Oil prices rose during Friday's trading session, with Brent crude touching its highest level in more than five months, amid fears of an escalation in the pace of war in the Middle East, which may increase disturbances in energy supplies from the region.
By 08:10 GMT, Brent crude futures rose 79 cents, or 0.7 percent, to $113.96 a barrel, after earlier reaching $114.72, its highest level since May 4. US West Texas Intermediate crude futures increased $1.10, or 1.1 percent, to $100.57.
Brent is heading for a third consecutive week of gains of nearly 4 percent, while West Texas Intermediate crude is expected to end the week down 0.8 percent.
“The market is still concerned about an escalation, which could lead, in a worst-case scenario, to renewed supply disruptions,” said Giovanni Staunovo, an analyst at UBS, according to Reuters, adding that the volatility of oil flows and high shipping rates caused a shortage in supply.
Fighting has intensified between the Houthis and the Saudi-led coalition supporting the internationally recognized Yemeni government since the Houthis, allied with Iran, advanced towards the Bab al-Mandab Strait.
Linh Tran, an analyst at XS.com, said: “The main factors to monitor now are the extent of the actual disruption and the time required to resume operations, as these two factors will ultimately determine the value of the risk premium that the market will be willing to bear for the sake of supplies.” She added: “If the attacks continue and lead to delays in deliveries, the rise in prices will have a stronger basis.”
In Libya, the valve of the oil pipeline extending from the Hamada and Tahara fields to the port of Zawiya was closed, leading to a decrease in production in both fields, the head of the National Oil Corporation said on Thursday.
On the other hand, data from the London Stock Exchange Group showed, on Friday, that a tanker flying the Maltese flag and loaded with up to 40,000 tons of Russian diesel is heading towards New York.
Russia agreed to lift the ban on diesel exports in order to supply global markets, including the United States, in an attempt to reduce fuel prices following an agreement between US President Donald Trump and his Russian counterpart, Vladimir Putin.
Copper fell, on Thursday, to its lowest level in more than five weeks, as additional quantities continued to flow into London Metal Exchange warehouses, which contributed to alleviating some concerns about supplies, despite continued expectations of regional supply bottlenecks outside the United States.
By 16:00 GMT, the benchmark copper price for delivery after three months on the London Metal Exchange fell by 1.8 percent to $14,089 per metric ton. During the session, the metal recorded its lowest level at $14,031, which is the lowest level since September 15, according to Reuters.
Copper stocks in London Metal Exchange warehouses rose for the fourth day in a row, after entering 29,050 tons on Wednesday, most of which was concentrated in the exchange’s storage center in New Orleans in the United States.
Thus, total registered copper inventories reached 272,950 tons, the highest level since July 24, following earlier flows during the week to New Orleans and Baltimore. About 62 percent of all listed copper stocks are currently located within the United States.
Alistair Munro, chief metals strategist at the brokerage firm Marks, said that the recent increase in copper stocks on the London Metal Exchange came as a result of the contraction in the price premium on the US COMEX exchange as contract delivery dates approached.
Traders had shipped quantities of copper to the American COMEX exchange throughout most of this year, seeking to avoid potential customs duties on the metal, which pushed prices on the American stock exchange to rise above their levels on the London Metal Exchange.
But this situation changed, as the prices of nearby contracts on the COMEX became lower than their counterparts on the London Metal Exchange, which encouraged shipments to be directed to the London Stock Exchange instead. The “price decline” situation on the London Metal Exchange, in which spot delivery prices are higher than futures delivery prices, also contributed to stimulating deliveries.
In the latest trading, the price of copper for immediate delivery on the London Metal Exchange recorded a premium of $116 per ton compared to the contract price for delivery after three months, indicating continued scarcity of supply in the near term.
In a related context, industrial metals were under pressure as a result of selling operations in stock markets, which came against the backdrop of doubts about the prospects of artificial intelligence.
In other metals, aluminum fell by 1 percent to $3,010 per ton, zinc fell by 2.2 percent to $3,670, while lead fell by 0.7 percent to $1,896.50, despite an order to withdraw 46,800 tons of it from warehouses in Singapore.
Nickel also fell by 1 percent to $16,060, after jumping by 3.7 percent during the previous session, against the backdrop of indications of a reduction in production in Indonesia. Tin, in turn, fell by 1.7 percent to $50,330.
Private sector growth in the euro zone slowed to its weakest pace in four months in October, under pressure from rising energy costs and a renewed contraction in economic activity in France, in light of the political and financial pressures facing the country, according to a survey conducted by Standard & Poor's Global.
The Standard & Poor's Global Composite Purchasing Managers' Index for the euro zone fell to 51.9 points in October, from 53.1 points in September, recording the lowest level since June. It fell below all expectations in a Reuters poll, which suggested a decline to 52.7 points. A reading above 50 points indicates growth, while a reading below this level reflects a contraction in activity.
