Oil ‘set’ for weekly loss on stock build, trade dispute
Gold prices edge up
LONDON, Oct 20, (RTRS): Oil prices rose on Friday on signs of surging demand in China, the world’s second-biggest oil consumer, although the market was heading for a second week of losses on rising US inventories and concern that trade wars were curbing economic activity.
Benchmark Brent crude oil jumped $1.14 a barrel, or 1.4 percent, to a high of $80.43 before easing back to around $80.29, up $1.00 by 1330 GMT. US light crude was 60 cents higher at $69.25.
For the week, Brent crude was 0.2 percent lower while US crude was down 2.9 percent, both on track for a second consecutive weekly decline, and down around $7 a barrel from four-year highs reached in early October.
“After two consecutive days of slide the oil market is staging a half-hearted come-back,” said Tamas Varga, analyst at London brokerage PVM Oil. “Maybe it is down to some pre-weekend shortcovering.”
Refinery throughput in China, the world’s largest oil importer, rose to a record high of 12.49 million barrels per day (bpd) in September as some independent plants restarted operations after prolonged shutdowns over the summer to shore up inventories, government data showed on Friday.
Undermining sentiment were official figures showing China’s economic growth slowed in the third quarter to its weakest pace since the global financial crisis, with gross domestic product expanding by only 6.5 percent, missing estimates.
The data raised concerns that China’s trade war with United States was beginning to hit growth, which may limit oil demand.
Also denting confidence was evidence this week that US oil inventories had risen sharply.
US crude stocks last week climbed 6.5 million barrels, marking a fourth straight weekly build and almost triple the amount analysts had forecast, the U.S. Energy Information Administration said on Wednesday.
“EIA Weekly Petroleum Status Report was a complete shocker sending oil markets spiralling lower amidst some concerning development for oil bulls,” said Stephen Innes, head of trading APAC at OANDA in Singapore.
Inventories rose sharply even as US crude production slipped 300,000 barrels per day (bpd) to 10.9 million bpd last week due to the effects of offshore facilities closing temporarily for Hurricane Michael.
Meanwhile, Iranian oil exports may have risen in October as buyers took cargoes before US sanctions on Tehran take effect from Nov 4.
An unprecedented volume of Iranian crude oil is set to arrive at China’s northeast port of Dalian this month and in early November before then, according to an Iranian shipping source and data on Refinitiv Eikon.
Gold prices edged up on Friday, setting the metal on course for a third week of gains as weaker stock markets spurred investors to seek refuge in bullion, which also gained technical momentum after scaling major milestones.
Spot gold added 0.2 percent to $1,226.85 per ounce by 1115 GMT. The metal has gained 0.7 percent so far this week, after hitting a 2-1/2-month high at $1,233.26 on Monday.
US gold futures were steady at $1,229.80 an ounce.
“Gold has done really well to hold up here, given the Fed was really hawkish. Sensitivity to equity markets is helping gold at the moment,” Macquarie commodity strategist Matthew Turner said.
“We are entering a new paradigm, where any further rate hike could be a sign that the economy is overheating a bit, which should be more positive for gold and problematic for equities.”
Every Federal Reserve policy maker backed raising interest rates last month, according to September meeting minutes released on Wednesday.
Rising interest rates are normally negative for gold since they could boost the dollar and also increase the opportunity cost of holding non-yielding bullion.
In wider markets, European stocks tumbled again as a showdown between Italy’s government and the European Union loomed.
“Today’s attempt by gold to lastingly exceed the 100-day moving average looks promising. If it succeeds, technical follow-up buying should push the gold price further up,” Commerzbank analysts said in a note.
“At the same time, gold is resisting the firm US dollar. It is finding support from increased risk aversion among market participants, as reflected in falling stock markets, and from additional ETF (exchange traded fund) inflows.”
Holdings of the SPDR Gold Trust, the largest gold-backed ETF, have gained 2.5 percent in the past two weeks.
The recent sell-off in global stock markets has boosted gold’s appeal, as some investors see it as a safe store of value during political and economic uncertainty.
In other precious metals, platinum rose 0.7 percent to $831 per ounce.
Palladium gained 0.8 percent to $1,079.50 per ounce and was up over 1.4 percent for the week. Silver was up 0.5 percent at $14.61.