Oil rises 1% as OPEC+ focus on supply cuts outweighs recession concerns

NEW YORK, Nov 22 (Reuters) – Oil prices rose about 1% on Tuesday after top exporter Saudi Arabia said OPEC+ was sticking with output cuts and could take further steps to balance the market.

However, prices pared gains late in the session after Bloomberg reported that the European Union watered down its latest sanctions proposal for a price cap on Russia’s oil exports by delaying its full implementation and softening key shipping provisions.

The bloc proposed adding a 45-day transition to the introduction of the cap, according to Bloomberg.

On Dec. 5, a European Union ban on Russian crude imports is set to start, as is a G7 plan that will allow shipping services providers to help to export Russian oil, but only at enforced low prices.

“The price cap is turning out to be an enabling device for western countries to keep Russian crude on the market,” said John Kilduff, partner at Again Capital LLC in New York. “The big crux of this market has been whether or not we will lose meaningful amounts of crude and refined products from Russia and that still has not happened.”

Brent crude rose 91 cents, or 1%, to settle at USD 88.36. US West Texas Intermediate (WTI) crude was up 91 cents, or 1.1%, at USD 80.95.

Supporting prices throughout the session, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman on Monday was quoted by state news agency SPA as denying a Wall Street Journal report that sent prices plunging by more than 5%, saying the Organization of the Petroleum Exporting Countries was considering boosting output.

The United Arab Emirates, another big OPEC producer, denied it was holding talks on changing the latest OPEC+ agreement, while Kuwait said there were no such talks. Algeria said an “improbable” revision of the OPEC+ agreement was not discussed.

OPEC, Russia and other allies, known as OPEC+, meet on Dec. 4.

Concerns over oil demand in the face of the US Federal Reserve’s interest rate hikes and China’s strict COVID lockdown policies also tempered prices.

Beijing shut parks, shopping malls and museums on Tuesday and more Chinese cities resumed mass COVID testing. The Chinese capital on Monday warned that it is facing its most severe challenge of the pandemic and tightened rules for entering the city.

Analysts now are cutting forecasts for China’s year-end oil demand.

In focus later will be the latest weekly snapshots of supply in the United States, which are expected to show crude inventories fell by 2.2 million barrels. The American Petroleum Institute’s report is due at 2130 GMT.

(Reporting by Stephanie Kelly; additional reporting by Alex Lawler, Laura Sanicola and Isabel Kua; Editing by Marguerita Choy, Jane Merriman, David Gregorio and Cynthia Osterman)

Philippines central bank plans December hike to keep pace with Fed, says governor

MANILA, Nov 22 (Reuters) – The Philippines’ central bank plans to adjust its policy rates in December to keep up with an expected 50 basis points rate hike by the US Federal Reserve, its governor said on Tuesday.

Keeping in step with the Fed will prevent volatility and pressure on the peso, Bangko Sentral ng Pilipinas Governor Felipe Medalla told reporters at the sidelines of a fintech summit.

(Reporting by Neil Jerome Morales; Editing by Ed Davies)

Oil rises after Saudis deny report of OPEC+ supply increase

Nov 22 (Reuters) – Oil prices rose slightly in early Asian trade on Tuesday, a day after Saudi Arabia denied a media report that it was discussing an increase in oil supply with OPEC and its allies.

Brent crude futures rose 17 cents, or 0.2%, to USD87.62 by 0007 GMT. US West Texas Intermediate (WTI) crude futures for January began trading Tuesday, rising 7 cents, or 0.1%, to USD80.11 a barrel.

Both benchmarks had plunged by more than USD5 a barrel in the previous session after the Wall Street Journal (WSJ) reported an increase of up to 500,000 barrels per day will be considered at the OPEC+ meeting on Dec. 4.

