Oil eases ahead of China, US data, but OPEC+ cuts limits slide

SINGAPORE (Reuters) – Oil prices dipped in Asian trade on Monday as investors tread cautiously ahead of fresh economic data from top consumers the United States and China this week, though expected crude supply cuts from Saudi Arabia and Russia limited losses.

Brent crude futures fell 55 cents, or 0.7%, to USD 77.92 a barrel by 0630 GMT, and US West Texas Intermediate crude was at USD 73.31 a barrel, also down 55 cents, or 0.7%.

“Oil traders may be cautious ahead of the US CPI and China’s slew of economic data later this week,” CMC Markets analyst Tina Teng said.

However, crude prices could rebound after OPEC+ announced plans to further reduce supply, she added.

China’s factory-gate prices fell at the fastest pace in over seven years in June, government data showed on Monday, as the momentum of economic recovery in the world’s second-largest economy has slowed.

The oil benchmarks gained more than 4% last week to touch their highest marks since May, rising for a second straight week after the world’s biggest oil exporters Saudi Arabia and Russia pledged to deepen supply cuts in August.

“The presence of economic slowdowns in China adds to the prevailing uncertainty in the oil market,” said Mukesh Sahdev, head of downstream and oil trading at Rystad Energy.

“The market’s instability is further fueled by the ongoing tug-of-war between fears of demand control by Western economies and the supply-control strategies employed by OPEC, which impacts the oil market’s delicate balance.”

Saudi Arabia will extend its 1 million barrels per day (bpd) output cut into August and Russia will cut crude exports by 500,000 bpd. Instead of cutting output, Russia will be using the crude to produce more fuel to meet domestic demand, a government source told Reuters on Friday.

Saudi Arabia’s cuts are easing its oil glut as floating storage off the Egyptian Red Sea port of Ain Sukhna is down by almost half to 10.5 million barrels from mid-June, according to data from oil analytics firm Vortexa as of July 7.

Non-OPEC+ supply has been keeping up with global demand, JPMorgan analysts said in a note, adding that OPEC+ needs to deepen its cuts by another 700,000 bpd in the second half of the year on top of announced reductions and extend them into 2024.

In the US, Friday’s data showed still-strong wage growth and a slight drop in the unemployment rate this week will likely keep the Federal Reserve on track to raise interest rates at the upcoming July meeting.

Money managers raised their net long US crude futures and options positions in the week to July 3, the US Commodity Futures Trading Commission (CFTC) said on Friday.

A sustained break for WTI prices above USD 75 would likely see the benchmark testing the top of its eight-month USD 64 to USD 84 range, IG analyst Tony Sycamore said.

US oil rigs fell by five to 540 last week, the lowest since April 2022, according to a Baker Hughes report on Friday.

(Reporting by Florence Tan and Emily Chow; Editing by Tom Hogue, Stephen Coates and Jamie Freed)

Oil dips 1% on US interest rate fears but OPEC+ cuts limit fall

HOUSTON, July 10 (Reuters) – Oil prices eased 1% on Monday on the increasing likelihood of more US interest rate hikes, but crude supply cuts from top oil exporters Saudi Arabia and Russia limited the losses.

Brent crude futures settled down 78 cents, or 1%, at USD 77.69 a barrel after touching their highest level in more than two months earlier in the session.

US West Texas Intermediate crude fell 87 cents, or 1.2%, at USD 72.99.

“Traders are very nervous about higher interest rates, which could kill demand very quickly,” said Dennis Kissler, senior vice president of trading at BOK Financial, adding that some investors were also engaging in profit-taking after last week’s gains.

Both benchmarks rose more than 4.5% last week after Saudi Arabia and Russia announced fresh output cuts bringing total reductions by the OPEC+ group to around 5 million barrels per day (bpd), or about 5% of global oil demand.

San Francisco Federal Reserve President Mary Daly on Monday repeated that she believes two more rate hikes this year will likely be needed to bring down inflation that is still too high, while Cleveland Fed President Loretta Mester also signaled more rate rises.

Higher interest rates could slow economic growth and reduce oil demand.

The US Labor Department reported last Friday the smallest monthly job gain in 2-1/2 years along with strong wage growth. The data strengthened the likelihood that the Fed would raise interest rates at its meeting later this month.

Meanwhile, China’s factory gate prices fell at the fastest pace in more than seven years in June, according to government data, indicating a slowdown in the recovery in the world’s second-largest economy.

However, oil demand from China and developing countries, combined with OPEC+ supply cuts, is likely to keep the market tight in the second half of the year despite a sluggish global economy, the head of the International Energy Agency (IEA) said.

