Yields dip before Fed meeting minutes

US Treasury yields dipped on Tuesday as investors waited on minutes from the Federal Reserve’s latest policy meeting on Wednesday for any fresh clues on when the US central bank is likely to begin cutting interest rates.

Benchmark 10-year yields have fallen from five-month highs reached in late April as data weakens and inflation shows signs of easing.

“There’s reason to believe that the rapid pace (in inflation) that we saw in Q1 can’t continue and won’t continue going forward,” said Michael Lorizio, senior fixed-income trader at Manulife Investment Management in Boston.

Lower-than-expected consumer price data and weaker retail sales data for April last week boosted expectations the Fed will begin cutting rates in September. But those expectations have since been pared back as Fed officials stress the need to see further progress.

Fed policymakers on Tuesday said it is prudent to wait several more months to ensure that inflation really is back on a path to the 2% target before commencing interest rate cuts.

Economic surprise indices are easing, after increasing in the first quarter, which could support the bond market if it continues.

“The data looks like it’s beginning to slip and certainly slipping significantly from our expectations, so I think that should be supportive of yields in the near term unless we see once again the data releases reverse,” Lorizio said.

The Fed minutes from its April 30-May 1 meeting due on Wednesday may reflect more concern about higher-than-expected inflation in the first quarter, as the meeting was held before last week’s consumer price inflation report.

The US central bank signaled at the meeting that it is still leaning towards eventual reductions in borrowing costs, but acknowledged that disappointing inflation readings could make those rate cuts a while in coming.

The minutes may also offer more detail on the Fed’s plans to slow down the reduction in its balance sheet.

The Fed announced it would scale back the pace at which it is shrinking its balance sheet starting on June 1, allowing only USD 25 billion in Treasury bonds to run off each month versus the current USD 60 billion. Mortgage-backed securities will continue to run off by up to USD 35 billion monthly.

Benchmark 10-year note yields were last down 2 basis points on the day at 4.416%. They have fallen from 4.739% on April 25, which was the highest since Nov. 2.

Two-year yields fell half a basis point to 4.833%. They reached 5.045% on April 30, the highest since Nov. 14.

The inversion in the yield curve between two-year and 10-year yields US2US10=TWEB widened one basis point to minus 42 basis points.

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

Gold prices cool near record peak as dollar holds footing

Gold prices cooled near a record peak hit in the previous session on Tuesday as the dollar held ground, but stayed afloat at the USD 2,400 level on support from safe-haven interest and prospects of US interest rates easing this year.

Spot gold fell 0.2% to USD 2,420.49 per ounce by 1756 GMT, as the US dollar index edged up, making bullion more expensive for other currency holders.

US gold futures settled 0.5% lower to USD 2,425.90.

As gold scaled a record high of USD 2,449.89 on Monday, “the general picture has not really changed (since March) … which is just the backdrop of very attractive global macroeconomic and geopolitical environment for gold,” said Nikos Kavalis, managing director at Metals Focus.

Concerns about the rapidly rising US government debt as the Federal Reserve tries to make for a soft landing are drivers for some investors.

Recent data suggested that US inflation resumed its downward trend, however, several Fed policymakers remained cautious about cutting rates too soon but ruled out the need for a hike.

Elsewhere in China, where efforts are being made to stabilize its crisis-hit property sector, investors are inclined to invest in safe-haven gold.

China itself, officially loaded up bullion in the first quarter of 2024.

“Gold’s key role is to offset risk, whether financial, geopolitical, or volatility. That is not new, but sentiment has now realized,” StoneX analyst Rhona O’Connell said.

Global gold physically backed gold exchange-traded funds (ETFs) saw net inflows of USD 1 billion last week – the largest weekly inflow since October 2023, according to the World Gold Council.

“More and more investors, including a lot of mainstream investors, like macro funds and the likes, have missed a part of that rally, and are convinced by the case for gold and therefore want to participate,” Kavalis said, adding however that the market is ripe for correction before prices could further move up.

Investors will keep a tab on minutes of the Fed’s last policy meeting due on Wednesday.

Silver rose 0.2% to USD 31.90 after hitting an over 11-year high in the last session. Platinum rose 0.7% to USD 1,054.00 per ounce and palladium fell 0.1% to USD 1,025.43 per ounce.

