Dollar drops as jobs gains revised sharply lower

The dollar fell to a more than one-year low against the euro and sterling on Wednesday after data showed employers added 818,000 fewer jobs in the year to March 2024 than previously thought.

The data was released later than its scheduled 1000 EDT time, leading to market confusion and some choppy trading.

“It suggests the labor market was not as strong as the Fed believed at the time and has been communicating. But it’s less clear what it means for the outlook going forward,” said Vassili Serebriakov, an FX strategist at UBS in New York.

“This is very consistent with the Fed starting to cut rates. But it’s harder to say what it means for the pace of easing and other details,” he added.

Traders will focus on comments by Fed Chair Jerome Powell on Friday at the Kansas City Fed’s Jackson Hole economic symposium for any new clues on his view of the labor market and whether he references Wednesday’s data.

Markets in particular are looking for clarity on the likely size of a rate cut next month, and whether borrowing costs are likely to be lowered at each subsequent Fed meeting.

Traders are pricing in a 33% probability of a 50 basis point cut, little changed from before the jobs data, and a 67% chance of a 25 basis point reduction, according to the CME Group’s FedWatch Tool.

“It got easier for the Fed to cut rates now and through year-end but I don’t think it makes a strong case for 50 basis points,” said Adam Button, chief currency analyst at ForexLive in Toronto.

“We know that it was a year of solid economic growth, that company profits were fine, and that the economy grew at a good clip for the year ending in March,” Button said.

Fewer-than-expected job gains in July and an unexpected increase in the unemployment rate led traders to price for larger rate cuts on concern the United States is facing an imminent recession.

Those concerns were rowed back by better data, including a strong retail sales report for July and also higher-than-expected shelter inflation for the month.

But markets remain highly sensitive to jobs data for any new signs that the economy is worsening at a quicker pace.

The Fed is due to release the minutes from its July 30-31 meeting on Wednesday.

August employment and inflation data will be released after Powell’s speech but before the September meeting.

The dollar index was last down 0.16% at 101.22, the lowest since Dec. 29. The euro rose 0.11% to USD 1.1142, the highest since July 2023.

Strength in the euro may be stretched after the recent rally, said UBS’ Serebriakov.

“You haven’t seen a big move in US rates. I don’t think the European data is especially positive for the euro. So, it seems still a bit of a technical move in FX,” he said.

Sterling strengthened 0.36% to USD 1.3076, also the highest since July 2023.

The dollar weakened 0.05% to 145.18 Japanese yen, the lowest since August 7.

Bank of Japan Governor Kazuo Ueda is expected to discuss the central bank’s decision last month to raise interest rates when he appears in parliament on Friday.

The Bank of Japan will raise interest rates again by year-end, according to more than half the economists in a Reuters poll published on Wednesday, with those who had a view on which month leaning towards a December increase.

Data next week is expected to show Japan’s consumer inflation rate picked up in July for a third consecutive month, a Reuters poll of 18 economists showed.

In cryptocurrencies, bitcoin rose 0.31% to USD 59,498.

(Reporting By Karen Brettell; Editing by Sharon Singleton and Nick Zieminski)

Global stocks set for modest gains, hinging on series of rate cuts

BENGALURU – Global stocks will brush aside recent market turmoil and gain modestly from current levels in coming months, according to a Reuters poll of equity strategists, amid rising expectations major central banks are set for a series of interest rate cuts.

Unwinding of large leveraged positions funded in Japanese yen and recent weaker US jobs data sent equity markets into a tailspin in early August, causing the global MSCI index to plummet about 9% from an all-time high set in mid-July.

But that key global index has since recovered almost all its losses and is now up around 14% for the year. Markets have swiftly moved away from recession concerns even though they are now pricing in more interest rate cuts than were expected just a few months ago.

Economists are predicting a more gradual easing cycle, given there has been no shift in the view the global economy will keep growing at a steady pace. Federal Reserve officials have said nothing to suggest more aggressive rate cuts are imminent.

