Oil treads water as markets weigh China optimism, Fed uncertainty

Oil prices moved little on Friday and were set to close flat after a volatile week, as markets weighed optimism over robust demand in top crude importer China against uncertainty over more U.S. interest rate hikes.

China optimism helps crude reverse recent losses 
Crude prices rallied on Thursday, recouping recent losses after data showed that refinery throughput in China rose 15.4% in May from the prior year, its second-highest level on record. 

A series of interest rate cuts this week also boosted hopes for a Chinese economic recovery, which some market players have forecast will push crude demand to record highs.

But the rate cuts also came amid a string of weak economic readings from China, with both industrial production and retail sales rising less than expected in May. 

Brent oil futures were flat at $75.54 a barrel, while West Texas Intermediate crude futures rose 0.2% to $70.52 a barrel by 21:13 ET (01:13 GMT). Both contracts were set to end the week between 0.4% and 1% higher.

Focus is now on a potential cut in China’s benchmark loan prime rate next week, which could unlock more monetary stimulus in the country as it struggles with a post-COVID recovery. 

Fed uncertainty, weak economic data make for volatile week 
Oil prices saw wild swings this week as optimism over China was largely countered by fears of rising interest rates in major economies and worsening global economic conditions.

The Federal Reserve had earlier this week kept interest rates steady, but signaled that it could raise rates at least two more times this year. This was followed by an interest rate hike by the European Central Bank, with the ECB also positing a hawkish outlook on future rate hikes.

Rising interest rates are expected to stymie economic activity this year, which markets fear could greatly dent crude demand. 

These fears were compounded by weak economic readings from several major oil consumers this week. But signs of slowing growth also saw markets question just how much economic headroom global central banks had to keep raising interest rates.

Still, the outlook for oil remains uncertain as global economic conditions worsen. With demand remaining relatively weak, analysts expect oil supply to outpace demand this year, despite recent production cuts by the Organization of Petroleum Exporting Countries.

Gold wobbles as traders juggle hawkish Fed, weaker dollar.

(Reuters) - Gold prices were choppy on Friday as investors juggled a hawkish Federal Reserve outlook on interest rates, which offset support from the dollar’s overall retreat this week.
https://www.reuters.com/article/global-precious/gold-wobbles-as-traders-juggle-hawkish-fed-weaker-dollar-idUSKBN2Y204Q

Russia's Putin: OPEC+ oil output cuts are non-political. 

OSCOW, June 16 (Reuters) - Russian President Vladimir Putin said on Friday that decisions made by the OPEC+ group to cut oil production were "depoliticised" and were not related to what Moscow calls its "special military operation" in Ukraine.

After Russia's started what it calls a special military operation in Ukraine in February last year, Western nations have accused OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West has also accused OPEC of siding with Russia.

"I have to tell you that all the decisions made within the framework of OPEC+ to reduce production are, above all, of a depoliticised nature," Putin said in comments to the St Petersburg International Economic Forum.

"This is neither related to Russia's special military operations, nor to some other considerations," said Putin, adding that the current oil pricing environment was suitable for Russia.

OPEC+ has in place cuts of 3.66 million barrels per day (bpd), amounting to 3.6% of global demand, including 2 million bpd agreed last year and voluntary cuts of 1.66 million bpd agreed in April.

Putin also said that Russia provides different discounts to its oil in various markets. The United States said Kremlin's changes to the way it taxes oil sales were forced by Western sanctions on Russia over Ukraine and will hit its oil production capacity over time.

He said that traditional Russian sales markets are being replaced by other markets as Moscow is shifting away its oil and gas trade away from Europe.

"We don't see a catastrophe there," Putin said.