Oil prices climb as risk appetite grows, focus returns to supply outlook

TOKYO, Oct 2 – Oil prices edged up on Monday, recouping some of the losses suffered at the end of last week, as investors focused on a tight global supply outlook while a last-minute deal that avoided a US government shutdown restored risk appetite.

Brent December crude futures rose 49 cents, or 0.5%, to USD 92.69 a barrel by 0645 GMT after falling 90 cents on Friday. Brent November futures settled down 7 cents at USD 95.31 a barrel at the contract’s expiry on Friday.

US West Texas Intermediate crude futures gained 55 cents, or 0.6%, to USD 91.34 a barrel, after losing 92 cents on Friday.

Both benchmarks rallied nearly 30% in the third quarter on forecasts of a wide crude supply deficit in the fourth quarter after Saudi Arabia and Russia extended additional supply cuts to the end of the year.

The Organization of the Petroleum Exporting Countries with Russia and other allies, or OPEC+, is unlikely to tweak its current oil output policy when the panel called the Joint Ministerial Monitoring Committee meets on Wednesday, four OPEC+ sources told Reuters, as tighter supplies and rising demand drive an oil price rally.

“Oil prices started the week on a strong note amid supply concerns with no policy change by OPEC+ expected, while the avoidance of a U.S. government’s shutdown over the weekend gave some relief,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

“Still, whether or not the market will rise further will depend on future demand trends,” he said.

While OPEC+ is not expected to change its output policy given the recent strength in the market, Saudi Arabia could start to ease its additional voluntary supply cut of 1 million barrels per day (bpd), said ING analysts in a note on Monday.

“The Saudis have said that there is still concern over Chinese demand. However, PMI data out over the weekend will provide some confidence with China’s manufacturing PMI returning to expansion territory in September for the first time since March.”

Official data on Saturday showed that China’s factory activity expanded for the first time in six months in September, adding to a run of indicators suggesting the world’s second-largest economy has begun to stabilise.

However, a private-sector survey on Sunday was less encouraging, showing the country’s factory activity expanded at a slower pace in September.

Indeed, a durable recovery in China’s economy is being delayed by a deep property slump, falling exports and high youth unemployment, raising fears of weaker fuel demand.

Elsewhere, a last-minute decision by Republican House of Representatives Speaker Kevin McCarthy to turn to Democrats to pass a short-term funding bill pushed the risk of shutdown to mid-November, meaning the U.S. federal government’s more than 4 million workers can count on continued paychecks for now.

Amplifying supply fears, the US oil and gas rig count, an early indicator of future output, fell by seven to 623 in the week to Sept. 29, the lowest since February 2022, energy services firm Baker Hughes BKR.O said in its closely followed report on Friday.

Brent is forecast to average USD 89.85 a barrel in the fourth quarter and USD 86.45 in 2024, according to a survey of 42 economists compiled by Reuters on Friday.

(Reporting by Yuka Obayashi in Tokyo and Emily Chow; Editing by Jamie Freed, Shri Navaratnam and Kim Coghill)

Oil tumbles 2% to 3-week low on strong dollar, profit taking

NEW YORK, Oct 2 – Oil prices fell about 2% on Monday to a three-week low as a higher-priced Brent contract expired, the US dollar strengthened and traders took profits, concerned about rising crude supplies and pressure on demand from high interest rates.

On its first day as the front-month, Brent futures for December delivery settled at USD 1.49, or 1.6%, lower at USD 90.71 a barrel, or down about 5% from where the November contract expired on Friday. That was the Brent front-month’s biggest daily percentage decline since early May.

US West Texas Intermediate crude (WTI), meanwhile, fell USD 1.97, or 2.2%, to settle at USD 88.82 per barrel.

Analysts said some traders took profits after crude prices rose nearly 30% to 10-month highs in the third quarter.

Before the crude price pullback that started on Sept. 28, US speculators boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges to the highest since May 2022, according to the US Commodity Futures Trading Commission.

It is “highly likely that profit-taking by speculators is currently playing a role (in the recent price decline) and should cease weighing on markets as the days pass,” analysts at energy consulting firm Gelber and Associates said in a note.

On Monday, the US dollar rose to a 10-month high against a basket of other currencies after the US government avoided a partial shutdown and economic data fuelled expectations the US Federal Reserve will keep rates higher longer, which could slow economic growth.

Higher interest rates along with a stronger dollar, which makes oil more expensive for holders of other currencies, could dent oil demand.