Markets are also focusing on the release of US Consumer Price Index data, a key inflation report, and a slew of economic reports from China later this week to ascertain demand.

(Reporting by Arathy Somasekhar; Additional reporting by Noah Browning, Florence Tan, and Emily Chow; Editing by Alexander Smith, David Goodman, Peter Graff, Will Dunham, and Paul Simao)

Wall Street ends choppy day lower after jobs data

July 7 (Reuters) – Wall Street’s main indexes ended lower on Friday in a seesaw session, as investors digested a US jobs report that showed weaker-than-expected growth and awaited more economic data and corporate earnings in the weeks ahead.

The US added the fewest jobs in 2-1/2 years in June, although persistently strong wage growth pointed to still-tight labor market conditions, US government data showed.

The benchmark S&P 500 was solidly higher for most of the afternoon, but stocks sold off toward the end of the session.

“Investors are more cautious going into a very important week with the beginning of earnings season and a very important inflation reading mid-week,” said Quincy Krosby, chief global strategist at LPL Financial.

The report showing nonfarm payrolls increased by 209,000 jobs last month followed a sell-off on Thursday sparked by a surge in June private payrolls that stoked fears the Federal Reserve would move aggressively to hike interest rates to tame inflation.

“The jobs report today I think is consistent with what the Fed would like to see,” said Josh Jamner, investment strategy analyst at ClearBridge Investments.

“That’s not to say, mission accomplished or the job is done. But continued cooling in the jobs market ultimately will make their lives easier.”

On Friday, the Dow Jones Industrial Average fell 187.38 points, or 0.55%, to 33,734.88, the S&P 500 lost 12.64 points, or 0.29%, to 4,398.95 and the Nasdaq Composite dropped 18.33 points, or 0.13%, to 13,660.72.

Among S&P 500 sectors, defensive groups fell the most, with consumer staples down 1.3%. Energy gained 2.1% while materials rose 0.9%.

The small-cap Russell 2000 ended up 1.2% on the day.

Major indexes ended with weekly losses after a strong first half of the year. For the week, the S&P 500 fell about 1.2%, the Dow slid roughly 2% and the Nasdaq dropped 0.9%.

The Fed is still widely expected to raise rates at its meeting later this month after pausing in June, as job growth remains above the pace in the decade before the pandemic.

Chicago Fed President Austan Goolsbee said he does not disagree with his fellow US central bankers that rates will need to rise a couple more times this year to beat back too-high inflation.

In company news, Levi Strauss & Co (LEVI) shares tumbled 7.7% after the denim clothing maker cut its annual profit forecast.

Shares of Rivian Automotive (RIVN) surged 14.2% after the electric vehicle maker reported better-than-expected quarterly deliveries.

US-listed shares of Alibaba (BABA) gained 8% after Chinese authorities said they will impose a USD 984 million fine on Ant Group, ending the affiliate fintech company’s years-long regulatory overhaul.

Advancing issues outnumbered decliners on the NYSE by a 2.49-to-1 ratio; on Nasdaq, a 2.00-to-1 ratio favored advancers.

The S&P 500 posted 11 new 52-week highs and five new lows; the Nasdaq Composite recorded 45 new highs and 63 new lows.

About 10.3 billion shares changed hands in US exchanges, compared with the 11.1 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf and Sinead Carew in New York, Bansari Mayur Kamdar and Johann M Cherian in Bengaluru; Additional reporting by Caroline Valetkevitch; Editing by Shinjini Ganguli and Richard Chang)

US yields lose steam after payrolls report

NEW YORK, July 7 (Reuters) – US Treasury yields moved lower on Friday, although longer-dated yields were higher on the session, after a reading on the labor market calmed concerns the Federal Reserve would aggressively raise interest rates.

Nonfarm payrolls increased by 209,000 jobs in June, the Labor Department said, shy of the 225,000 estimate of economists polled by Reuters. The unemployment rate slipped to 3.6% from 3.7% in May, indicating the labor market remains tight.

The yield on 10-year Treasury notes was down 1.7 basis points to 4.024% after earlier rising to 4.094%.

Yields jumped on Thursday after a flurry of data, including a much stronger-than-expected report on private payrolls in the ADP National Employment that fueled fears the Fed would need to be hawkish in taking steps to control stubbornly high inflation.

“The market kind of overreacted a little bit and we’ve kind of seen that reverse today when we kind of got the calm down, if you will, after the actual jobs report came out,” said Sam Millette, Fixed Income Strategist at Commonwealth Financial Network in Boston.

“We have seen a lot of news come in that the economy has been a little bit more resilient than expected so, it could have been sort of a last straw on the camel’s back situation with ADP yesterday, but today’s report sort of poured some water on that.”