(Reporting by Harshit Verma and Rahul Paswan in Bengaluru, additional reporting by Ashitha Shivaprasad; Editing by Franklin Paul, Shailesh Kuber, and Alan Barona)

US yields drift higher in quiet trading session

NEW YORK – US Treasury yields ticked higher on Monday as investors likely sold government bonds to buy new corporate debt, while Federal Reserve officials pointed to uncertainty over the central bank’s ability to cut interest rates if inflation remains sticky.

Investors largely expected a period of consolidation in Treasuries after softening consumer prices last month strengthened views that the Federal Reserve may be able to cut interest rates twice this year.

Yields, which move inversely to prices, have mostly declined over the past few weeks on indications that the economy was slowing, partly reversing months of gains caused by fears that inflation was rebounding.

Monday’s yield increases were a sign the market was “trying to find a balance” after the recent bond rally, said Danny Zaid, a portfolio manager at TwentyFour Asset Management, who expects Treasuries to be less volatile over the next few weeks.

The ICE BofA MOVE Index, a measure of expected volatility in US Treasuries, stood at its lowest since the end of March.

“It’s very quiet … I think the selling probably has more to do with new issue deals announced this morning,” said Tony Farren, managing director at Mischler Financial Group, referring to a slate of new corporate bond sales announced on Monday.

With no US economic data releases on both Monday and Tuesday, Fed officials’ remarks took center stage ahead of Wednesday’s publication of minutes of the Fed’s most recent policy meting, which may provide more insight on the central bank’s views on the path of interest rates.

Atlanta Fed President Raphael Bostic said in an interview on Monday that “it will take a while” for the Fed to be confident that inflation is on track back to the central bank’s 2% goal.

Fed vice chair for supervision Michael Barr struck a similar tone, saying that inflation data in the first months of this year has been disappointing, which left the central bank short of the evidence it needs to ease monetary policy.

“We will need to allow our restrictive policy some further time to continue its work,” Barr said.

Separately, Fed Vice Chairman Phillip Jefferson said he was cautiously optimistic the central bank could continue to battle inflation while permitting the economy to grow.

Traders of futures tied to the Fed’s policy rate on Monday saw a total of about 42 basis points of interest rate cuts this year, down from over 50 basis points in the aftermath of data last week showing US consumer price inflation cooled in April.

Benchmark 10-year yields were last seen at 4.437%, nearly two basis points higher than Friday. Two-year yields, which tend to more closely reflect monetary policy expectations, were last at 4.837%, up about one basis point.

(Reporting by Davide Barbuscia)

Dollar edges higher as investors await Fed guidance

NEW YORK – The dollar edged up against the euro on Monday as investors awaited further clues on the path of US interest rates in the wake of cautious comments from Federal Reserve officials, even as inflation showed signs of cooling.

Federal Reserve officials are not ready to say inflation is heading to the US central bank’s 2% target after data last week showed a welcome easing in consumer price pressures in April, with several on Monday calling for continued policy caution.

Atlanta Fed President Raphael Bostic said on Monday it will take a while for the Federal Reserve to be confident that inflation is on track back to its goal.

“The issue right now is when are we going to be certain that inflation is clearly on a path back to 2%. I think it’s going to take a while before we know that for sure,” Bostic said in an interview with Bloomberg Television.

Speaking at the Mortgage Bankers Association conference in New York, Fed Vice Chair Philip Jefferson said it is too early to tell whether the recent slowdown in the disinflationary process will be long-lasting.

The euro was 0.05% down against the dollar at USD 1.0863. Against the yen, the dollar was up 0.4% to 156.26 yen.

Data last week showed US consumer prices rose less than expected in April, leading to markets pricing in 50 basis points of Fed rate cuts this year.

With little in the way of economic data on the calendar for the day, most major currency pairs clung to tight trading ranges on Monday.

“I think after CPI passed last week the FX market is rather lacking a catalyst at this stage,” said Michael Brown, market analyst at online broker Pepperstone in London.

“While the FOMC (Federal Open Market Committee) calendar is, again, stupendously busy, it seems there’s little fresh information that speakers can add at this stage, especially with the reaction function so well-signposted, another hike all but ruled out, and a couple more promising inflation figures, at least, needed to provide the requisite confidence of inflation returning towards 2% before the first cut can be delivered,” Brown said.

Survey-based gauges of the economy for the eurozone, Germany, the UK, and the United States are due this week.

The euro remained not far from the nearly two-month high of USD 1.0895 it touched last week. It is up 1.8% so far in May, boosted by a fall in the dollar on the back of softer US growth and inflation data, as well as a pickup in the eurozone economy.

