Oil prices rose during today’s trading after yesterday’s declines on news of a ceasefire agreement between Hezbollah and Israel, while the dollar rose and gold fell after US President-elect Donald Trump confirmed his intention to impose customs tariffs on China, Mexico and Canada.
Oil
Oil prices increased slightly in early trading today after falling in the previous session, while investors evaluate the impact of a potential ceasefire between Israel and Lebanese Hezbollah, putting pressure on the risk premium in the oil market.
Brent crude futures rose 26 cents, or 0.34%, to $73.28 per barrel, and US West Texas Intermediate crude futures increased 19 cents, or 0.26%, to $69.12, at the time of writing this report.
The prices of the two standard crude oils fell by $2 per barrel at settlement yesterday, Monday, after reports indicating the imminent announcement of a ceasefire agreement between Hezbollah and Israel, which led to sales of crude oil.
Philip Nova market analyst Priyanka Sachdeva said the market’s reaction to the ceasefire news was “exaggerated.”
She added that while the news calmed fears of Middle East supply disruptions, Israel’s war in Gaza “did not significantly disrupt supplies that drive war premiums” this year.
Analysts at ANZ said: “The ceasefire in Lebanon reduces the possibility of the next US administration imposing strict sanctions on Iranian crude oil.”
Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and its production is about 3.2 million barrels per day, or 3% of global production.
Analysts said that Iranian exports may decline by one million barrels per day if the Trump administration returns to the campaign to impose maximum pressure on Tehran, which will reduce global crude oil flows.
In Europe, the Ukrainian capital, Kiev, was attacked by Russian drones early on Tuesday, according to what the city’s mayor, Vitali Klitschko, said.
The intensity of the conflict between Moscow, the main oil producer, and Kiev escalated this month after US President Joe Biden allowed Ukraine to use American-made weapons to strike deep into Russia, in a major shift in Washington’s policy towards the conflict.
On the other hand, Azerbaijani Energy Minister Parviz Shahbazov said that the OPEC+ group may consider at its meeting next Sunday maintaining the current oil production cuts as of January 1, after the group had already postponed increases amid concerns about demand.
Trump said that he would sign an executive order imposing 25% customs duties on all products coming to his country from Mexico and Canada, and it was not clear whether this included oil imports.
The vast majority of Canada’s crude oil exports, amounting to 4 million barrels per day, go to the United States, and analysts ruled out that Trump would impose customs duties on Canadian oil, which cannot be easily replaced because it differs from the types produced by his country.
gold
Gold prices continued to decline today, Tuesday, after falling 3% in the previous session, under pressure from the rise in the dollar following Trump’s pledge to impose customs duties on Mexico, Canada, and China.
Gold in spot transactions fell 0.38% to $2,615.99, while US futures contracts fell 0.1% to $2,615.40.
“Despite yesterday’s extended sell-off, gold is holding up relatively well, which indicates some safe-haven demand,” City Index analyst Matt Simpson said.
He added: “We may see more confusion in the future, especially with Trump back in the spotlight.”
Trump has pledged to impose heavy tariffs on Canada, Mexico and China, raising the risk of trade wars.
Gold is considered a safe haven in times of economic and geopolitical uncertainty, such as trade wars and other conflicts.
Minneapolis Federal Reserve Bank President Neel Kashkari, who usually leans toward tightening monetary policy, said he was open to cutting interest rates again next month.
According to the CME Group’s Fed Watch tool, the markets currently see a 55.9% probability that the Federal Reserve (the US central bank) will cut interest rates by 25 basis points next December.
Traders are awaiting the release of US consumer confidence data and the minutes of the Federal Reserve’s November meeting later today, in addition to the first review of GDP and the core personal consumption expenditures index later in the week.
“I expect gold to trade in a narrow range in the short term, with a slight trend to the upside,” Simpson said.
On the geopolitical level, 4 senior Lebanese sources expected yesterday that US President Joe Biden and his French counterpart, Emmanuel Macron, would announce a ceasefire in Lebanon between Hezbollah and Israel within 36 hours.
Dollar
The dollar rose today after US President-elect Donald Trump said that he would impose customs duties on products coming to the United States from Mexico, Canada and China, with investors preparing for policies that could lead to a trade war.
In an initial reaction to Trump’s statements, the dollar jumped by more than 2% against the Mexican peso, before losing its gains by 1.6%, in the latest trading, and the US currency also recorded its highest level in 4 and a half years against the Canadian dollar.
The US currency also rose to its highest level since July 30 against the Chinese yuan, and other currencies also fell against the dollar, but trimmed their losses by afternoon trading in Asia.
The dollar has found itself on the defensive over the past two days as the Treasury market welcomed the president-elect’s selection of Scott Besent, a hedge fund manager, to take over the Treasury portfolio.
While traders see Picent as a veteran Wall Street expert with conservative financial tendencies, he has expressed his support for the strength of the dollar and his support for imposing tariffs, and analysts said that the market’s reaction to Picent’s choice will likely be short-lived.
- The dollar index, which measures the performance of the US currency against 6 major currencies, recorded 107.10 points in the latest reading.
- The euro fell 0.11% to $1.0482, while the British pound fell 0.20% to $1.2542.
- As for cryptocurrencies, Bitcoin was trading at $92,809, which is much lower than the record high of $99,830 that it recorded at the beginning of the week.
Bitcoin witnessed profit-taking operations before reaching the symbolic $100,000 barrier, after it rose by more than 40% since the US elections held earlier this month amid expectations that Trump would ease regulatory measures for cryptocurrencies.
Source : Reuters + CNBC + Websites