“We think growth fears moved too far, and in places look overpriced relative to our central forecast,” said Kamakshya Trivedi, head of global FX, rates, and emerging market strategy at Goldman Sachs.

“From a market standpoint, we again think it makes sense to lean against extreme concerns and keep faith in…continued expansion and decelerating inflation rather than imminent recession.”

The latest Reuters poll of over 150 equity strategists, stock brokers and portfolio managers taken Aug. 8-20 showed most major equity indices gaining further by year-end.

However, with 13 of 15 bourses surveyed already trading at or near their record highs, all but one were forecast to rack up single-digit gains from now until then.

In a May survey, analysts said while a run-up in global stocks was not yet over, it was beginning to show signs of fatigue.

Analysts in the August survey expected 13 out of the 15 equity indices polled to grow more slowly in 2024 versus last year, with only London and Toronto expected to better their 2023 performance.

While the benchmark US S&P 500 was forecast to trade near current record levels at year-end, the euro zone’s blue chip index, the STOXX50E was forecast to gain 3.4% from Monday’s close to 5,038 by end-2024.

Even India’s high-flying benchmark stock index, the BSE Sensex, was predicted to rise just over 3% from Monday’s close to a lifetime high of 83,000 by year-end.

Despite the tempered outlook, an outright global correction – a drop of 10% or more – was not expected over the coming three months, according to a 60% majority of analysts, 57 of 95, who answered an additional question.

That was mostly because a majority of strategists, 51 of 85, predicted corporate earnings to outperform expectations for the rest of the year in their local markets. The remaining 34 said earnings will underperform expectations.

“We believe the market may be in a goldilocks scenario with the Fed poised to cut rates”, inflation on a downward path, the job market contained, and the macro-economic picture resilient overall, said Michael Gibbs, Lead Portfolio Manager at Raymond James.

“(This) should drive earnings growth and support our positive bias for equities,” he added.

(Reporting by Hari Kishan; Additional reporting and polling by correspondents in Bengaluru, Buenos Aires, London, Mexico City, Milan, New York, San Francisco, Sao Paulo, Tokyo, and Toronto; Editing by Ross Finley and Ana Nicolaci da Costa)

Gold prices hover near record high post US Fed minutes

Gold prices regained lost ground on Wednesday to hover close to their all-time highs after minutes from the US Federal Reserve’s last meeting showed officials strongly leaned towards an interest rate cut at their September policy meeting.

Spot gold was up 0.1% at USD 2,516.01 per ounce as of 2:42 p.m. ET (1842 GMT) after hitting a record high of USD 2,531.60 on Tuesday.

US gold futures settled 0.1% lower at USD 2,547.50.

“Gold is closing at the highs after Fed minutes indicated that ‘a vast majority’ of the committee was prepared to cut rates in September,” said Tai Wong, a New York-based independent metals trader.

“I am cautiously optimistic because all the market-friendly news is already out there. Gold is likely to grind higher but unlikely to accelerate aggressively without an unforeseen event driver.”

At the July meeting, “the vast majority” of policymakers “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” according to the minutes.

Following the Fed minutes, the dollar extended losses to a more than seven-month low, while benchmark US 10-year bond yields fell to a more than two-week low. USD/ US/

Market’s focus will now turn to Fed Chair Jerome Powell’s keynote speech at the Jackson Hole symposium on Friday.

Elsewhere, spot silver rose 0.6% to USD 29.61 per ounce. Platinum gained 2.6% to USD 970.75 and palladium rose 2.7% to USD 951.00, its highest level in over a month.

“There has been more interest in PGMs as the fundamentals are expected to improve, so prices started to move higher, and particularly palladium investors needed to cover their shorts,” said Bart Melek, head of commodity strategies at TD Securities.

The auto-catalyst metals also got a lift after Ford Motor said it was killing a planned three-row electric SUV and pushing back a new electric version of its best-selling pickup, the F-150.