With the Japanese yen weaker on the day, traders remained on alert for signs of government intervention. The currency has moved in tight ranges in the past couple of trading days after a tumultuous start to May in the wake of suspected rounds of currency interventions by Tokyo to prop up the yen.

Sterling was up 0.07% at USD 1.2711 on the day after touching a two-month high of USD 1.27255, ahead of a UK inflation report due on Wednesday.

The Australian dollar was down 0.3% at USD 0.6671. The Aussie has risen 3% this month amid high Australian inflation. Monday’s weakness in the commodity-linked currency despite strength in commodity prices bodes ill for the near-term outlook for the Australian dollar, Pepperstone’s Brown said.

“(The weakness) on a day with commodities rallying and equities solid enough, (is) perhaps a canary in the coal mine for antipodean bulls,” Brown said.

In cryptocurrencies, bitcoin was 2.7% higher on the day at USD 68,715, a new five-week high.

(Reporting by Saqib Iqbal Ahmed; Additional reporting by Harry Robertson in London and Ankur Banerjee in Singapore; Editing by Sharon Singleton, Bernadette Baum, Will Dunham, and Jonathan Oatis)

Oil eases on worries about US inflation, interest rates

NEW YORK – Oil prices eased less than 1% on Monday as US Federal Reserve officials said they were awaiting more signs that inflation was declining before the central bank starts cutting interest rates.

Two top Fed officials said they’re not yet ready to say inflation trends are again moving sustainably back to the central bank’s 2% target, weighing in after data last week showed a welcome easing in consumer price pressures in April.

Lower interest rates would reduce borrowing costs for consumers and businesses, which could boost economic growth and demand for oil.

Brent futures fell 27 cents, or 0.3%, to settle at USD 83.71 a barrel, while US West Texas Intermediate (WTI) crude fell 26 cents, or 0.3%, to settle at USD 79.80.

That kept the premium of Brent over WTI near its lowest level since March for a third day in a row. A narrower premium makes it less profitable for energy companies to send vessels to the US to pick up crude cargo for export. That leaves more oil in the US that must be consumed or stored.

The premium of the Brent front-month over the second month, known in the industry as backwardation, fell to its lowest since January.

When a market is in backwardation, energy firms are more likely to pull oil out of storage and use it now rather than wait for prices to decline in the future. If the market switches to contango, with future contracts worth more than the front-month, energy firms could start storing oil for the future, which could depress prices.

UNFAZED BY WORLD EVENTS

The market, however, appeared unfazed by political uncertainty in two major oil-producing countries after Iran’s president died in a helicopter crash and Saudi Arabia’s crown prince deferred a trip to Japan because of the health of his father, the king.

Iranian oil policy should be unaffected by the president’s sudden death because Supreme Leader Ayatollah Ali Khamenei holds ultimate power with the final say on all state matters.

In Saudi Arabia, the market is already accustomed to Crown Prince Mohammed Bin Salman’s leadership in the energy sector, said Saul Kavonic, an energy analyst at MST Marquee.

“Continuity in Saudi strategy is expected regardless of this health issue,” he said.

The Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, are scheduled to meet on June 1.

“The market also appears increasingly numb to developments on the geopolitical front, likely due to the large amount of spare capacity OPEC is sitting on,” said Warren Patterson, head of commodities strategy at ING.

Data showed that Saudi Arabia’s crude oil exports rose for a second consecutive month in March, reaching their highest in nine months.

Russia remained China’s top oil supplier in April for a 12th month, with volumes rising 30% from a year earlier as refiners continued to cash in discounted shipments, while supplies from Saudi Arabia fell a quarter on higher prices.

Russian President Vladimir Putin said gas output rose by 8% in the first four months of the year but oil output declined by 1.8%, a dip largely due to production cuts under OPEC+ agreements.

Even though the Slavyansk oil refinery in the Krasnodar region of Russia was damaged by a drone attack over the weekend, Russia said it suspended a ban on gasoline exports until June 30. The country, however, said it would put the ban back in place from July 1 to Aug. 31.

(Reporting by Scott DiSavino In New York, Natalie Grover in London, Deep Vakil in Bengaluru, Colleen Howe in Beijing, and Florence Tan in Singapore; editing by Jonathan Oatis and Nick Zieminski)

‘Perfect storm’ steers gold to another record high; silver jumps

Gold prices rose to an all-time high on Monday as a cocktail of factors from US rate cut expectations, China’s stimulus measures to geopolitical tensions lifted demand, with the momentum also carrying silver to a more than 11-year peak.

