Oil prices fell in European trade for the first session in six days off ten-week highs on active profit-taking.

Oil prices are still heading for the third weekly profit in a row amid expectations of excessive market shortages in the fourth quarter of the year and amid OPEC optimism for global demand. 

Prices are also boosted by strong Chinese economic data, which renewed hopes for improving fuel demand, in turn overshadowing concerns about US oversupply as inventory and crude production increase.

Global Prices 

US crude fell 1.5% to $89.27 a barrel, with the highest since November 2022 at $91.11 a barrel, while Brent declined 1.25% to $92.70 a barrel, with the highest since November 2022 at $94.58. 

US crude rose 2.1% on Thursday, while Brent added 2.0%, the fifth profit in a row amid expectations of excessive shortages in the final quarter of the year. 

Weekly Trades 

Oil prices are up 2.5% so far this week on track for the third weekly profit in a row. 

Shortages

The International Energy Agency said the decision by Saudi Arabia and Russia to cut crude output by 1.3 million bpd until the end of the year will cause shortages in the fourth quarter of the year.

Bank of America analysts believe such cuts will send Brent prices above $100 by the end of the year.

Conversely, OPEC maintained its optimistic outlook for demand growth worldwide this year and next year,while also expecting flexible global economic growth despite higher interest rates.

OPEC specifically expects global demand on crude to rise by 2.25 million bpd in 2024, and to rise by 2.44 million bpd this year.

Chinese Demand 

Recent strong Chinese data indicated the economy is likely recovering in the third quarter of the year and exiting the recent struggles.

China's industrial production rose 4.5% in August, beating estimates of 3.9%, while retail sales rose 4.6% in August, beating estimates of 3.0%, as unemployment fell to 5.2%.

In another stimulus step to boost the economy, the People's Bank of China decided to lower the required cash reserves held by banks by 25 basis points to nearly 7.4%.

US Stocks

The Energy Information Administration reported a buildup of 4 million barrels in US crude stocks last week, while analysts expected a 2.2 million barrels drop.

US production also surged by 100 thousand bpd to a total of 12.9 million bpd, the highest since March 2020.

Dollar fell in European trade on Friday against a basket of major rivals off six-month highs, on track for the first loss in four days on profit-taking.

The greenback is still heading for the ninth weekly profit in a row, the longest such streak of weekly gains in nine years following a spate of strong US data. 

The Index

The dollar index fell 0.2% to 105.15, with a session-high at 105.41, after closing up 0.55% on Thursday, the third profit in a row, scaling a six-month high at 105.43. 

Such showed retail sales rose unexpectedly in August, while producer prices rose past estimates, as unemployment claims were less than expected last week.

Such data revived the possibility of maintaining higher interest rates for an extended duration in 2024 as the inflation continues to be stubborn. 

The dollar index is up 0.25% so far this week, on track for the ninth weekly profit in a row, as the US economy proves flexible. 

There's still a 40% chance the Federal Reserve will raise interest rates by 25 basis points at the November meeting, in turn boosting the dollar's standing. 

Silver prices rose over 2% in European trade on Friday off four-week lows and on track for the largest profit since late August on active purchases from low levels.

Recent strong Chinese data raised hopes for improving demand on metals and commodities, as authorities continue to take strong measures to support recovery. 

Silver Prices Today

Silver prices rose 2.25% to $23.16 an ounce, with a session-low at $22.63, after declining 0.8% on Thursday, the third loss in a row, plumbing a four-week trough at $22.30 an ounce under pressure from dollar and US treasury yields.

Chinese Demand 

Recent strong Chinese data indicated the economy is likely recovering in the third quarter of the year and exiting the recent struggles.

China's industrial production rose 4.5% in August, beating estimates of 3.9%, while retail sales rose 4.6% in August, beating estimates of 3.0%, as unemployment fell to 5.2%.

In another stimulus step to boost the economy, the People's Bank of China decided to lower the required cash reserves held by banks by 25 basis points to nearly 7.4%.

Such strong data and monetary decisions will service to boost hopes for improving actual demand on metals, especially industrial metals in the world's largest metals consumer. 

Gold prices rose in European trade on Friday away from three-week lows and away from the barrier of $1,900, as the dollar stalls against major rivals.

Prices are also boosted as global central banks prepare to end the current cycle of policy tightening, with the European Central Bank hinting at ending interest rate hikes this week.

Gold Prices Today

Gold prices rose 0.5% to $1,919 an ounce, with a session-low at $1,909, after rising 0.2% on Thursday, the first profit in three days, away from a three-week low at $1,901. 

The Dollar

The dollar index fell 0.2% on Friday, on track for the first loss in four sessions off six-month highs at 105.43 against a basket of major rivals.

The dollar fell as well ahead of crucial US industrial production data for August, in addition to inflation forecasts and consumer confidence data. 

Strong Data

Recent US data showed retail sales rose unexpectedly in August, while producer prices rose past estimates in August, as unemployment claims were below estimates last week.

Such data bolstered the case for another US interest rate hike later this week as the US economy proves resilient. 

US Rates

Following the data, pricing for a US interest rate hike in September stood at 7%.

Odds for a 0.25% Federal Reserve interest rate hike in November fell to 41% to 36%.

ECB

Unexpectedly, the European Central Bank raised interest rates for the tenth meeting in a row, carrying on its battle against inflation.

The ECB raised interest rates by 25 basis points to 4.50%, the highest since 2001.

ECB President Christine Lagarde said that ECB members believes the current rates will help control inflation and bring it back to 2%.

The ECB will continue to rely on data to determine the duration of the currently high interest rates.

As central banks in Canada, Australia, and New Zealand pause interest rate hikes, it's now likely the global monetary policies will stall and taper out from the recent policy tightening frenzy. 

The SPDR

Gold holdings at the SPDR Gold Trust fell 879.7 tonnes yesterday to a total of 879.7 tonnes, the lowest since January 2020.