Both platinum and palladium are used by automakers in catalytic converters to clean car exhaust fumes.

(Reporting by Anushree Mukherjee, Brijesh Patel, and Sherin Elizabeth Varghese in Bengaluru; Editing by Tasim Zahid and Shailesh Kuber)

As Democrats gather, investors gauge market impact from a Harris administration

NEW YORK – Investors are grappling with the market implications of a possible Kamala Harris presidential administration, which could pressure corporate profits through higher taxes while weighing on consumer staples and boosting solar energy.

Harris’ nomination is in focus this week at the Democratic convention after her late entry following President Joe Biden’s withdrawal tightened the race against Republican candidate Donald Trump.

Investors’ views on markets are typically shaped by factors such as the economy’s strength and the trajectory of interest rates, but the question of how a Harris White House could approach policy, regulations, and taxation looms large.

“She seems to be on a track to be more aggressive than the Biden administration on a lot of these consumer issues that go right to the market,” said Frank Kelly, senior political strategist at investment firm DWS Group, citing Harris’ recent economic proposals and her record as a US senator and California attorney general.

On Monday, Harris proposed increasing the corporate tax rate to 28% from 21%, a plan her campaign characterized as a way to “ensure billionaires and big corporations pay their fair share.”

The plan contrasts with Trump’s record, after he slashed the corporate tax rate to 21% from 35% as president, and as he seeks to make other tax breaks permanent.

A higher tax rate would help reduce the US budget deficit by USD 1 trillion over the next decade, according to the nonpartisan Committee for a Responsible Federal Budget, addressing an issue that has worried some investors.

Higher taxes could also bite into corporate profits. Each percentage point change in the statutory domestic corporate tax rate should shift S&P 500 earnings by slightly less than 1%, strategists at Goldman Sachs said.

“Anything that reduces earnings should … have a negative impact on the stock market,” said Peter Tuz, president of Chase Investment Counsel. However, “until you see the proposal, there may be various offsets.”

Many of the proposals from both candidates would require approval from Congress, which is narrowly divided between Republicans and Democrats. Control of the House of Representatives and Senate will be in contention on Nov. 5.

Harris’ tax proposal could face serious obstacles in a Congress that is divided or under Republican control.

Harris and Trump are locked in a tight presidential race that will likely be decided in a handful of battleground states, polls show. Harris in recent weeks has taken the lead

on the PredictIt politics betting platform.

FOOD, HEALTHCARE, SOLAR STOCKS

Mounting expectations that Trump would beat Biden sparked a so-called Trump trade in US stocks last month, lifting areas of the market seen as benefiting from tax cuts and regulatory easing, including shares of smaller US companies and cryptocurrencies.

Harris outlined a plan last week to ban price gouging on food and groceries, which her campaign says aims to stop big corporations from exploiting consumers.

Harris also is pushing to lower healthcare costs, with analysts expecting she could expand negotiating powers over prescription drug prices enacted during the Biden administration.

Lori Calvasina, head of global equity strategy research at RBC Capital Markets, said in a note this week that the proposals could weigh on consumer staples and healthcare stocks.

Harris also pledged last week to introduce a child tax credit, however, which could lead to a “pretty meaningful boost to consumer spending,” said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions.

Such spending particularly could benefit retailers and other consumer-related areas, he said.

King Lip, chief strategist at BakerAvenue Wealth Management, expects clean-energy initiatives launched under Biden to continue under a Harris administration.

That could offer relief to shares of solar companies, which have faced headwinds from elevated US interest rates, Lip said. The Invesco Solar ETF is down over 20% this year.

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Rod Nickel)

Oil settles USD 1 down after US job data revised significantly lower

HOUSTON – Oil prices settled down by USD 1 a barrel on Wednesday after the US government revised sharply lower a set of employment statistics closely watched by investors.

Brent crude futures settled down USD 1.15, or 1.49%, at USD 76.05 a barrel. US West Texas Intermediate crude CLc1 futures settled USD 1.24 lower or 1.69% at USD 71.93.