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 10.4 basis points at 4.902% after hitting a 16-year high of 5.12% on Thursday.

Expectations for a 25-basis-point rate hike from the Fed at its July 25-26 meeting stand at 94.9%, up from 91.8% a day prior, according to CME’s FedWatch Tool. However, traders priced in a lower chance of any further increases later in the year.

The yield on the 30-year Treasury bond was up 1.8 basis points to 4.021%.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a negative 88.0 basis points.

The spread had its deepest inversion since 1981 earlier in the week.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.234%, after closing at 2.249% on Thursday, its highest close in just over two months.

The 10-year TIPS breakeven rate was last at 2.274%, indicating the market expects inflation to average 2.27% a year for the next decade.

(Reporting by Chuck Mikolajczak; editing by Barbara Lewis)

Gold rises as dollar, yields slip after US jobs data

July 7 (Reuters) – Gold prices rose on Friday and were on track for their first weekly gain in four as the dollar and bond yields fell after weaker US nonfarm payrolls numbers cast doubts over the trajectory of interest rate hikes beyond July yet again.

Spot gold was up 0.8% at USD 1,926.54 per ounce at 2:06 p.m. EDT (1806 GMT). Bullion was up 0.4% so far this week.

US gold futures settled 0.9% higher at USD 1,932.50.

Labor department data showed nonfarm payrolls came in well below expectations last month, but the unemployment rate retreated from a seven-month high amid fairly strong wage gains.

Benchmark 10-year US Treasury yields retreated from a more than four-month peak, while the dollar slipped 0.9% to a more than two-week low after the data, making gold attractive for other currency holders.

Traders stuck to bets the Fed would raise interest rates this month, but were becoming more skeptical of the chance for hikes beyond that.

“Gold remains stubbornly bid – trading higher even before the number. Today’s report has given bulls some relief, at least short term,” said Tai Wong, a New York-based independent metals trader.

“Gold should hold above USD 1,910 but the real test is USD 1,950-60 level where the 100 and 200-day moving averages are converging. The report wasn’t soft enough to warrant that kind of rally today.”

Gold is sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion.

But this comes a day after another set of data showed people filing new claims for unemployment benefits increased only moderately last week, while private payrolls surged in June, showing a strong labor market remained.

Elsewhere, silver gained 1.5% to USD 23.08 per ounce, platinum rose 1% to USD 910.77 and palladium was up 0.6% at USD 1,248.66.

(Reporting by Arpan Varghese and Deep Vakil; Additional reporting by Seher Dareen and Brijesh Patel in Bengaluru; Editing by Jason Neely, Mark Potter, David Evans and Shilpi Majumdar)

Global investors extend buying streak into equity funds on signs of easing inflation

July 7 (Reuters) – Global investors extended their streak as net buyers of equity funds into a second week, drawing support from indications of cooling inflation that may moderate central banks’ inclination to raise rates further.

According to Refinitiv Lipper data, global equity funds received a net USD 5.94 billion in inflows in the week ended July 5, after witnessing net buying of USD 3.36 billion in the previous week.

Last week’s personal consumption expenditures (PCE) report from the US Commerce Department showed cooler-than-expected inflation in May, while consumer spending abruptly decelerated, providing further evidence that the Fed’s barrage of rate hikes is having their desired effect.

Investors allocated USD 4.44 billion to US equity funds and USD 2.29 billion to Asian equity funds, while withdrawing USD 1.29 billion from European funds.

Among sector funds, inflows of USD 871 million were observed in industrials, USD 278 million in consumer staples, and USD 275 million in technology. However, financials experienced an outflow of USD 548 million.

Meanwhile, global bond funds received a net USD 10.4 billion in a second straight week of net buying.

Global government bond funds attracted inflows of USD 1.82 billion, while corporate bond funds recorded the largest weekly inflow in six weeks with USD 2.19 billion. Additionally, high-yield funds saw net purchases of USD 536 million, rebounding after two consecutive weeks of outflows.

Investors also pumped USD 53.1 billion into money market funds, marking their first weekly net buying in four weeks.

Data for commodity funds showed that investors withdrew USD 767 million from precious metal funds in a sixth straight week of net selling, but energy funds received about USD 35 million after two weekly outflows in a row.

Meanwhile, data for 24,130 emerging market funds showed equity funds had USD 504 million worth of outflow during the week, the first in four weeks, but bond funds received about USD 1.4 billion in inflows.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Maju Samuel)

Dollar holds steady ahead of jobs data; Japan wage data boosts yen

LONDON (Reuters) – The dollar held steady against most major currencies on Friday ahead of U.S. employment figures that could confirm rates are likely to stay higher for longer, but fell sharply against the yen, which got a lift from Japanese wage data.

