Oil futures: Crude in cautious recovery, Brent above $72/b

12 Nov 2024

Quantum Commodity Intelligence – Crude oil futures Tuesday were nudging higher as benchmarks steadied after surrendering over 5% of value during the previous two sessions. 

Front-month Jan25 ICE Brent futures were trading at $72.05/b (2000 GMT), compared to Monday's settle of $71.83/b, while the Jan25/Feb25 spread has narrowed to under +$0.20/b.

At the same time Dec24 NYMEX WTI was trading at $68.28/b versus Monday's settle of $68.04/b.

The commodities sector has been left trailing by the broader risk-on sentiment across financial markets since the Trump election win, with oil hit by fears that policies from the new administration could stall global demand growth and boost US energy output.

Concerns that a tariff-led trade world will damage a fragile global economy have rocked confidence in the oil sector, although prices will likely determine any boost to US oil production.

Meanwhile, the dollar continues to rise on speculation of policy changes following the US election, as the USD index consolidated at four-month highs above 105.50 points.

"The main contributors to the index's strength are weakness in the single currency and the Japanese yen. In both cases, there is a cocktail of political uncertainty and fears that Trump's protectionist policies will hurt EU and Japanese exporters," said Alexander Kuptsikevich of FxPro.

China

Sentiment was further dampened after Beijing disappointed with its latest stimulus plans, while GDP and oil demand growth remain below par.

OPEC has also trimmed its forecasts for global oil demand in 2024 for a fourth consecutive month, as tepid growth from China continued to drag on consumption forecasts.

The Trump administration has also pledged to support ceasefire plans on major conflicts, but over the weekend, Russia and Ukraine exchanged the largest drone attacks against each other since Moscow's invasion.

Meanwhile, Middle East peace talks faced a setback after Qatar suspended its efforts to mediate a ceasefire and hostage deal between Israel and Hamas.

On the plus side for oil, a Republican administration could step up purchases of crude for the Strategic Petroleum Reserve, although it will first need to find additional funding from Congress when it takes power in January.