US employers added far fewer jobs than originally reported in the year through March, the Labor Department said on Wednesday.

“The market is now going from pricing in a stronger economy to a potential hard landing, which is why oil prices are reluctant to move higher,” said Phil Flynn, analyst with Price Futures Group.

The department’s estimate for total payroll employment for the period from April 2023 to March 2024 was lowered by 818,000.

“The sting in the scorpion’s tail that hurts worse than anything is that this data helped create a crisis of confidence,” said Tim Snyder, chief economist at Matador Economics.

The revised jobs data offset support from a drop in US oil inventories, and recently released minutes from the Federal Reserve indicating a likely September rate cut.

US crude stocks, gasoline and distillate inventories fell in the week ending Aug. 16, the Energy Information Administration (EIA) said on Wednesday.

Crude inventories fell by 4.6 million barrels to 426 million barrels in the week, the EIA said, exceeding analysts’ expectations in a Reuters poll for a 2.7 million-barrel draw.

Fed officials last month were strongly leaning toward an interest rate cut at their September policy meeting, and several would have been willing to reduce borrowing costs immediately, according to the minutes of the July 30-31 gathering.

Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.

Meanwhile, investors’ worries persisted over the prospect of economic weakness in China weighing on the country’s crude demand.

China’s economic struggles have contributed to weak processing margins and low fuel demand that has curbed operations at state-run and independent refineries.

“We are measuring everything right now by the Chinese economy and if anything is leaning negative out of China, it is going to pressure energy,” said Matador Economics’ Snyder.

GEOPOLITICAL RISK

Elsewhere, a Greek-flagged oil tanker was adrift in the Red Sea on Wednesday after repeated attacks that started a fire on the vessel and caused the ship to lose power, the UK maritime agency said.

Iran-aligned Houthi militants have launched a series of attacks on international shipping near Yemen since last November in solidarity with Palestinians in the war between Israel and Hamas.

The Red Sea leading to the Suez Canal is a key shipping route for oil, and sustained attacks pose a potential threat to global crude flows.

Meanwhile, US President Joe Biden planned to talk by phone with Israeli Prime Minister Benjamin Netanyahu on Wednesday about ways to keep a potential Gaza ceasefire and hostages deal alive, a US official said.

The call follows US Secretary of State Antony Blinken’s whirlwind trip to the Middle East that ended on Tuesday without an agreement between Israel and Hamas militants on a truce in the Palestinian enclave.

(Reporting by Georgina McCartney in Houston; Additional reporting by Paul Carsten and Ahmad Ghaddar in London, and Jeslyn Lerh in Singapore; Editing by David Holmes, Kirsten Donovan, and David Gregorio)

Japan’s Nikkei edges down as yen resumes march higher

TOKYO – Japan’s Nikkei share average declined in early trade on Wednesday, as a stronger yen overnight weighed on domestic stocks.

The Nikkei was down 0.9% at 3,7726.01 as of 0008 GMT, while the broader Topix fell 0.7%.

The declines run reverse to the yen, which was last trading around 145.37 per dollar after falling as far as 147.34 the previous day.

Market players are also awaiting the release of preliminary benchmark revisions to US employment data for the 12 months through March, due later on Wednesday. The Jackson Hole Economic Symposium is also set to get underway on Thursday.

Uniqlo parent firm Fast Retailing, chip-related shares Tokyo Electron and Advantest, and automakers like Toyota Motor were among a wide range of shares starting the day lower.

(Reporting by Brigid Riley; Editing by Tom Hogue)

US yields slump as rate cut outlook weighs

NEW YORK – US Treasury yields sank on Tuesday as the prospect of an interest rate cut next month loomed large ahead of Federal Reserve Chair Jerome Powell’s remarks on Friday at a central bank gathering in Jackson Hole, Wyoming.

The federal funds futures market has fully priced in easing by the Fed at the September meeting, with a 71% chance of a 25-basis-point cut, according to LSEG calculations.