The US nonfarm payrolls report is due later on. Expectations are for the US economy to have created 225,000 jobs in June.

The release follows data on Thursday that showed private payrolls surged last month, while the number of Americans filing new claims for unemployment benefits increased only moderately last week, suggesting the jobs market is on solid ground.

That pushed short-dated Treasury yields to their highest since 2007, reflecting the view that the Federal Reserve is likely to keep raising rates to tame inflation.

By Friday, the dollar index clung to its recent trading range, as most currencies held steady, bar the yen, which headed for its biggest one-day rise against the dollar in a month.

Data from the Japanese labour ministry showed regular wages posted their largest annual increase in May since early 1995, reinforcing the view among investors that the Bank of Japan (BOJ) will have to modify its ultra-loose monetary policy sooner rather than later.

“The stronger wage negotiations are starting to feed through, which is what the BOJ wants. They’ve said very clearly that if they see evidence of more sustained, stronger wage growth that could give them more confidence that they can beat their inflation target and then look obviously to moving away from loose policy settings,” MUFG strategist Lee Hardman said.

The dollar was last down 0.7% against the yen at 143.04, having fallen by nearly 0.9% this week, marking its biggest weekly fall against the Japanese currency in two months.

Adding a tailwind to the rally in the yen was some position-squaring among speculators, who have built up fairly sizeable bearish positions, MUFG’s Hardman said.

Yen bears, beware
Weekly data from the US regulator shows speculators hold a short position in the yen worth USD 9.793 billion, the largest since May 2022, having almost doubled in size in the last three months alone.

The yen has held just below the 145 level – which prompted the BOJ’s first intervention in decades last autumn – for about two weeks and authorities have made clear they are concerned about the weakness in the currency.

The euro fell 0.9% against the yen to 155.5 and was down 0.1% against the dollar at USD 1.0876

Sterling was flat at USD 1.2746, having touched a two-week high of USD 1.2780 on Thursday, as markets bet the Bank of England would raise interest rates to 6.5% early next year, up from a previous expected peak of 6.25%.

The dollar drew extra support from a rise in two-year Treasury yields, which are the most sensitive to changes in interest rate expectations. The two-year Treasury yield rose above 5% on Friday, nearing the previous day’s 16-year high of 5.12%.

“The bond market, at least, is still concerned about the impact of restrictive monetary policy in the U.S. on the economy, and in fact, we still expect the U.S. economy to enter a recession later this year,” Carol Kong, a currency strategist at Commonwealth Bank of Australia, said.

The Australian dollar rose 0.2% to USD 0.6638, but was still heading for a third straight weekly loss, having been battered by weak Chinese economic data and broad risk aversion in the previous sessions, while the offshore yuan rose, leaving the dollar 0.2% lower on the day at 7.2434.

(Additional reporting by Rae Wee in Singapore; Editing by Sam Holmes and Mark Potter)

Yellen says US wants healthy competition with China, not ‘winner-take-all’ approach

BEIJING (Reuters) – The United States is seeking a healthy competition with China based on fair rules that benefit both countries, not a “winner-take-all” approach, U.S. Treasury Secretary Janet Yellen told Chinese Premier Li Qiang in a meeting in Beijing on Friday.

Yellen, in prepared remarks, told Li she hoped her visit would spur more regular channels of communication between the world’s two largest economies, adding that both countries had a duty to “show leadership” on global challenges such as climate change.

She said Washington would “in certain circumstances, need to pursue targeted actions to protect its national security,” but disagreements over such moves should not jeopardize the broader relationship.

“We may disagree in these instances. However, we should not allow any disagreement to lead to misunderstandings that unnecessarily worsen our bilateral economic and financial relationship,” she said.

Yellen cited Li’s remarks in January at the World Economic Forum in Davos, Switzerland, where he said “differences should not be a cause for estrangement, but a driver for more communication and exchange,” and underscored her hope to expand communication with China.

“We seek healthy economic competition that is not winner-take-all but that, with a fair set of rules, can benefit both countries over time,” she said.

(Reporting by Andrea Shalal; Editing by Michael Perry and Kim Coghill)

Oil prices set for second straight weekly gain after U.S. data

LONDON (Reuters) – Oil prices rose on Friday and were on track for their second straight weekly gain, as resilient demand resulted in a larger-than-expected fall in US oil stockpiles, offsetting fears of higher US interest rates.