Spot gold rose 0.9% to USD 2,435.96 per ounce as of 2:26 p.m. ET (1826 GMT) after hitting a record high of USD 2,449.89 earlier in the session.

US gold futures settled 0.9% higher to USD 2,438.50.

“Inflation is sticky, we may see some whipsaws in the inflation data, but also the burdening debt in the US, there is a cause to be diversified away from that too. So it’s this perfect storm that’s kept the market elevated in gold,” said Daniel Pavilonis, senior market strategist at RJO Futures.

Data last week showed that US consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend, boosting expectations for a September interest rate cut.

Lower rates reduce the opportunity cost of holding non-yielding bullion, which also benefits from uncertainty in the market.

RJO’s Pavilonis expects gold to propel to near USD 2,500 in the short term as there’s a fear of missing out from gold’s rally. “There’s a lot of non-traders that are calling up places(brokers) … to buy futures or to take physical delivery.”

Gold has also been supported by increased holdings in China’s central bank.

Adding to gold’s upside was elevated risk aversion as Iranian President Ebrahim Raisi, was killed in a helicopter crash, analysts at Kitco Metals wrote in a note.

Meanwhile, some analysts also pointed out gold’s surge to China’s announcement of “historic” steps to stabilize its crisis-hit property sector. China is a key consumer of gold and other industrial metals.

Spot silver rose 2.2% to USD 32.17 after hitting an over 11-year high.

Platinum dipped 2.5% to USD 1,053.43 after hitting its highest since May 2023. Palladium rose 2% to USD 1,028.66.

“Platinum is trading at a premium over palladium with rising inflows of exchange-traded funds,” ANZ said in a note.

(Reporting by Harshit Verma in Bengaluru; Editing by Shailesh Kuber, Ravi Prakash Kumar, and Alan Barona)

China’s property support measures disappoint, developers’ shares falter

HONG KONG – Shares of Chinese developers wobbled on Monday as investors fretted that China’s “historic” steps to stabilize its crisis-hit property sector fell short of what is required to foster a sustainable turnaround in demand and confidence.

Hong Kong’s Hang Seng Mainland Properties Index closed down 0.7%, after having gained around 18% so far this month after the Politburo said in an April 30 meeting that it would coordinate to clear housing inventory.

Embattled state-backed developer China Vanke eased 0.2%, after bouncing as much as 6.4% in the morning session. Shimao Group, R&F Properties, Kaisa Group, and KWG Group were down more than 10% each.

China unveiled measures on Friday to facilitate up to 1 trillion yuan (USD 138 billion) in funding and ease mortgage rules, with local governments set to buy “some” apartments.

As part of those steps, the central bank said it would set up a 300 billion yuan (USD 41.49 billion) relending facility for state-owned enterprises (SOEs) to purchase completed and unsold homes at “reasonable prices” for affordable housing.

The central bank expects the relending program would result in 500 billion yuan worth of bank financing.

Friday’s announcement came after waves of policy support measures over the past two years failed to revive the sector, which at its peak accounted for a quarter of national GDP and remains a major drag on the world’s second-biggest economy.

While a housing ministry publication described the latest policies as a “historic moment” for the industry, many China watchers were more circumspect in their assessment.

Analysts said the central government’s decision to step in as a buyer marked an important step but noted that the size of financing on offer pales in comparison to the estimated trillions of yuan worth of housing inventory across the country.

There were 391 million square meters (4.2 billion square feet) of new housing for sale in January-April, up 24% year-on-year, the latest official data show, equivalent to 6.6 Manhattans Tianfeng Securities estimates it will cost around USD 1 trillion to buy the entire stock.

Bank of America head of Greater China property research, Karl Choi, noted that social housing programs are only mandated in larger cities, estimating that the 500 billion funding could purchase up to 15% of inventory in tier-2 cities at a deep discount.

Macquarie economists say Beijing’s previous statements suggested 18 months of inventory clearing may be the government’s policy goal, versus the current timeframe of 28 months to clear the stock.

Achieving the policy goal will cost an estimated 2 trillion yuan, they said.

“Given its limited size and the various challenges in execution, it alone is unlikely to solve the problem,” Larry Hu, the bank’s chief China economist said in a report. “But it’s encouraging that policymakers are moving in this direction after failures in the previous years.”

Analysts compared the latest 300 billion relending facility to another 100 billion yuan facility introduced in January 2023 for eight pilot cities to purchase inventory for subsidized rental housing. So far, only around 2 billion yuan have been drawn down by January this year, official data showed, highlighting the lack of incentives and participations from the market.