“The global outlook is quickly taking a turn for the worse and that is both driving the king dollar trade again and weighing on the crude demand outlook,” said Edward Moya, senior market analyst at data and analytics firm OANDA, noting that soaring bond yields were also pressuring crude prices.

In Europe, manufacturing data showed the eurozone, Germany, and Britain remained mired in a downturn in September.

In China, the world’s biggest oil importer, the World Bank maintained its forecast for 2023 economic growth at 5.1%, but trimmed its prediction for 2024, citing persistent weakness of its property sector.

MORE OIL COMING

Pumping more crude supply into the system, Turkey’s energy minister said the country will restart operations this week on a pipeline from Iraq that has been suspended for about six months.

Additionally, Saudi Arabia could start to ease its additional voluntary supply cut of 1 million barrels per day (bpd), ING analysts said in a note.

OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) plus Russia and other allies, will meet on Wednesday but is unlikely to tweak its current oil output policy.

A Reuters survey showed OPEC oil output rose for a second straight month in September despite cuts by Saudi Arabia.

(Reporting by Scott DiSavino in New York, Paul Carsten in London, Yuka Obayashi in Tokyo, and Emily Chow; Editing by Marguerita Choy and David Gregorio)

US recap: Quarter-end dollar pullback fizzles on inflation updates

Sept 29 – The dollar’s quarter-end pullback versus the euro, yen, and sterling fizzled on Friday at daily tenkan supports after inflation data from Japan, the eurozone and the US weighed more on short-term bund and gilts yields than Treasury yields and as US spending data remained solid versus German sales 1.2% dive.

Final Michigan consumer sentiment came in above forecast and final 1-year and 5-year inflation expectations were 0.1% higher than the preliminary, though still down from August.

New York Fed President John William reiterated officials’ data-dependent posture and high-for-longer rates guidance on Friday. The market isn’t pricing in further hikes, but neither is it for the ECB, with both seen likely to begin cutting rates by July.

The net result was that 2- and 10-year Treasury yields found support near 5% and 4.5%, bouncing slightly off the lows and helping the dollar recoup its earlier losses.

EUR/USD was flat, but was well off the 1.0617 high by the 10-day moving average and tenkan. Subsiding period-end squaring of September’s 4% slide, and what is set to be the eleventh consecutive week of losses, helped cap prices. But prices now need to break this week’s 1.0488 trend low by 2023’s 1.0482 trough on EBS to resume the downtrend.

With a US government shutdown seen quite possible on Sunday, markets and the Fed may be without key government economic data such as Friday’s employment report. That might leave the highly Treasury-yield sensitive USD/JPY uptrend to trade off of Monday and Wednesday’s US PMI reports, while dealing with the potential for MoF intervention to support the yen above 150 and toward 2022’s 32-year peak at 151.94.

USD/JPY’s early dip to tenkan and other support was scooped up by traders happy for any discounts while Fed-BoJ policy divergence remains immense.

Sterling fell slightly and was well off its 1.2271 Friday high by the daily tenkan and 10-DMA.

Aussie and USD/CNH were little changed, though seasonals might favor riskier assets and high-beta currencies in the fourth quarter.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Hopes rise for IPO recovery after September deal rush

NEW YORK/LONDON, Sept 29 – Bankers and investors are embracing a degree of optimism for the IPO market following a slew of major market debuts in September that made for one of the busiest months since the start of 2022.

So far this year there have been USD 423 billion worth of equity capital markets transactions, a 5% increase from the same period last year, according to Dealogic data, though this total remains a far cry from the record levels of 2021.

The performance of a spate of high-profile IPOs is being closely watched as an indicator of investors’ appetite for new issues.

In the last four weeks, at least 25 companies in the United States and Europe have joined the stock market, raising hopes that a recovery may be in sight after a lengthy drought in fresh listings.

“We’re definitely seeing a bit of a soft open in the IPO market”, said Lizzie Reed, global head of the ECM syndicate desk at Goldman Sachs. “The last cohort of IPOs … provided a case study for issuers who might be contemplating markets access.”

British chip designer Arm Holdings (ARM), marketing automation firm Klaviyo (KVYO), and grocery delivery app Instacart (CART) raised more than USD 6 billion combined in their September debuts in New York, accounting for over a fifth of total proceeds raised by IPOs in the US and Europe this year.

All three companies priced their IPOs at the top end, or above, their indicated price range, highlighting support from investors.

But while shares rallied on their first day of trading, they have since retreated. Arm and Instacart shares briefly fell below their issue price, suggesting there is still some way before the IPO market fully recovers.

