Oil prices held steady on Friday as concerns over oversupply and weak US demand were offset by risks of supply disruptions stemming from conflicts in the Middle East and Ukraine.

Brent crude futures rose 42 cents, or 0.6%, to $66.79 a barrel by 10:20 GMT, while US West Texas Intermediate gained 31 cents, or 0.5%, to $62.68. Both Brent and WTI had fallen on Thursday by 1.7% and 2%, respectively.

Olle Hvalbye, analyst at SEB Research, said in a note: “Brent crude is nearly unchanged this week, but after notable volatility (…) reflecting the ongoing tug-of-war in the market between the risks of growing oversupply and persistent geopolitical uncertainty as well as resilient refined product margins.”

A monthly report from the International Energy Agency (IEA) on Thursday indicated that global oil supplies will rise faster than expected this year, driven by output increases from OPEC+, the alliance of OPEC and partners including Russia.

However, OPEC’s own report later that same day maintained relatively upbeat forecasts for oil demand growth this year and next, reaffirming that the global economy remains on a solid growth trajectory.

John Evans, analyst at PVM Oil Associates, said that while downside risks remain for oil prices, factors such as tightness in the middle distillates market, China’s continued stockpiling, and potential sanctions on Russia and secondary sanctions on its customers continue to support the market.

On Friday, Russia’s Primorsk port in the northwest — one of its largest hubs for crude and fuel exports — came under drone attack, sparking a fire at a vessel and a pumping station, according to the regional governor.

On the supply side as well, India’s Adani Group, the country’s largest private port operator, banned vessels under Western sanctions from entering all of its ports, according to three sources and documents seen by Reuters. This decision could restrict flows of Russian oil.

India is the largest buyer of seaborne Russian oil, most of which is transported on tankers subject to sanctions by the European Union, the US, and the UK.

The dollar recorded a slight gain on Friday after falling in the previous session, as a surge in US jobless claims and a modest rise in inflation kept investors focused on upcoming Federal Reserve decisions regarding interest rate cuts next week and beyond.

The dollar index rose 0.1% to 97.66, after ending a two-day winning streak on Thursday, though it remains on track for a second consecutive weekly decline.

Thursday’s data showed the largest weekly increase in new US jobless claims in four years, overshadowing August inflation data, which showed prices rising at the fastest pace in seven months but staying modest and broadly in line with expectations.

Although this mixed data may add some complications for policymakers at the Fed’s next meeting, investors’ attention remains fixed primarily on the path of rate cuts.

Dominic Bunning, head of G10 currency strategy at Nomura, said: “The hurdle to faster rate cuts is labor market weakness, as long as inflation remains under control. I think the probability of a 50-basis-point cut next week is still very low.”

Futures markets are pricing in an almost certain 25-basis-point cut at the September 17 meeting. However, traders have trimmed bets on a larger 50-basis-point cut, with expectations shifting toward a more modest easing path before year-end, according to the CME FedWatch tool.

In bonds, the yield on 10-year US Treasuries rose two basis points to 4.0338% from 4.011% at the previous close, after coming close to breaking below 4% on Thursday for the first time since April.

In the currency market:

The euro held at $1.1727 after rising yesterday, as traders reduced bets on further European Central Bank cuts, with expectations staying below 50% after the bank struck a relatively upbeat tone on the economic outlook.

The ECB kept its main interest rate at 2% for the second straight meeting, with President Christine Lagarde saying the economy is “in a good place” and risks are more balanced.

Markets are awaiting Fitch’s review of France’s public finances late Friday after the September 8 confidence vote. Citi analysts said the agency’s sovereign model may indicate a slight improvement, and that a manual downgrade would mean Fitch sees a further shift in the balance of power toward borrowers over creditors since its last spring review.

Against the Japanese yen, the dollar climbed 0.4% to 147.76, after the US and Japanese governments issued a joint statement stressing that exchange rates should be market-determined and that excessive volatility and disorderly moves are undesirable.

Sterling fell 0.2% to $1.3545 after data showed the UK economy stagnated in July.

The offshore yuan held at 7.1219 per dollar, down 0.1%.

The Australian dollar slipped slightly to $0.665 but stayed near a 10-month high.

Gold prices rose in the European market on Friday to resume gains that had paused yesterday, trading once again near record highs, on track to post a fourth consecutive weekly gain, supported by the current weakness in US dollar levels.

