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Oil prices declined for a second consecutive day, with Brent near $74 a barrel and West Texas Intermediate close to $70. The downturn is attributed to a weak economic outlook in China, highlighted by low consumer inflation and falling factory-gate prices, despite a recent debt-swap plan from Beijing that failed to meet investor expectations.
Oil prices steadied after a volatile session, with West Texas Intermediate trading below $72 a barrel and Brent near $75. Traders are assessing the implications of Donald Trump's election victory, which has strengthened the dollar and contributed to a rise in US crude inventories, now at their highest since August, with stockpiles increasing by 2.15 million barrels.
Oil supply is expected to exceed demand early next year, especially with OPEC+ increasing production. The recent Israeli strikes on Iranian targets have not escalated tensions significantly, leading to a potential decline in oil prices as the market anticipates a reduction in the war premium. Traders are likely to shift focus back to the bearish supply-demand outlook for 2025.
Oil traders are increasingly turning to options contracts to hedge against potential price spikes due to risks in the Middle East. This week, Brent options open interest surpassed 4 million contracts for the first time, reflecting a more than 25% increase in positions held by traders this month.
The Federal Reserve's recent 50-basis point rate cut has sparked optimism in equity markets, with the S&P 500 reaching a record high and a year-to-date gain of 20.2%. This easing cycle is expected to support oil prices, projected to rise to around USD 87 a barrel by year-end, while gold has surged nearly 29% this year, potentially reaching USD 2,700 by mid-2025. However, the US dollar faces pressure as the Fed's cuts diminish its yield advantage, prompting investors to seek alternatives and diversify internationally.
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The information provided herein is generated by experimental artificial intelligence and is for informational purposes only.
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