Brent crude futures were up 31 cents, or 0.4%, at USD 76.83 a barrel at 0819 GMT, while US West Texas Intermediate crude gained 31 cents, or 0.4%, to USD 72.11 a barrel.

Both benchmarks were set to gain about 2% on the week.

Brent is still trading around USD 10 a barrel below April peaks, and has remained between around USD 71 and USD 79 a barrel since early May in the face of interest rate hikes and weak Chinese economic data.

“The crude demand outlook is starting to look better as we enter peak summer travel in the US, and as the Saudis were able to raise prices to Europe and Asia,” said Edward Moya, an analyst at OANDA.

US crude stocks fell more than expected on strong refining demand, while gasoline inventories posted a large draw after an increase in driving last week, the Energy Information Administration said on Thursday.

However, oil price gains were capped by strengthening expectations that the US Federal Reserve is likely to raise interest rates at its July 25-26 meeting, which could weigh on growth and thus oil demand.

The number of Americans filing new claims for unemployment benefits increased moderately last week, while private payrolls surged in June, data showed on Thursday.

More US employment data is due at 1230 GMT.

Top oil exporters Saudi Arabia and Russia this week have also announced fresh output cuts for August. The total cuts by OPEC and its allies now stand at around five million barrels per day (bpd), equating to 5% of global oil output.

OPEC will likely maintain an upbeat view on oil demand growth for next year, sources close to OPEC said.

Investors will look for cues on rate paths from U.S. and Chinese inflation data next week.

(Additional reporting by Sudarshan Varadhan in Singapore; editing by Jason Neely)

Oil prices up 3% to 9-week high on supply concerns

NEW YORK, July 7 (Reuters) – Oil prices climbed about 3% to a nine-week high on Friday as supply concerns and technical buying outweighed fears that further interest rate hikes could slow economic growth and reduce demand for oil.

Brent futures rose USD 1.95, or 2.6%, to settle at USD 78.47 a barrel, while US West Texas Intermediate crude (WTI) rose USD 2.06, or 2.9%, to settle at USD 73.86.

That was the highest close for Brent since May 1 and WTI since May 24. Both benchmarks ended up about 5% for the week.

“We’re knocking on the door of a major breakout to the upside. I think you’re seeing some short covering here today … because a lot of people have been betting on the short side, said Phil Flynn, an analyst at Price Futures Group.

After two months of price consolidation between roughly USD 73-77, Brent moved into technically overbought territory for the first time since mid-April.

“The rally over the last week or so … has been quite strong and backed by momentum – as well as fresh cuts from Saudi Arabia and Russia,” said Craig Erlam, a senior market analyst at OANDA.

Top oil exporters Saudi Arabia and Russia announced fresh output cuts this week bringing total reductions by OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, to around 5 million barrels per day (bpd), or about 5% of global oil demand.

“OPEC+ production cuts are expected to tighten the market, driving supply deficits in the second half of 2023, supporting higher oil prices,” analysts at US financial services company Morningstar said in a note.

OPEC will likely maintain an upbeat view on oil demand growth for next year, sources close to OPEC said.

Russia’s latest pledge to reduce oil exports will not require a similar cut in production, a government source told Reuters.

Oil analytics firm Vortexa said there are currently 10.5 million barrels of Saudi crude in floating storage off the Egyptian Red Sea port of Ain Sukhna, down by almost half from mid-June.

In the US, energy firms this week added oil and natural gas rigs for the first time in 10 weeks, due to the biggest weekly increase in gas rigs since October 2016, according to energy services firm Baker Hughes Co (BKR).

In Norway, Equinor ASA (EQNR) paused production at its Oseberg East oil field in the North Sea due to staffing shortages.

In Mexico, six people were injured after a fire broke out on Friday morning at an offshore platform run by state oil company Pemex in the Gulf of Mexico.

Also supporting crude prices, the US dollar, fell to a two-week low after data showed US job growth was lower than expected but still strong enough to likely lead the US Federal Reserve (Fed) to resume raising interest rates later this month as it has signaled.

A weaker dollar makes crude cheaper for holders of other currencies, which could boost oil demand.

According to the CME Group Inc’s (CME) FedWatch Tool, the probability that the Fed increases interest rates by 25 basis points at its July 25-26 meeting is now around 95%, up from 92% just prior to the data coming out.

Higher borrowing costs could slow economic growth and reduce oil demand.

In Europe, decades-high inflation and the impact of war in Ukraine have forced companies to impose hiring freezes and lay-offs.

In Germany, a swift economic recovery appeared less likely as data showed a surprise fall in industrial production.

(Additional reporting by Shadia Nasralla in London and Sudarshan Varadhan in Singapore; editing by David Gregorio and Marguerita Choy)

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