REBUILD MODE

“We’re still in a rebuild mode for the market more than an absolute bull market,” said Robert Stowe, head of Americas ECM at Barclays. “But we are starting to see more engagement (in IPOs) from both sides.”

Bankers are not expecting a deluge of deals to rush to market as a result of the recent issues.

“It’s encouraging to see deals being priced, but it will continue to be a gradual re-opening of the market rather than the floodgates opening,” said Suneel Hargunani, co-head of ECM at Citigroup for Europe, the Middle East and Africa (EMEA).

In the last month, technology has been the dominant sector for new issues in the US, but the full quarter has offered a more varied IPO class.

Medical glass producer Schott Pharma debuted on the Frankfurt Stock Exchange on Thursday, with shares closing 16% above the IPO price. In July, German hydrogen firm ThyssenKrupp Nucera (NCH2) and Romanian energy producer Hidrolectrica went public in their home countries.

IPO candidates on both sides of the Atlantic share a common characteristic – they are either already profitable or show a clear path to profitability.

Arm, Instacart, and Klaviyo were all profitable at the time of their listings. Klaviyo’s shares are now trading at a 21% premium to their IPO price.

“The success of (the) Klaviyo (IPO) is a strong affirmation of profitable growth being a path towards a rewarding valuation by the public markets,” said Ross Devor, partner at Thoma Bravo, a software-focused private equity firm.

“Most of the companies in the pipeline, if they’re not profitable, they have a definitive path to profitability,” said Samir A. Gandhi, a capital markets lawyer at Sidley Austin.

STABLE OWNERSHIP

Notably, some of this year’s most emblematic IPOs have attracted cornerstone investors as a way to reduce risk and ensure stable ownership.

“For companies that are market leaders in their sector and have a long-term thematic element, we find that investors are more likely to consider a cornerstone investment,” said Stephane Gruffat, co-head of ECM in EMEA at Deutsche Bank.

That was the case of Arm, a leader in chip technology, which saw an array of clients including Nvidia and Apple snap up shares, and Schott Pharma, which attracted the Qatar Investment Authority, as it pushed into the growing market for injectable drugs.

A narrowing gap between buyers’ and sellers’ views on valuation has also paved the way for more IPOs to come to market.

Instacart agreed to sell shares to investors at a USD 9.9 billion valuation in its IPO, a fraction of the USD 39 billion it fetched in a private fundraising round in March 2021 amid a pandemic-induced boom for online grocery deliveries.

For its part, SoftBank bought the 25% it did not already own in Arm at a USD 64 billion valuation in August to then sell shares at a lower price a month later.

“For the IPO market to open more broadly in the first quarter in 2024 … we need the 2023 IPO cohort to continue to perform well,” said Josh Weismer, head of US ECM, Mizuho Americas. “And the market needs a bit more clarity from the Fed.”

(Reporting by Echo Wang in New York and Pablo Mayo Cerqueiro in London; Editing by Anousha Sakoui and David Holmes)

Gold set for monthly fall on Fed rate outlook

Sept 29 – Gold prices extended declines on Friday and were on track for monthly and quarterly declines on expectations that the US central bank may keep interest rates higher for longer.

Spot gold fell 0.8% to USD 1,850.44 per ounce by 1:53 p.m. EDT (1753 GMT), its lowest in more than six months. US gold futures settled 0.7% lower at USD 1,866.10.

Bullion is set to end September down 4.6% and the quarter 3.6% lower, after the Federal Reserve struck a hawkish stance.

“Gold’s outlook, fortunately or unfortunately, has a lot to do with the underlying interest rate environment moving forward,” said David Meger, director of metals trading at High Ridge Futures.

Higher rates raise the opportunity cost of holding gold, which is priced in dollars and does not yield any interest.

The dollar index and benchmark 10-year Treasury yields were headed for quarterly rise.

Gold prices briefly rose as much as 0.8% after a milder inflation report. The core personal consumption expenditures (PCE) price index rose 3.9% on an annual basis in August, down from 4.3% in July. The headline index, however, gained by 3.5% on the year, up from 3.4% in July.

“Demand for gold as a hedge against a soft-landing failure is unlikely to go away as the outlook for the US economic outlook in the months ahead looks increasingly challenged,” Ole Hansen, head of commodity strategy at Saxo Bank, wrote in a note.

On the physical front, gold premiums eased slightly in top consumer China this week, but remained elevated on high investor demand amid a broadly weaker yuan and economic worries.

