follow through on his promises? If so, what will this mean for the energy situation of these countries?
India and China are the two largest buyers of Russian crude oil. Their reaction is as important as Putin’s response to Trump’s latest shift.
Trump told NBC News he was "pissed" at Putin, and that he would impose tariffs up to 50% for buyers of Russian crude if he felt Moscow was blocking efforts to bring peace to Ukraine.
If Russia and I cannot reach an agreement to stop the bloodshed in Ukraine and if I believe it is Russia's responsibility, then I will impose secondary tariffs on all oil coming out of Russia. Trump said that he would impose secondary tariffs on all Russian oil.
It is a reversal from his previous friendly attitude toward Putin. This had attracted widespread criticism because it was seen as a surrender to Russia and a tacit acceptance of its aggression.
Russia, China, and India have to assess whether Trump's threats are credible and likely.
Putin may back down a little if he believes Trump is going to increase sanctions against Russia's major export.
India is in a difficult position, as Modi's stance has been to try to appease Trump. A proposal to abolish the import duty for U.S. Liquefied Natural Gas in order to increase purchases was an example.
India is also a major beneficiary from the fact that the rest of world has shunned Russian crude. This has allowed the South Asian nation the opportunity to purchase discounted cargoes, so much so that Russia now ranks as its biggest supplier.
According to LSEG Oil Research, India will import 1.52 million barrels of Russian oil per day in March. This represents just over 30% of the total number of arrivals.
India is already refusing to buy crude oil from Iran due to U.S. sanctions. Replacing Russian barrels would lead to an increase in India's oil costs, and the scramble to find other suppliers.
CHINA RISK
China is less likely than the U.S. to give in to pressure, since it is the sole major buyer of Iranian oil. It is also the top importer for Russian oil.
Beijing faces the risk that an additional tariff up to 50% of U.S. imported goods from China on top of Trump's 20% would cause real pain to its economy. It is already struggling for momentum.
If Trump's threat of secondary duties on buyers of Russian oil is credible, this will also change the dynamics of the OPEC+ exporters group, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia.
For OPEC+ member countries other than Russia any reduction in Russian barrels will likely boost prices and allow them to increase production and exports.
It's a fight between self-interest and group solidarity. With the fiscal position of many OPEC+ countries deteriorating, it may be difficult to resist the temptation of earning more money through higher exports.
For the moment, players will likely respond cautiously - at least publicly - as they attempt to determine whether Trump's new tariff threat was a thought balloon easily discarded by the next change in sentiment.
Initial market reactions were subdued. Brent futures, the global benchmark, rose a modest 0.3% in early Asian trading on Monday to $73.84 per barrel.
These are the views of the columnist, who is also an author. (Editing by SonaliPaul)
(source: Reuters)