Prices rebounded quickly in full after Saudi Arabian energy minister Prince Abdulaziz bin Salman said the kingdom is sticking with output cuts and not discussing a potential oil output increase with other OPEC oil producers, state news agency SPA reported, denying the WSJ report.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) recently cut production targets and the energy minister of de facto leader Saudi Arabia was quoted this month as saying the group will remain cautious on oil production because of uncertainty about the global economy.

The front-month Brent crude futures spread narrowed sharply last week, while WTI flipped into contango, reflecting easing supply concerns.

Rising COVID-19 cases in China capped market gains as the country battles outbreaks nationwide that are nearing April peaks.

(Reporting by Laura Sanicola; Editing by Jamie Freed)

Wall Street slips as concerns rise of stricter China COVID curbs

Nov 21 (Reuters) – Wall Street’s main indexes ended Monday roughly down on fears that China could resume stricter measures to fight COVID-19 after it said it faces its most severe test of the pandemic.

Beijing said on Monday it would shut businesses and schools in hard-hit districts and tighten rules for entering the city, as infections ticked higher.

“There is this fear that China might reinstitute some of the COVID restrictions that they’ve just purportedly started to lift,” said Carol Schleif, deputy chief investment officer at BMO Family Office.

US casino operators with businesses in China including Wynn Resorts Ltd, Las Vegas Sands Corp, MGM Resorts International and Melco Resorts & Entertainment Ltd all fell at least 2%.

The Dow Jones Industrial Average fell 45.41 points, or 0.13%, to 33,700.28, the S&P 500 lost 15.4 points, or 0.39%, to 3,949.94 and the Nasdaq Composite dropped 121.55 points, or 1.09%, to 11,024.51.

Trading volume was low on Monday, and likely to lessen towards the Thanksgiving holiday on Thursday, leaving markets more prone to volatility.

Volume on US exchanges was 9.43 billion shares, compared with the 11.88 billion average for the full session over the last 20 trading days.

“If you want to blame a little bit of profit taking on some concerns on spikes in COVID cases, that’s fine,” said Jack Janasiewicz, lead portfolio strategist and portfolio manager at Natixis Investment Managers Solutions. “It gets really tricky because of volume.”

Stocks trimmed losses in early afternoon after the San Francisco Federal Reserve President Mary Daly commented that officials need to be careful to avoid a “painful downturn.”

Cleveland Fed President Loretta Mester echoed Daly, saying she supports a smaller rate hike in December.

The S&P 500 energy sector index fell almost 3% on Monday to its lowest level in four weeks as oil prices tumbled more than 5% after a report that Saudi Arabia and other OPEC oil producers were discussing an output increase. The index, however, pared losses after Saudi Arabia denied talks about it.

Energy was the only major S&P 500 sector eying gains for the year, surging around 63%.

Walt Disney Co jumped 6.30% after Bob Iger’s return as chief executive to the entertainment giant.

The S&P 500 extended its fall from the previous week when multiple Federal Reserve officials reiterated the central bank’s pledge to raise rates until inflation was in check, as investors now await the release of minutes from the Fed’s November meeting on Wednesday.

Traders are widely betting on a 50-basis point hike in the December meeting, with a peak for rates expected in June.

Among other stocks, Tesla Inc plummeted 6.84% after the electric-car maker said it will recall vehicles in the United States over an issue that may cause tail lights to intermittently fail to illuminate.

Gay dating app Grindr tumbled 46.00% amid a broader market weakness, after skyrocketing in its debut on the New York Stock Exchange in the previous session.

Declining issues outnumbered advancing ones on the NYSE by a 1.27-to-1 ratio; on Nasdaq, a 1.60-to-1 ratio favored decliners.

The S&P 500 posted 9 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 96 new highs and 220 new lows.