Spot silver fell 1.7% to USD 22.20 per ounce and was down 2.4% for the quarter.

Platinum fell 0.3% to USD 902.14, while palladium edged down 2.1% at USD 1,245.48.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Varun H K, Maju Samuel and Shweta Agarwal)

Oil settles lower but ends quarter up 28% on tight global supply

Sept 29 – Oil prices settled 1% lower on Friday due to macroeconomic concerns and profit-taking, but rose about 30% in the quarter as OPEC+ production cuts squeezed global crude supply.

Front-month Brent November futures settled down 7 cents to USD 95.31 per barrel at the contract’s expiry, up about 2.2% in the week and 27% in the third quarter. The more liquid Brent December contract was settled down 90 cents to USD 92.20 per barrel.

US West Texas Intermediate crude (WTI) settled down 92 cents to USD 90.97, up 1% in the week and 29% in the quarter.

With oil futures inching closer to USD 100 a barrel, many investors took profits on the rally given ongoing macroeconomic concerns.

“WTI has been the belle of the ball, but today it’s losing its luster,” said John Kilduff, partner at Again Capital LLC in New York, citing profit-taking and economic concerns.

Oil and gas activity in three US energy-producing states has been rising with the latest jump in prices, according to a survey by the Federal Reserve Bank of Dallas.

In July, US crude production grew to its highest since November 2019, according to data from the Energy Information Administration.

Investors looked ahead to a potential partial US government shutdown on Sunday, an “unnecessary risk” to a resilient US economy, top White House economic adviser Lael Brainard said.

Worries about the Chinese economy also intensified as shares of indebted property developer Evergrande Group were suspended until further notice following a report that its chairman had been placed under police watch.

The US oil and gas rig count, an early indicator of future output, fell by seven to 623 in the week to Sept. 29, the lowest since February 2022, energy services firm Baker Hughes said in its closely followed report on Friday.

While the total rig count fell by 51 in the third quarter, the cuts have slowed compared with a reduction of 81 in the second quarter as oil prices have rebounded due to tightening supplies.

Brent is forecast to average USD 89.85 a barrel in the fourth quarter and USD 86.45 in 2024, according to a survey of 42 economists compiled by Reuters on Friday.

The OPEC+ ministerial panel meeting will take place on Oct. 4 and there is “increasing probability the voluntary supply cuts by Aramco are reduced,” National Australia Bank analysts said in a client note, referring to Saudi Arabia’s state oil producer.

The supply cuts announced by Saudi Arabia and Russia are expected to dominate oil prices for the remainder of this year.

However, a run towards USD 100 per barrel could be short-lived because of “the artificial nature of supply shortages in the system, and the fragile macro environment”, said Suvro Sarkar, energy sector team lead at DBS Bank.

(Additional reporting by Robert Harvey, and Katya Golubkova; Editing by Sonali Paul, Mark Potter, Paul Simao, Jan Harvey, and David Gregorio)

Curtain comes down on quarter to forget

Sept 29 – Investors in Asia go into the final trading day of a bruising quarter – also a day packed with top-tier economic indicators from Japan – in a slightly better frame of mind after a much-needed rebound in global sentiment and risk assets on Thursday.

Japanese retail sales, industrial output, consumer confidence, and Tokyo inflation data top the regional calendar on Friday, which also includes Australian credit and lending figures and Thai manufacturing and current account data.

Investors will not be able to switch off completely over the weekend, however, with the fast-evolving Evergrande saga making for gripping reading.

On top of that, China’s manufacturing and service sector purchasing managers index reports for September – official and unofficial – will be released on Sunday. Chinese markets will then close for the Golden week holidays.

It has been a tough few weeks, and a tough quarter.

The MSCI World stock index’s rise on Thursday was its first in 10 days, snapping its longest losing streak since November 2011. Unless it rises 4% on Friday, it will post its first quarterly loss in a year.

The MSCI Asia ex-Japan index fared even worse. It is on course for a 5% decline, which will be its second consecutive quarterly loss and seventh out of the last nine.

Other Asia-related stats from the quarter tell a similar story.

The yen is down three quarters in a row, and 10 out of the last 11; the Hong Kong property index is down three quarters, eyeing a 17% slide in Q3 and a 30% loss so far this year, on track for its worst year since 2008; and Chinese shares are down two quarters in a row for the first time since 2019.

The drivers are by now well known – rising US interest rates, surging Treasury yields, and a powerful dollar rally, as well as a chronically underperforming China, tightening financial conditions, and growing worries over the world economy.