Mounting concerns over weakness in the US labor market have overshadowed inflation worries ahead of a widely expected interest rate cut by the Federal Reserve next week.

Price Overview

• Gold prices today: Gold rose by 0.65% to ($3,656.71), from the opening level at ($3,633.96), with a low at ($3,630.63).

• At Thursday’s settlement, gold lost 0.2% in its second decline in the last three sessions, following profit-taking from the all-time high of $3,674.80 an ounce.

Weekly Performance

Over the course of this week, which officially ends at today’s settlement, gold is up about 1.95% so far, on track for a fourth straight weekly gain.

These weekly gains are attributed to strong safe-haven demand amid rising concerns about soaring global debt levels and intensifying geopolitical tensions in the Middle East and Eastern Europe.

US Interest Rates

• US consumer prices rose by 0.4% in August, the largest monthly increase in seven months, while data on Wednesday showed an unexpected contraction in US producer prices for the same month.

• Weekly jobless claims increased last week, confirming a tangible decline in the labor market. This followed last Friday’s US employment report, which indicated that job growth nearly stalled in August alongside a rise in unemployment.

• According to CME Group’s FedWatch tool: the probability of a 25-basis-point rate cut at the September meeting is currently priced at 100%, with a 7.5% chance of a larger 50-basis-point cut.

• The probability of a 25-basis-point cut in October is also priced at 100%, with a 6% chance of a 50-basis-point move.

• The Federal Reserve meets next week to discuss appropriate monetary policy for US economic developments, with a widely expected 25-basis-point rate cut.

Gold Outlook

• Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: the market is now pricing in a high probability of at least three Fed rate cuts before the end of 2025, far above the expectations from two months ago, which supports higher gold prices.

• Ryan McIntyre, managing partner at Sprott, said: the price is not far from $3,700, which could happen at any moment. In the short term, we see resistance around $3,900 based on our technical analysis, but in the long term, we believe this is still far below the level of institutional ownership at most investment firms.

SPDR Fund

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 2.01 metric tons on Thursday, bringing the total to 977.95 metric tons, the lowest since August 29.

The euro rose slightly in the European market on Friday against a basket of global currencies, maintaining its gains for the second consecutive day against the US dollar, on its way to achieving a new weekly gain, supported by the European Central Bank meeting, which turned out to be more hawkish than markets had expected.

In line with expectations, the ECB kept interest rates unchanged for the second consecutive meeting. Sources confirmed that European monetary policymakers believe there is no need for further rate cuts to achieve the medium-term inflation target.

Price Overview

• Today’s euro exchange rate: The euro rose against the dollar by less than 0.1% to 1.1741$, from the opening price of 1.1734$, and recorded the lowest level at 1.1721$.

• On Thursday, the euro ended trading up by 0.35% against the dollar, resuming gains that had paused for two days due to correction and profit-taking from the seven-week high at 1.1780$.

Weekly Trading

Over the course of this week’s trading, which officially ends at today’s settlement, the euro is so far up by about 0.25% against the US dollar, on the verge of securing a second consecutive weekly gain.

European Central Bank

In line with expectations, the European Central Bank on Thursday kept its main interest rates unchanged at 2.15%, the lowest level since October 2022, marking the second consecutive meeting without changes.

In its monetary policy statement, the ECB said that inflation is currently approaching the 2% medium-term target, and that the Governing Council’s assessment of inflation expectations has remained broadly unchanged.

The ECB also noted that any minor deviation from the inflation target, if temporary and short-lived, would not necessarily justify an immediate policy move.

Christine Lagarde

ECB President Christine Lagarde said on Thursday that the bank remains in a “good position” and noted that risks to the economy have become more balanced than before.

European Interest Rates

• Sources: Policymakers at the European Central Bank believe that no further rate cuts are needed to achieve 2% inflation, despite new economic forecasts pointing to lower rates over the next two years.

• Sources: Unless the eurozone faces another major economic shock, borrowing costs are expected to remain at current levels for some time.

• Money market pricing for an ECB rate cut of 25 basis points in October fell from 30% to below 10%.

• Traders have trimmed bets on ECB monetary easing, pointing to the end of this year’s rate-cutting cycle.

• Money markets now estimate a 50% probability of a 25-basis-point ECB rate cut by June 2026, compared with nearly 60% before the ECB’s statement.