Global oil prices rose by over 1% on Thursday following the OPEC+ ministerial meeting, at which member countries asserted their readines to take additional measures to deal with new market developments.

Markets are also underpinned by the sharp decline in US crude production last week according to official EIA data, which overshadowed an unexpected buildup in crude stocks.

Prices 

US crude rose 1.2% to $76.80 a barrel, while Brent added 1.1% to $81.41 a barrel, the lowest since $80.18. 

US crude lost 2.5% on Wednesday, while Brent shed 2.3% on profit-taking off two-month highs.

Oil prices rose 5.5% on average in January amid rising geopolitical tensions in the Middle East and amid a positive outlook on global demand in 2024.

OPEC+ 

Just now, the OPEC+ ministerial meeting wrapped up with oil production data for November and December 2023 reviewed. 

The meeting maintained OPEC’s decision to cut output by 2.2 million bpd this year. 

The Committee asserted the strong cohesion between OPEC countries and OPEC+ nations and their preparations to intervene if needed.

US Production 

The Energy Information Administration announced a drop of 300 thousand bpd in US crude output last week, the largest weekly decline since September 2021, bringing total output to 13 million bpd. 

US Stocks

The EIA also reported a rise of 1.2 million barrels in US commercial stocks last week, while analysts expected a drop of 0.8 million barrels. 

Dollar powered up in European trade on Thursday against a basket of major rivals, extending gains for the second straight day and almost hitting multi-week highs.

The strong gains came following the bullish Federal Reserve’s policy meeting this week, which hurt the odds of an interest rate cut in March. 

Now investors await a batch of important US data later today on unemployment claims and manufacturing.

The Index

The dollar index rose 0.3% to 103.81, with a session-low at 103.44, after closing up 0.1% on Wednesday, the first profit in four days, resuming gains and approaching a six-week high at 103.82.

The Fed 

The Federal Reserve held interest rates flat as expected this week at below 5.5%, already the highest since 2001.

The Fed said the US economy is performing better than expected, which convinces the Fed to slow down when it comes to changing its monetary policy, especially as achieving the 2% inflation target takes more time. 

The Fed said it’s not appropriate to cut down the target range of interest rates this year until inflation is sustainably moving towards 2%. 

The Fed said that US economic outlook remains uncertain, with the FOMC remaining highly attentive to inflation risks. 

Powell

Fed Chair Jerome Powell said on Wednesday that FOMC members are committed to bringing inflation back to the 2% target, noting the strength of the economy, which would allow for a rate cut “sometime”. 

Powell said the strength of the US economy surprised analysts more than once due to strong consumer demand, with the labor sector heading for a better balance overall. 

Powell said that what the Fed needs is total confidence that inflation is heading towards 2% in the medium term. 

When asked about an interest rate cut in March, he said it’s unlikely, however everying relies on data.

US Rates

Following the meeting, the odds for a 0.25% Fed interest rate cut in March tumbled from 52% to 35%, down from over 80% just a month ago.

Traders now expect a total of 140 basis points of interest rate cuts in the US throughout 2024, down from 160 basis points in previous forecasts.

Important Data

Now investors await a batch of important US data later today, with unemployment claims expected down slightly to 213 thousand in the week ending January 27 from 214 thousand. 

US ISM manufacturing PMI is expected down to 47.2 in January from 47.4 in December. 

Gold prices rose in European trade on Thursday, maintaining gains for the fourth straight session, and approaching two-week highs on active demand on safe havens amid concerns about the New York bank Community Bancorp.

The gains are curbed by mounting pressure from the dollar on metals and commodities following the bullish Fed meeting this week, which hurt the odds of US interest rate cuts in March. 

Gold Prices Today

Gold prices rose 0.5% to $2,049 an ounce, with a session-low at $2,038, after rising 0.15% on Wednesday, the third profit in a row, hitting a two-week high at $2,056 as US treasury yields fell. 

Safe Haven 

Haven demand rallied about the surprise losses sustained by the New York bank Community Bancorp, which renewed concerns about the stability of the US banking system. 

The bank’s shares fell by over 45% on Wednesday after sustaining sudden losses due to deteriorating credit quality and lower dividends. 

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The Dollar

The dollar index rose 0.3% on Tuesday, extending gains for the second straight session and almost hitting a multi-week high against a basket of major rivals. 

A stronger dollar makes greenback-denominated gold futures costlier to holders of other currencies. 

The Fed 

The Federal Reserve held interest rates flat as expected this week at below 5.5%, already the highest since 2001.

The Fed said the US economy is performing better than expected, which convinces the Fed to slow down when it comes to changing its monetary policy, especially as achieving the 2% inflation target takes more time. 

The Fed said it’s not appropriate to cut down the target range of interest rates this year until inflation is sustainably moving towards 2%. 

The Fed said that US economic outlook remains uncertain, with the FOMC remaining highly attentive to inflation risks. 

Powell

Fed Chair Jerome Powell said on Wednesday that FOMC members are committed to bringing inflation back to the 2% target, noting the strength of the economy, which would allow for a rate cut “sometime”. 

Powell said the strength of the US economy surprised analysts more than once due to strong consumer demand, with the labor sector heading for a better balance overall. 

Powell said that what the Fed needs is total confidence that inflation is heading towards 2% in the medium term. 

 When asked about an interest rate cut in March, he said it’s unlikely, however everying relies on data.

US Rates

Following the meeting, the odds for a 0.25% Fed interest rate cut in March tumbled from 52% to 35%, down from over 80% just a month ago.

Traders now expect a total of 140 basis points of interest rate cuts in the US throughout 2024, down from 160 basis points in previous forecasts.

The SPDR 

Gold holdings at the SPDR Gold Trust, the world’s largest gold-backed trust fund, fell 1.73 tonnes yesterday to a total of 851.15 tonnes, an October 18 low. 

Sterling fell in European trade on Thursday against a basket of major rivals, extending losses for the third straight day against the dollar following the bullish Fed’s meeting.

The decline comes ahead of Bank of England’s policy decisions later today, expected to hold interest rates flat.

GBP/USD

GBP/USD fell 0.4% to 1.2642, with a session-high at 1.2698, after closing down 0.1% on Wednesday. 

The Dollar 

The dollar index rose 0.3% on Thursday, extending gains for the second session against a basket of major rivals.

The gains come after the Federal Reserve’s policy meeting yesterday, at which the Fed held rates unchanged, while Chair Jerome Powell said that an interest rate cut at the March meeting is unlikely. 

Following the meeting, the odds for a 0.25% Fed interest rate cut in March tumbled from 52% to 35%, down from over 80% just a month ago.

Bank of England 

Bank of England is widely expected to hold interest rates unchanged at 5.25%, already the highest since 2008. 

The policy statement will likely include clues on the future of interest rates in the UK, especially as consumer prices rose once again in December.