Local governments, already some USD 9 trillion in debt, may be reluctant to expand their social housing projects which provide low returns, and banks would also be hesitant to lend to potentially loss-making businesses.

Bank of America’s Choi also said the duration of this lending, designed to be a maximum of five years, is too short for the payback period for a rental housing project, which could be a concern for SOEs and commercial banks.

Goldman Sachs expected it would take nine months to stabilize China’s property prices if the government launches a full-scale program to reduce inventory.

“Much depends on execution,” the US investment bank said. “Despite policymakers signaling a more supportive stance, the effectiveness of any new measures will hinge on how quickly and easily they can be implemented.”

Reviving homebuyer confidence is still the key to a property recovery, analysts say.

Li Gen, chairman of Beijing G Capital Private Fund Management Center LLP, said few entities will be motivated by Friday measures under current market conditions.

“The demand for property is weak with many people concerned about jobs and incomes in future.”

(USD 1 = 7.2302 yuan)

(Reporting By Hong Kong and Shanghai newsrooms; Editing by Anne Marie Roantree, Shri Navaratnam, and Louise Heavens)

Asian stocks eye best run since 2021

Investors’ appetite for stocks and risk assets shows no sign of waning which, in the absence of any major market-moving economic data or events in Asia on Tuesday, should pave the way for further gains across the continent when trading gets underway.

Monday’s global market moves encapsulated the ‘FOMO’ that seems to be fueling the ongoing risk rally – volatility, the dollar, bond yields, and geopolitical uncertainty all rose to varying degrees, yet equities marched higher regardless.

‘Fear of missing out’ – which some might say isn’t all that far removed ‘irrational exuberance’ – is a powerful force. But it can also be a red flag, especially when long-time market bears join the frenzy.

Morgan Stanley’s US equity strategist Mike Wilson has not been the only Wall Street bear over the last couple of years, but he has certainly been one of the most prominent.

On Monday, he and his team raised their base-case, 12-month forecast for the S&P 500 to 5400 points. That’s only up around 2% from Friday’s close, but 20% higher than their previous forecast of 4500.

Only time will tell if Wilson’s about-turn will be an indication that investors’ exuberance has become irrational. Right now, however, at least until chipmaker Nvidia’s earnings on Wednesday, market bulls are firmly in control.

And Asia is enjoying the ride too.

The MSCI Asia ex-Japan equity index on Monday rose to a two-year high with its seventh consecutive rise, its best run since January last year. Another increase on Tuesday will seal its best run since August-September 2021.

Japan’s Nikkei is back above 39,000 points for the first time in over a month, and the dollar is back above 156.00 yen. The dollar is now within one yen, more or less, of where Japanese authorities are widely thought to have conducted yen-buying intervention on May 1.

Intervention seems unlikely right now, but currency traders will not be complacent. The latest Commodity Futures Trading Commission data show that speculators reduced their net short yen positions for a third week, but not by much.

The main event on the Asian and Pacific calendar on Tuesday is the release of the minutes from the Reserve Bank of Australia’s May 7 policy meeting.

The RBA quashed market talk at the time of a near-term interest rate hike but also didn’t hold out much chance of a cut for months to come. The Aussie dollar has regained its poise since then to climb to a four-month high just above $0.67.

Australian rates markets are not fully pricing in a 25-basis point rate cut until April next year.

Here are key developments that could provide more direction to markets on Tuesday:

– Reserve Bank of Australia meeting minutes

– Australia consumer sentiment (May)

– Indonesia’s government presents 2025 economic forecasts to parliament

(Reporting by Jamie McGeever)

Dollar mostly flat as market mulls inflation outlook

NEW YORK/LONDON – The dollar retreated against major currencies on Friday as market speculation continues to swirl about the timing of Federal Reserve interest rate cuts amid signs of cooling yet persistent inflation and a softening US economy.

While consumer prices for April, reported on Wednesday, rose less than expected – leading to a risk-on flavor in equity markets – various Fed officials have sounded words of caution about when rates may fall, limiting the dollar’s decline this week.

The dollar index, which tracks the US currency against six peers, slid 0.04% to 104.44 after earlier trading about 0.3% higher.

“The market has turned cautious on the prospect of rate cuts in the near term. The overall picture, though, does appear consistent with a fading of the US exceptionalism trade,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“We are seeing signs of slowing momentum in the US economy,” Schamotta added. “All of that is translating into less upward pressure on the dollar at the same time you are seeing a brightening of prospects elsewhere.”