Traders have also priced in about 99 bps of cuts by the end of the year, down from roughly 150 bps a few weeks ago at the height of the panic earlier this month driven by the soft US nonfarm payrolls report for July and the sudden unwinding of the yen carry trade.

Since that turbulent period, the US numbers have depicted an economy that is unlikely to tip into recession anytime soon, even as the Bank of Japan has moved to calm investor nerves about the carry trade.

Investors remained focused though on the Jackson Hole meeting starting Friday, at which Powell is scheduled to speak.

“You have to see a change in Fed policy, at least in their language. I think the Fed is going to tell markets that, yes, rates are going to go lower, but at a slower pace than expected,” said Byron Anderson, head of fixed income at Laffer Tengler Investments in Scottsdale, Arizona.

The slower pace in easing is based on economics, he noted.

“If you look at US GDP (gross domestic product), it was higher than expected. The only real outlier is the unemployment rate going up,” said Anderson.

“But even the inputs on unemployment over the last few weeks were temporary. So you could see unemployment start trending back down. Economically, we’re not seeing the US economy fall off a cliff.”

In afternoon trading, the benchmark 10-year yield slid 4.9 bps to 3.818%. So far this month, it has dropped nearly 28.7 bps, on track for its biggest monthly decline since December.

BULL STEEPENER

US 30-year yields fell to a two-week low of 4.054%, and were last down 4.7 bps at 4.068%.

On the front end of the curve, the two-year yield, which reflects interest rate expectations, sank 7 bps to 3.998%.

The closely watched US two-year/10-year yield curve narrowed its inversion, or steepened, to minus 18 bps.

The curve bull-steepened on Tuesday, which means short-dated rates fell more sharply than longer-dated ones. Yield curves typically steepen ahead of a Fed easing cycle, as investors price in the expectation that rates on the front end have peaked and the Fed’s next move would be a rate cut.

A steeper curve shows longer-dated yields are higher than those on shorter maturities, reflecting a normal upward slope and suggested that investors are being compensated more for the risk of holding longer-term securities.

The market pricing in a more moderate rate cut pace is based primarily on the last Federal Open Market Committee meeting and the weak labor market for July, said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania,

“The Fed needs to be careful though. If they don’t deliver what the market is anticipating, and let’s say they try and keep no rate cuts at all, that’s when financial conditions could tighten up again,” Barnes said, and investors could see a repeat of the volatility witnessed earlier this month.

Market participants are also watching out for Wednesday’s preliminary revisions to US data that includes the nonfarm payrolls reports from April 2023-March 2024.

“If you see the revisions on the BLS (Bureau of Labor Statistics) numbers come out worse than expected, that’s going to be a big one,” said Laffer Tengler’s Anderson. “And the Fed is going to have to stand up and actually start looking to speed up rate cuts.”

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis)

Gold extends record rally on dollar weakness, rate-cut bets

Gold prices extended their record run on Tuesday, holding firm above the key USD 2,500 level, driven by a weaker dollar and growing investor confidence that the Federal Reserve will likely cut interest rates in September.

Spot gold rose 0.3% to USD 2,510.35 per ounce by 01:44 p.m. ET [1744 GMT], after hitting an all-time high of USD 2,531.60 earlier in the session.

US gold futures settled 0.4% higher at USD 2,550.6.

The dollar index sank to a seven-month low, making gold more attractive for other currency holders, while benchmark US 10-bond yields slipped.

“The primary drivers of the gold price move are financial investment demand, particularly with ETF buying improving and overall improved sentiment as the expectations of Fed easing cycle to begin in September,” said Aakash Doshi, head of commodities, North America at Citi Research

Gold could reach USD 3,000 per ounce by mid-2025 and USD 2,600 by the end of 2024, Doshi added.

Holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, jumped to their highest in seven months at 859 tons on Monday.

