Oil prices rose during trading on Tuesday with anticipation of the results of the OPEC+ alliance meeting, while gold prices rose with the expectation of a US interest rate cut, which put pressure on the performance of the US dollar against 6 major currencies.
Oil
Oil prices rose today as traders awaited the outcome of the OPEC Plus meeting this week.
Brent crude futures rose 0.71% to $72.34 per barrel, after losing one cent in the previous session, and US West Texas Intermediate crude rose 0.66% to $68.55 after rising 10 cents yesterday.
OPEC Plus sources said that the coalition, which includes OPEC countries and allies led by Russia, will extend the latest round of production cuts until the end of the first quarter at its meeting on December 5.
“Given the increased level of commitment to production cuts from Russia, Kazakhstan and Iraq, lower Brent price levels, and indicators in press reports, we assume an extension of OPEC+ production cuts until April,” analysts from Goldman Sachs said in a note.
The OPEC Plus alliance aimed to reverse the cuts in the first quarter of 2025, but expectations of excess supply affected prices, and the alliance pumps about half of the world’s oil.
Priyanka Sachdeva, a market analyst at Philip Nova, said: “I think there is no other option but to postpone,” adding that it may only be for a month or so, as there is a lot of pressure from the participating countries to increase production.
In light of the lack of bullish catalysts and weak demand, Sachdeva expects oil prices to trade in a limited range with a downward bias.
Researchers and analysts say that demand for oil in China is expected to reach its peak next year, increasing the gap between demand and supply.
Traders expected Saudi Arabia to reduce crude prices for Asian buyers to their lowest level in at least 4 years.
Fears that the Federal Reserve (the US central bank) would not cut interest rates at its meeting this December also worked to keep oil prices under control, which dissipated the effect of some positive signals from China, where the purchasing managers index rose to the highest level in 7 days. Months in November.
Prices of the two global benchmarks fell by more than 3% last week.
In the Middle East, what were described as violations of the ceasefire brokered by the United States between Israel and Hezbollah continued.
Yesterday, a preliminary poll conducted by Reuters concluded that crude oil inventories in the United States are expected to decline last week, while gasoline and distillate inventories are likely to rise. The American Petroleum Institute and the Energy Information Administration are scheduled to issue weekly data on Tuesday and Wednesday, respectively.
Dollar
The dollar rose today against the euro, due to political turmoil in France, while the risks of tariffs and the weakness of the Chinese economy pushed the yuan to its lowest level in a year.
However, the yen rose near its highest level in 6 weeks as bets increased that Japan is about to raise interest rates.
- The euro was the weakest of the ten major currencies during November, and this month began with a 0.7% decline last night and hovered around $1.0489 in early trading in Asia, at a time when the French government was heading towards collapse due to the budget impasse.
- The improvement in US manufacturing data and the decline in Chinese bond yields to record low levels pushed the yuan below the support level at about 7.26 against the dollar, to the lowest level in 4 months.
China set the yuan’s trading range at its weakest levels in more than a year, and the currency slid to its lowest levels since November 2023 at 7.297 to the dollar in early trading.
- The Australian dollar fell 0.7% to $0.6470, with some mixed economic data showing a larger than expected deficit in the current account balance, but it had rebounded at the time of preparing this report, rising 0.43% to $0.6499.
- The New Zealand dollar rose 0.22% to $0.5899.
- As for the yen, it was the only currency in the group of ten major currencies that achieved gains against the dollar last month, and it touched its highest levels since late October yesterday, Monday, at 149.09 against the dollar, and was trading near this level on Tuesday.
The market expects a 60% chance that Japan will raise interest rates by 25 basis points later this December.
In general, the dollar index, which measures the performance of the US currency against 6 major currencies, showed a rise of 0.23% to 106.2 points.
The six main currencies in the index are (the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc).
Markets are awaiting employment data in the United States on Friday to bet on whether the Federal Reserve (the US central bank) will cut interest rates later in the month.
The dollar usually suffers from seasonal weakness in December as companies tend to buy foreign currencies, but this year traders are cautiously watching the incoming administration of President-elect Donald Trump, and maintaining the stability of the dollar.
In the past few days, Trump threatened the BRICS group with punitive customs duties unless it committed to the dollar as a reserve currency.
gold
Gold prices rose supported by growing expectations of a cut in US interest rates this month, with focus turning to upcoming economic data for additional insights into the monetary policy of the world’s largest economy.
Gold rose in instant transactions by 0.15% to $2,642.50 per ounce, after falling by about 1% yesterday.
US gold futures rose 0.16% to $2,662.70.
Federal Reserve Board member (US Central Bank) Christopher Waller said yesterday that with continued expectations of a decline in inflation to 2%, he is inclined “for the time being” to support another cut in interest rates later this month.
The comments increased investors’ expectations of a cut in interest rates at the US central bank’s meeting on December 17 and 18 to approximately 75%.
Gold, which does not generate a return, thrives in light of low interest rates.
The main US data this week includes several reports on jobs and the labor market.
The data showed that US manufacturing contracted at a moderate pace in November, with orders growing for the first time in eight months and a significant decline in factory input prices.