(Reporting by Carolina Mandl, in New York, Ankika Biswas, Shubham Batra and Shreyashi Sanyal in Bengaluru; Editing by Arun Koyyur, Shounak Dasgupta and Grant McCool)

Gold dips 1% as dollar bounces higher; Fed policy minutes awaited

Nov 21 (Reuters) – Gold prices slipped to their lowest in over a week on Monday, falling over 1% as the dollar extended gains, while the market’s attention turned to the US Federal Reserve’s November meeting minutes due this holiday-shortened week.

Spot gold fell 0.7% to USD 1,738.40 per ounce by 1:36 p.m. ET (1836 GMT), after earlier hitting its lowest level since Nov. 10 at USD 1,731.40. US gold futures settled down 0.8% to USD 1,739.6.

“Overall, the general macro environment still is higher interest rates, which is a negative for the precious metals as central banks continue to look to increase interest rates,” said Chris Gaffney, president of world markets at TIAA Bank.

The dollar rose 0.9%, weighing on the yellow metal by making it expensive for overseas buyers.

The Fed’s November meeting minutes are due on Wednesday, with most traders betting on a 50-basis point hike in the December meeting, and some seeing 24.2% chance of a 75-bps hike following recent comments by Fed officials.

Higher interest rates sour the appeal of gold, traditionally a hedge against inflation, as they raise the opportunity cost of holding bullion which yields no interest.

“We’re probably going to venture into the low 1700s…those are support levels that we’re likely going to move down to,” said Bart Melek, head of commodity markets strategy at TD Securities.

Beijing’s most populous district urged residents to stay at home on Monday as the city’s COVID-19 case numbers rose.

“China in particular is an active market for precious metals and if they continue to lock down…[it’s] less money to spend in China for investment purposes,” Gaffney said.

Spot silver fell 0.3% to USD 20.85 per ounce and platinum rose 0.8% to USD 985.13.

Auto-catalyst metal palladium fell 4% to USD 1,860.26, earlier dropping to a week-low of USD 1,823.

Negative economic news out of China puts pressure on palladium since its used in catalytic converters for vehicles, Melek highlighted.

(Reporting by Seher Dareen in Bengaluru, editing by Deepa Babington and Krishna Chandra Eluri)

Dollar rebounds as China COVID worries spook markets

NEW YORK, Nov 21 (Reuters) – The US dollar advanced against most major currencies on Monday, recouping recent losses, as fresh COVID-19 curbs in China fueled worries over the global economic outlook and made traders shun riskier currencies.

China’s capital warned on Monday that it was facing its most severe test of the COVID-19 pandemic, shutting businesses and schools in hard-hit districts and tightening rules for entering the city as infections ticked higher in Beijing and nationally.

The new cases have cast doubt on hopes that the government could soon ease its tough restrictions. That has boosted the dollar, which is seen as a safe haven in times of stress.

The dollar rose 0.9% against the Japanese yen JPY=EBS to 141.665 yen, on pace for its largest one-day gain since Oct. 14. The euro fell 0.74% against the greenback to USD 1.0248.

“All eyes are on China today and their COVID Zero policy. Traders are worried that China could expand their restrictions which could slowdown growth and threaten higher inflation,” said John Doyle, vice president of dealing and trading at Monex USA.

“The worry is seen across asset classes,” Doyle said.

China’s onshore yuan opened at 7.1451 per dollar and weakened to a low of 7.1708, the softest level since Nov. 11.

With investors taking a dim view of riskier currencies, the Australian dollar, viewed as a liquid proxy for risk appetite, sank 0.8% to a more than 1-week low of USD 0.6617.

Analysts pegged some of the dollar’s strength to a rebound following the sharp selloff over the last few weeks that saw the Dollar Index slip as much as 4.7% in November.

“I look at the dollar’s rally this morning as a reflection of recent weakness, rather than as a sign that anything is changing,” said Kit Juckes, chief FX strategist at Societe Generale.

Cooler-than-expected US inflation data had spurred investors’ hopes that the Federal Reserve’s dollar-boosting interest rate hikes may be set to be moderated. That had prompted traders to take profits on existing long dollar positions.