Some of these conditions may be stretched and the gloom over-cooked. Would a partial recovery in risk appetite and reversal of many of these trades at the start of the fourth quarter be a complete surprise?

Thursday’s market action shows nothing ever moves in a straight line. Although the 10-year Treasury yield hit a new high intraday, US yields fell across the curve, oil and the dollar posted notable losses, and stocks finally snapped higher.

Sticking with the positivity, the International Monetary Fund said on Thursday it sees signs of economic stabilization in China and is confident it can grow faster if it takes steps to rebalance growth from investment toward consumer spending.

In currency markets on Thursday, the yuan had its best day in two weeks, the yen eased a little bit further away from the 150/USD level, and the dollar index fell 0.5%, its biggest fall in nearly three weeks.

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

– Japan unemployment, retail sales, industrial output (August)

– Japan Tokyo CPI inflation (August)

– Australia lending, credit (August)

(By Jamie McGeever; Editing by Josie Kao)

Wall Street ends higher as investors digest economic data ahead of inflation report

Sept 28 – Wall Street’s main indexes ended higher on Thursday as investors assessed the latest batch of economic data and as a surge in Treasury yields stalled ahead of a key inflation report.

Investors were also watching developments in Washington to see whether US lawmakers could avert a government shutdown.

The recent move in Treasury yields to 16-year highs has loomed over the stock market, which has pulled back after the Federal Reserve last week signaled a hawkish long-term outlook for interest rates.

The benchmark 10-year Treasury yield pausing at around 4.6% was bringing “relief,” said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management Co.

“Markets in general the last few days have been really, really choppy,” Stucky said.

“A little bit of a counter-trend rally is to be expected after three or four pretty sharply negative days.”

The Dow Jones Industrial Average rose 116.07 points, or 0.35%, to 33,666.34, the S&P 500 gained 25.19 points, or 0.59%, to 4,299.70 and the Nasdaq Composite gained 108.43 points, or 0.83%, to 13,201.28.

Among S&P 500 sectors, the communication services group gained 1.2%, while materials rose 1%. The rate-sensitive utilities sector sank 2.2%, continuing its recent slide.

The S&P 500 has pulled back over 6% since late July, but remains up about 12% for 2023.

Data showed the US economy maintained a fairly solid pace of growth in the second quarter.

Separate readings showed initial jobless claims rose slightly last week and a higher-than-expected fall in contracts to buy existing homes in August.

Investors were looking ahead to Friday’s personal consumption expenditures price index for the latest view on inflation.

“This is the most important US datapoint this week, and there is a growing anticipation that it won’t run hot,” said Kristina Hooper, chief global market strategist at Invesco.

In Washington, the Democratic-led US Senate forged ahead with a bipartisan stopgap funding bill aimed at averting a fourth partial government shutdown in a decade. The House of Representatives prepared to vote on partisan Republican spending bills with no chance of becoming law.

In company news, Micron Technology (MU) shares dropped 4.4% after the chip company forecast a bigger loss than analysts had expected.

Accenture (ACN) shares slumped 4.3% after the IT services firm forecast full-year earnings and first-quarter revenue below Wall Street targets.

Advancing issues outnumbered decliners by a 2.2-to-1 ratio on the NYSE. There were 75 new highs and 337 new lows on the NYSE.

On the Nasdaq, advancing issues outnumbered decliners by a 1.5-to-1 ratio. The Nasdaq recorded 39 new highs and 303 new lows.

About 10.7 billion shares changed hands in US exchanges, compared with the 10.3 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf in New York, Ankika Biswas and Shashwat Chauhan; Editing by Sriraj Kalluvila, Maju Samuel, and David Gregorio)

Gold slides on hawkish Fed, inflation test looms

Sept 28 – Gold plumbed a six-month low on Thursday as bets for higher-for-longer US interest rates diminished non-yielding bullion’s appeal, while traders shifted focus to inflation readings this week for clues on the Federal Reserve’s strategy.

Spot gold fell 0.7% to USD 1,861.59 per ounce by 2:06 p.m. EDT (1806 GMT), its lowest level since March. US gold futures settled 0.7% lower at USD 1,878.60.

Higher rates soften gold’s appeal as an inflation hedge, and could push prices to USD 1,800, said Daniel Pavilonis, senior market strategist at RJO Futures.

Treasury yields climbed to a 16-year peak, increasing the opportunity cost of holding zero-yield gold.

But a retreat in the US dollar, which makes gold cheaper for overseas buyers, capped further declines in bullion.