Markets are pricing in about a 71.5% chance of Fed cutting interest rates by 25 basis points in September, according to the CME FedWatch Tool.

Traders will be closely monitoring the minutes of the Fed’s July policy meeting on Wednesday and Fed Chair Jerome Powell’s keynote speech at the Jackson Hole symposium at the end of the week for more cues on rate cuts.

Positioning in gold might be overextended, with expectations of significant Fed rate cuts possibly leading to a correction if this narrative is challenged, said Daniel Ghali, commodity strategist at TD Securities.

Gold, which tends to thrive in a low-interest-rate environment, has risen more than 20% so far this year and heading for the best year since 2020.

“Geopolitical uncertainties, the rise in speculative interest, and substantial global ETF inflows are further fueling the bullish trend in gold,” said Joseph Cavatoni, market strategist at World Gold Council.

Elsewhere, spot silver fell 0.2% to USD 29.42 per ounce, platinum eased 0.5% to USD 949.05 and palladium fell 0.5% at USD 927.00.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Alan Barona and Shailesh Kuber)

Dollar hits 7-month low before Powell, Swedish crown volatile after rate cut

The dollar hit a fresh seven-month low on Tuesday with traders bracing for comments from Federal Reserve Chair Jerome Powell due on Friday, which could provide clues about the speed of the US monetary easing cycle.

Meanwhile, Sweden’s crown fell after swinging up and down in morning trade as the central bank cut rates and said it could speed up policy easing if price pressures did not pick up.

It was last down 0.33% at 10.27 versus the US dollar after hitting 10.33 earlier in the session a few minutes after the Riksbank announcement.

“None of this (Riksbank statement) is hugely surprising, but it’s still remarkable just how much the central bank’s stance has changed over these past few months,” said James Smith, economist at ING.

The euro last fetched USD 1.1078 on Tuesday having touched USD 1.1087, its highest since Dec. 28 in early trading.

The dollar index, which measures the US currency against six rivals, was last at 101.82 after touching its lowest since Jan. 2 of 101.76 earlier in the European session.

The focus this week is Powell’s speech during an annual gathering of central bankers in Jackson Hole, but minutes of the Fed’s last meeting will also be in the spotlight.

Some analysts say the next few weeks will likely prove decisive on whether the Fed cuts by 50-75 bps this year or by 150 bps or more. The Jackson Hole conference is the first opportunity for the Fed to push back against the chance of a 50-bps cut at one of the year’s three remaining meetings, they add.

While labor market deterioration led to expectations for a quicker monetary easing, data since then has been mixed with upbeat retail sales.

Still, the US economy remains “susceptible to a recession if there’s a financial shock”, said Thierry Wizman, global forex and rates strategist at Macquarie.

“But that financial shock may not be forthcoming,” he added. “In that case, we may stay at below-trend growth and look ‘peakish’, until the Fed has eased sufficiently.”

Markets are pricing in a total of 94 bps of Fed rate cuts this year.

A slim majority of economists polled by Reuters expect the Fed to ease by 25 bps at each of the remaining three meetings.

Expectations for the presidential elections’ outcome are also weighing on the greenback.

“As her (Kamala Harris) chances of winning some key swing states have improved, traders have abandoned a few of the (Donald) Trump trades, among which was a stronger dollar,” Macquarie’s Wizman argued.

Investors expected the greenback to rise in case of a Trump victory as tariffs would prop up the currency and higher fiscal spending would boost interest rates.

UEDA AWAITED

The Japanese yen was slightly weaker at 146.98 per dollar, still close to the near two-week high it touched in the previous session but grinding away from the seven-month high of 141.675 it touched at the start of August.

Bouts of intervention by Tokyo at the start of last month and a surprise rate hike have pulled the yen away from the 38-year lows of 161.96 it was stuck at in early July and wrong-footed investors who sharply cut their bets against the yen.

Investor attention will be on Bank of Japan Governor Kazuo Ueda when he appears in parliament on Friday. Ueda is expected to discuss the BOJ’s decision last month to raise rates and the focus will be on whether he sticks to his recent hawkish tone.