Speculators’ bets on the US dollar swung to a net short for the first time in more than a year, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.

The dollar index remains up 12% for the year.

Investors will be parsing minutes from the Fed’s November meeting, due to be released on Wednesday, for any hints about the outlook for interest rates.

On Monday, the stronger dollar weighed on Sterling with the British currency slipping 0.6% to USD 1.18125 against a strengthening US dollar and as investors braced for further weakness for the pound ahead of public finances data due on Tuesday and flash PMI numbers on Wednesday.

Elsewhere, cryptocurrencies remained under pressure, with bitcoin BTC=BTSP down about 1% to USD 16,130 as the crypto industry continues to reel from the high profile collapse of crypto exchange FTX. FTX owes its 50 biggest creditors nearly USD 3.1 billion, according to bankruptcy filings.

(Reporting by Saqib Iqbal Ahmed, Editing by William Maclean)

After rough year, US corporate credit entices investors

Nov 21 (Reuters) – Investors are increasingly eyeing US corporate credit offering attractive valuations and yields after steep declines in 2022, fund managers told the Reuters Global Markets Forum (GMF).

“We are at the beginning of a rotation as investors come back into credit. With the rapid move in front-end rates, the curve has repriced credit to attractive levels,” said Salim Ramji, global head of exchange-traded funds (ETF) and index investments at BlackRock.

iShares iBoxx Investment Grade Corporate Bond ETF and iShares High Yield Corporate Bond ETF are on track for quarterly gains of more than 3% in the fourth quarter after falling 20% and 14% respectively this year.

“We don’t know exactly when the peak in inflation will be but I think that’s not a million miles away,” said Jim Leaviss, chief investment officer for public fixed income at M&G Investments.

“If we’re at this turning point then the entry level you get by buying investment-grade credit in the (United) States looks really attractive.”

The jump in bond yields, which move inversely to prices, has also made corporate credit more attractive to investors looking for income after years of low interest rates, Ramji said.

The yield spread on the ICE BofA US Corporate Index – which indicates the premium investors demand to hold corporate bonds over safe-haven US Treasuries – has fallen to 145 basis points from October, when it spiked to 171 bps, the highest in over two years.

Both Leaviss and Ramji expect the Fed to be near the end of its hiking cycle, with Leaviss noting that corporate bond issuers appeared relatively well-placed to withstand higher borrowing costs as default rates were still low.

“Where we’ve been short risk across bond portfolios, we’ve added risk back in,” Leaviss said, adding “there’s good things happening wherever you look in bond markets at the moment.”

(Reporting by Lisa Pauline Mattackal and Nishara Pathikkal in Bengaluru and Divya Chowdhury in Mumbai; Editing by Andrea Ricci)

FTX collapse shows need to regulate crypto, says Bank of England

LONDON, Nov 21 (Reuters) – The implosion of cryptocurrency exchange FTX shows the need to bring the crypto world within the regulatory framework, Bank of England Deputy Governor Jon Cunliffe said on Monday.

FTX, which has filed for US bankruptcy court protection, has said it owes its 50 biggest creditors nearly USD 3.1 billion.

“While the crypto world, as was demonstrated during last year’s crypto winter and last week’s FTX implosion is not at present large enough or interconnected enough with mainstream finance to threaten the stability of the financial system, its links with mainstream finance have been developing rapidly,” Cunliffe said.

He added that FTX’s woes highlighted the need for regulators to put in place tighter controls as quickly as possible. It did not have a license to operate in Britain, yet had caused waves.

“We should not wait until it is large and connected to develop the regulatory frameworks necessary to prevent a crypto shock that could have a much greater destabilizing impact,” Cunliffe told a Warwick Business School event.

Currently, crypto firms in Britain only have to show they can put in place sufficient controls to stop money-laundering, though many firms have had license applications rejected by the UK’s Financial Conduct Authority (FCA).

