Oil Prices Rise Amid Mixed Demand Signals and OPEC+ Decision Watch

Oil prices rose on Friday and are on track to end the week with a small gain as markets await an OPEC+ decision on production levels for the second quarter and amid mixed demand signals from key consumers the United States and China.

WTI crude is on track for a weekly gain of at least 2.5%, while Brent crude is holding near last week’s settlement price. Brent has been hovering comfortably above $80 a barrel for three weeks. Sources say a decision on extending cuts is expected in the first week of March, and that each country is expected to announce its own decision.

The market also received support from strong expectations that Saudi Arabia will keep its crude oil prices for Asian customers largely unchanged in April compared to March levels.

Prices were also supported by the US personal consumption expenditures (PCE) reading, the Federal Reserve’s preferred inflation gauge, which showed that inflation in January was in line with economists’ expectations, boosting market bets for a rate cut in June, which could in turn lower costs for consumers and stimulate fuel buying.

However, China’s February manufacturing PMI data limited oil’s gains. An official survey showed on Friday that factory activity shrank in February for a fifth straight month, adding pressure on policymakers in Beijing to roll out more stimulus measures as manufacturers struggle to secure orders.

Gold Hovers Near Fresh Peak on Fed’s Preferred Inflation Data

Gold prices rose globally to near a one-month high during trading on Friday, following data that pointed to easing price pressures in the United States, while traders await comments from several Federal Reserve officials.

Markets were relieved by the lack of bad surprises in the PCE report. Gold traders were cheered by the fact that core personal consumption expenditures slowed on a year-over-year basis. Data from the US Labor Department showed that initial jobless claims rose by 13,000 to 215,000 in the week ended February 24, compared to expectations of 209,000.

Data on Thursday showed that PCE inflation in January rose 2.4%, the smallest annual increase since February 2021, after rising 2.6% in December. Federal Reserve members are generally focused on falling inflation, which they say is likely to pave the way for rate cuts later this year.

Lower interest rates make the non-yielding yellow metal more attractive. Currently, money market pricing shows that traders are pricing in three-quarters of a point in US rate cuts for 2024. Investors are looking ahead to comments from at least six more Federal Reserve officials later on Friday.

Gold and the dollar now

Gold futures are now up 0.1% to $2056 an ounce.

Spot gold is up about 0.2% to $2048 an ounce. after hitting $2050 on Thursday, its highest since February. The metal is on track for its second straight weekly gain.

At the same time, the dollar index is down 0.07% to 104.027.

Other metals

Spot platinum rose 0.6% to $881.40 an ounce, and palladium also jumped 0.6% to $947.35. But the two metals fell for a second straight month, with palladium hitting its lowest in more than five years at $849.13.

Important Statements by Fed Member Mester on Inflation and Rate Cuts

Cleveland Federal Reserve Bank President Loretta Mester made the following statements:

The personal spending data for January was a big surprise. The spending readings don’t change the fact that inflation is on a downward trend. The Fed has some work to do on the inflation front. It’s all about managing risk until we get to the Fed’s 2% target. US monetary policy is currently at restrictive levels, so demand should slow down. We can’t rely on the pace of inflation decline last year to continue the fight this year.

Demand will moderate this year, but US economic growth will not be as strong as it was last year. We don’t want to focus on the timing of rate cuts but on the incoming economic data. I expect some moderation in job growth, and we would like to see that moderation to cut rates. We want to make sure that inflation is on a downward trend. The Fed’s baseline scenario is that we will see a moderation in the labor market but in a stable and non-damaging way.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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