Analysts said the yen’s pace of appreciation will likely be more gradual as the data shows most speculative short positions have been cleared.

The latest weekly data to Aug. 13 showed leveraged funds – typically hedge funds and various types of money managers – flipped their long-standing short yen position and are now net long for the first time since March 2021.

Barclays recalled that monthly data showed retail investors halved their net short US dollar/yen positions in July as the yen rallied amid a resurgence in BOJ rate hike expectations.

(Reporting by Stefano Rebaudo and Ankur Banerjee; Editing by Jamie Freed, Shri Navaratnam, Helen Popper, and Sharon Singleton)

Oil settles down 1% as Middle East tensions ease, China data weak

Oil prices fell about 1% to a two-week low on Tuesday as Middle East supply concerns eased after Israel accepted a proposal to tackle disagreements blocking a ceasefire deal in Gaza, and as economic weakness in China weighed on fuel demand.

Brent futures for October delivery fell 46 cents, or 0.6%, to settle at USD 77.20 a barrel. US West Texas Intermediate (WTI) crude for September delivery fell 33 cents, or 0.4%, to settle at USD 74.04 on its last day as the front-month.

The more actively traded WTI futures for October, which will soon become the front-month, lost about 49 cents to USD 73.17 per barrel.

US Secretary of State Antony Blinken visited Egypt and pushed for progress toward a Gaza ceasefire and hostage release deal. Major differences still need to be resolved in talks this week.

“There was probably around USD 4 to USD 8 of geopolitical premium baked into the price of crude oil before negotiations began on Thursday,” Bob Yawger, director of energy futures at Mizuho, said in a note.

Israel retrieved the bodies of six hostages from the Gaza Strip as negotiations continued in an effort to bring back more than 100 captives remaining in the besieged Palestinian enclave.

“Despite ongoing ceasefire negotiations, clashes between Israel and Hamas continue, and the markets will remain highly sensitive to any developments in the region,” said Rystad Energy’s senior analyst Svetlana Tretyakova.

“If the market fundamentals don’t break this bearish trend soon, OPEC+ may be hesitant to unwind their voluntary cuts anytime soon.”

OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, has said global oil demand growth must accelerate in coming months or the market will struggle to absorb the group’s planned increase in supply from October.

OPEC member Saudi Arabia, the world’s biggest oil exporter, said crude exports fell to 6.047 million barrels per day (bpd) in June from 6.118 million bpd in May.

Data from China, the world’s second-largest economy, showed new home prices fell in July at their fastest pace in nine years, industrial output slowed, export and investment growth dipped and unemployment rose.

Worries about fuel demand in the US, the world’s biggest economy, pressured prices for US heating oil HOc1 futures to their lowest since May 2023 for a second straight day. The heating oil crack spread, which measures refining profit margins, stayed near its lowest since November 2021.

Prices for US gasoline futures fell to their lowest since February 2024.

“Following Q2 (second quarter) earnings, multiple refinery companies have responded to (price and demand) concerns by announcing cuts to capacity rate, including PBF Energy, Phillips, and Marathon,” analysts at energy consulting firm Gelber and Associates said in a note.

US OIL INVENTORIES

Weekly US oil storage data is due from the American Petroleum Institute (API) trade group on Tuesday and the US Energy Information Administration (EIA) on Wednesday.

Analysts projected US energy firms pulled about 2.7 million barrels of crude out of storage during the week ended Aug. 16.

If correct, that would be the seventh time US crude stocks declined in the past eight weeks. There was a withdrawal of 6.1 million barrels during the same week last year and an average decrease of 3.4 million barrels over the past five years (2019-2023).

(Reporting by Scott DiSavino in New York, Arunima Kumar in Bengaluru, Emily Chow in Singapore, and Arathy Somasekhar in Houston; Editing by Shounak Dasgupta, Louise Heavens, and David Gregorio)

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