Futures markets reduced the outlook for lower US rates, with less than 45 basis points of cuts seen by December, down from almost 50 on Wednesday, and a cut of 21 bps in September, down from almost 25 bps.

“The market over-reacted perhaps on Wednesday, and now we’re seeing a little bit of that over-reaction come off and that inflation could re-accelerate,” said Matt Weller, global head of research at FOREX.com in Grand Rapids, Michigan.

US inflation accelerated in the first quarter amid strong domestic demand after moderating for much of last year. Last month’s slowdown was a relief after data on Tuesday showed a jump in producer prices in April.

Policymakers said on Thursday that still-high inflation warrants keeping rates at current levels, and that reaching the Fed’s 2% inflation target will take longer than previously thought.

A surprisingly large 0.9% jump in import prices on Thursday kindled worries that rising import costs will only add to inflationary pressures.

Even though markets are pricing European rate cuts beginning in June, recent data has shown some upside surprises. Germany’s economy grew more than expected last quarter and investor morale is at a two-year high.

Eurozone consumer inflation data on Friday came in at 2.4% year-on-year in April, in line with a Reuters poll.

The euro rose 0.06% against the dollar to USD 1.0872.

Eurozone policymakers have increased confidence that inflation will ease back to target next year due to easing price pressures, ECB Vice-President Luis de Guindos said on Friday.

Largely disappointing Chinese data on Friday helped keep market risk sentiment in check. Factory output topped forecasts but retail sales slowed and home prices fell at their fastest pace in more than nine years.

Sterling rose 0.31% to USD 1.2705, while the dollar gained 0.17% on the Japanese yen at 155.64.

In cryptocurrency markets, bitcoin was up 1.89% at USD 66,517.00.

(Reporting by Herbert Lash, additional reporting by Iain Withers and Tom Westbrook in Singapore; Editing by Timothy Heritage, Will Dunham, and Emelia Sithole-Matarise)

Oil gains 1% on hopes of firmer demand

NEW YORK – Oil prices settled about 1% higher on Friday, with global benchmark Brent crude recording its first weekly gain in three weeks, after economic indicators from the world’s top two oil consumers – China and the US – bolstered hopes for higher demand.

Brent settled 71 cents higher, or 0.9%, at USD 83.98 a barrel. US West Texas Intermediate crude (WTI) gained 83 cents, or 1.1%, to USD 80.06.

For the week, Brent gained about 1%, while WTI rose 2%.

China’s industrial output rose 6.7% year-on-year in April as a recovery in its manufacturing sector gathered pace, pointing to possibly stronger demand to come. China also announced major steps to stabilize its crisis-hit property sector.

The Chinese figures showed potential for demand construction and supported oil prices, said Bob Yawger, director of energy futures at Mizuho. However, government data showing a drop in China’s annual refined output may have offset that support.

Declines in oil and refined product inventories at global trading hubs have also created optimism about demand, reversing a trend of rising stockpiles that had weighed heavily on crude oil prices in previous weeks.

The US oil rig count rose by one this week to 497, the first increase in four weeks, energy services firm Baker Hughes said.

Recent US economic indicators have fed into the optimism over global demand for oil. US consumer prices rose less than expected in April, data showed on Wednesday, boosting expectations of lower interest rates.

“Consumer prices were not as bad as expected,” said Tim Snyder, economist at Matador Economics. “It gave the US a little bit of a boost.”

Lower US interest rates could help soften the dollar, which would make greenback-denominated oil cheaper for buyers holding other currencies.

Meanwhile, a fire started at Russia’s Tuapse oil refinery overnight after a wave of Ukrainian drone attacks. The extent of the damage was unclear.

On the supply side, investors were mostly looking for direction from the upcoming OPEC+ meeting on June 1.

“With the price of Brent crude hovering below USD 90, a level quietly being targeted by Saudi Arabia and others, the upcoming OPEC+ meeting is likely to result in a rollover of current production cuts,” Saxo Bank analyst Ole Hansen said in a note.

Money managers raised their net long US crude futures and options positions in the week to May 14, the US Commodity Futures Trading Commission (CFTC) said.

(Reporting by Nicole Jao in New York, Robert Harvey, and Alex Lawler in London; additional reporting by Deep Vakil in Bengaluru, Shariq Khan in New York, and Trixie Yap in Singapore; editing by Bill Berkrot and Marguerita Choy)

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