Gold’s reaction to data showing the US economy maintained a fairly strong pace of growth in the second quarter, and a separate weekly report showing a slightly lower-than-expected rise in initial jobless claims was fairly muted.

“Gold has completely fallen out of fashion. In the absence of more promising US data on inflation and the labor market, it may remain a tough environment for gold,” Craig Erlam, senior markets analyst at OANDA, wrote in a note.

Minneapolis Fed President Neel Kashkari said on Wednesday it is not clear yet whether the central bank is finished raising rates.

Investors’ focus now turns to data on personal consumption expenditures (PCE), the Fed’s preferred inflation gauge, due on Friday.

“If the PCE data comes really hot, it is going to be bad for the metals as it would mean interest rates need to be raised more,” Pavilonis added.

Spot silver fell 0.2% to USD 22.48 per ounce.

“The next downside price objective for the (silver) bears is closing prices below solid support at USD 22.00,” Jim Wyckoff, senior analyst at Kitco Metals, wrote in a note.

Platinum added 2.1% to USD 905.89 and palladium gained 3.7% to USD 1,267.15.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Devika Syamnath and Shilpi Majumdar)

Oil eases 1%, reversing rally, on profit taking, interest rate worries

NEW YORK, Sept 28 – Oil futures eased about 1% on Thursday, as traders took profits after prices soared to 10-month highs, and some worried that high interest rates may weigh on oil demand.

On its second to last day as the front-month, Brent futures for November delivery fell USD 1.17 or 1.2%, to settle at USD 95.38 a barrel. Brent November futures expire on Friday.

Brent December futures fell about 1.3% to settle at USD 93.10 per barrel.

US West Texas Intermediate crude (WTI) fell USD 1.97, or 2.1%, to settle at USD 91.71 per barrel.

Earlier, scarce supply and inventory supplies lifted the Brent front-month hit USD 97.69, its highest since November 2022. WTI rose to its highest since August 2022 at USD 95.03.

“Oil was ripe for a pullback. After coming a few dollars short of the USD 100 level, energy traders are quickly locking in profits,” Edward Moya, senior market analyst at data and analytics firm OANDA, said in a note.

Some traders worried high oil prices would stoke inflation, encouraging the US Federal Reserve and other central banks to persist with high interest rates.

“Crude is now serving as a catalyst for bearishness … as investors view high oil prices as reason for the Fed to persist with high rates for longer than originally planned in order to curb inflation,” analysts at energy consulting firm Gelber & Associates said in a note.

The US economy maintained a fairly strong 2.1% pace of growth in the second quarter and appears to have gathered momentum this quarter with a resilient labor market driving strong wage gains.

Growth estimates for the July-September quarter are currently as high as a 4.9% rate. But the fourth quarter could see a sharp slowdown if there is a US government shutdown on Oct. 1.

Fed officials are focused on the super core price measure after hiking the benchmark overnight interest rate by 525 basis points since March 2022 to the 5.25%-5.50% range.

FALLING US INVENTORIES

The premium of the WTI front-month over the second month held near a 14-month high for a second day. The market structure called backwardation occurs when spot prices are higher than future prices, giving energy firms little incentive to pay to store fuel for future months.

On Wednesday, WTI backwardation soared 48% to USD 2.38 a barrel, the highest since the end of July 2022, after government data showed stocks at the Cushing, Oklahoma, storage hub and delivery point for US crude futures, extended their drawdown, also to the lowest since July 2022.

“Cushing storage has shrunk to a historically low level, leading to a further increase in backwardation in the WTI curve,” analysts at Barclays, a bank, said in a note.

“In the absence of a demand shock, it might take a sustained further narrowing of the WTI-Brent spread for a material turnaround in storage level at Cushing to occur,” Barclays said.

Cushing’s levels have slid to near-historic lows due to strong refining and export demand, prompting concerns about quality of the remaining oil.

Meanwhile, tight prompt US supplies have also narrowed the premium of Brent over WTI held near a five-month low after falling to USD 2.87 per barrel on Wednesday, its lowest since late April.

Falling US crude inventories follow combined cuts of 1.3 million barrels per day to the end of the year by Saudi Arabia and Russia, part of OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies.

Russia said its ban on fuel exports will remain in place until the domestic market stabilizes and noted it has not discussed with OPEC+ a possible supply increase to compensate for that fuel export ban.

(Reporting by Scott DiSavino in New York, Natalie Grover in London, Florence Tan in Singapore, and Mohi Narayan in New Delhi; Editing by Marguerita Choy and David Gregorio)

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