Chris Williamson, chief economist at Standard & Poor's Global Market Intelligence, said that the escalation of inflationary pressures during the month was a major factor behind the broader slowdown, explaining that input costs returned to a sharp rise, especially in the manufacturing sector, due to the increase in energy prices, which prompted companies to raise selling prices to protect their profit margins.
The increase in input costs accelerated for the second month in a row, as a result of rising energy, fuel and transportation prices, and part of these pressures are related to the war in the Middle East. However, companies raised selling prices for goods and services at a slower pace compared to September, indicating that their margins are under some pressure.
Williamson added that the rise in interest rates is also beginning to affect demand, warning that continued growth in conjunction with inflation remaining at high levels may increase speculation about the European Central Bank's tendency to tighten its monetary policy at a more severe pace.
A Reuters poll conducted earlier this month showed that the European Central Bank will keep the deposit rate at 2.50 percent next week, before raising it by 25 basis points in December, with inflation continuing at a level nearly double its target of 2 percent.
Business confidence in the euro zone also fell to its lowest level in five months, with the manufacturing sector recording the largest decline in optimism.
France is under pressure
France has emerged as the biggest concern, with financial pressures and political turmoil. Purchasing managers' indices showed a contraction in economic activity, while business confidence fell to its lowest level since 2012, with the exception of the Covid-19 pandemic.
The French government's borrowing costs have risen in recent weeks, with growing investor concerns about the country's ability to repair its financial conditions, while waves of street protests have contributed to escalating political tension ahead of the presidential elections scheduled for the spring.
Joe Hayes, chief economist at Standard & Poor's Global Market Intelligence, said that the recovery recorded in September was short-lived, in light of the rapid tightening of financial conditions and increasing political pressures during October.
The preliminary purchasing managers' index for the French services sector fell to 48.4 points in October, from 51.2 points in September, and came below Reuters' expectations of 50.7 points. The manufacturing sector index also fell to 49.3 points, from 50.6 points, compared to expectations of 50.5 points.
The French composite index, which combines services and manufacturing activities, fell to 48.4 points from 51.1 points, compared to expectations of 50.5 points.
Hayes warned that the October data may be an indication of what awaits the French economy, after the corporate morale index, which measures their expectations for the next twelve months, fell to the lowest level in six and a half years, amid concerns about the 2027 presidential elections and the country’s financial conditions.
Germany maintains growth despite the slowdown
In Germany, the largest economy in the euro zone, growth in private sector activity slowed during October, with a limited rise in new business, according to a preliminary survey conducted by Standard & Poor's Global.
Germany's Composite Purchasing Managers' Index fell to 52.8 points, from 53.8 points in September, but remained above 50 points for the fourth month in a row. Economists' expectations in a Reuters poll indicated a reading of 53.3 points.
Phil Smith, associate director of economics at Standard & Poor's Global Market Intelligence, said that the October results showed a continued recovery in German economic activity, but the slowdown in growth confirms that the recovery of the largest economy in the euro zone is still fragile.
Industrial production continued to rise at a strong pace, as the purchasing managers index for the sector rose to 54.2 points, from 53.9 points in September, recording the highest level in two months. On the other hand, services activity increased for the second month in a row, but at a limited pace, with its index declining to 51.7 points, from 52.9 points.
The survey showed only a slight increase in new business at the private sector level. Demand growth in the services sector has stalled, amid reports of delayed customer decisions and tightening budgets, while growth in manufacturing orders slowed to the lowest level in three months, despite continued support for export sales.
In a positive indicator, the overall inflation rate for the prices of goods and services charged by German companies fell to the lowest level in seven months, but remained clearly higher than its long-term average.
Despite the slowdown, German companies generally maintained their optimism about production during the next twelve months. The confidence of service companies rose to the highest level since February, while the expectations of manufacturing companies fell to the lowest level since July, amid fears of rising input costs.
New orders and exports
At the euro zone level, new orders, one of the main indicators of demand, rose at the slowest pace during the current four-month expansion phase, with the manufacturing and services sectors recording limited increases.
On the other hand, new export orders rose for the third month in a row, an encouraging development after nearly four and a half years of continuous monthly declines. The growth rate of export orders also exceeded the growth rate of overall new business.
The preliminary PMI for the euro zone services sector fell to 51.7 points in October, from 53 points in September, compared to expectations of 52.5 points. The manufacturing production index, which is included in calculating the composite index, also fell to 52.4 points, from 53.6 points, while the main industrial sector index fell to 52.4 points, from 52.9 points.
The data showed employment approaching a state of stagnation, as the number of workers recorded only a slight increase after a limited increase during the previous two months. Job creation in the services sector slowed to a five-month low, while employment in the manufacturing sector fell after a two-month improvement.