Britain is approving a new financial services and markets law that will introduce regulation for stablecoins, a cryptoasset backed by an asset such as a currency and marketing of cryptoassets generally.

Cunliffe said that the BoE will set out a public consultation to flesh out rules for stablecoins in more detail and on how coinholders’ claims on the issuer and wallets should be structured to deliver redemption at par in line with commercial bank money.

“The FTX example underlines how important these aspects are,” Cunliffe said.

The finance ministry will also consult soon on extending the investor protection, market integrity and other regulatory frameworks that cover the promotion and trading of financial products to activities and entities involving crypto assets, he added.

Jane Moore, head of payments and digital assets at the FCA, said that crypto will, one way or another, shape the future of financial services and therefore consumer protection must be considered.

Separately, the BoE and finance ministry are looking at the potential for a digital pound.

Cunliffe said his initial view had been that FTX’s failure would have no implication on the potential timeframe for a digital currency. However, on reflection, he said that the interconnected nature of the digital world was relevant.

“Our aim is to ensure that innovation can take place but within a framework in which risks are properly managed,” Cunliffe said. “The events of last week provide a compelling demonstration of why that matters.”

(Reporting by Marc Jones and Huw Jones, Editing by Louise Heavens)

Dollar rises as China COVID worries spur safe-haven buying

SINGAPORE/LONDON, Nov 21 (Reuters) – The US dollar was firmly higher against major currencies on Monday, as rising COVID-19 cases in China led to new restrictions there and weighed on global investor sentiment.

China is battling numerous COVID flare ups. Two deaths were reported in Beijing on Sunday, and the city’s most populous district urged residents to stay at home on Monday.

The new cases have cast doubt on hopes that the government could soon ease its tough restrictions. That has boosted the dollar, which is seen as a safe haven in times of global economic stress.

The dollar was up 0.5% against Japan’s yen at 141.07, its highest since Nov. 11. Meanwhile the euro was 0.62% lower against the greenback at USD 1.026.

“The outlook for China’s zero-COVID market will remain a key source of volatility,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

“If we do see another set of step up in restrictions, it indicates to me that the Chinese officials are still wary of any eventual reopening.”

The greenback was also rebounding somewhat after a sharp fall in recent weeks, analysts at Commerzbank said in a research note.

The dollar index, which tracks the currency against major peers, has slid more than 6% from a 20-year high in October. A fall in the US inflation rate last month has driven bets that the US Federal Reserve will slow down its interest rate hikes.

However, the index remained around 12% higher for the year on Monday. The Fed’s aggressive raising of interest rates has pushed up bond yields in 2022, sucking money back towards dollar-denominated fixed income assets.

China’s onshore yuan opened at 7.1451 per dollar and weakened to a low of 7.1708, the softest level since Nov. 11.

The People’s Daily newspaper, a mouthpiece of the Chinese Communist Party, on Monday published an article reiterating the need to catch infections early but avoid taking a “one-size-fits-all” approach.

Investors will be keenly interested in minutes from the Fed’s November meeting, due to be released on Wednesday, for any hints about the outlook for interest rates.

“(The) Fed has been pushing back against the dovish narrative the market has had after the October inflation data,” said Moh Siong Sim, currency strategist at Bank of Singapore.

Elsewhere, cryptocurrencies remained under pressure, with bitcoin down 1.6% to USD 16,003. FTX owes its 50 biggest creditors nearly USD 3.1 billion, according to bankruptcy filings, as the collapsed crypto exchange undertakes a strategic review of its global assets.

Sterling was last trading at USD 1.182, down 0.51% on the day.

The Australian dollar fell 0.49% versus the greenback to USD 0.664, while the kiwi was down 0.44% at USD 0.613.

(Reporting by Ankur Banerjee in Singapore and Harry Robertson in London; Editing by Shri Navaratnam and Bradley Perrett)

Oil prices ease to trade near 2-month lows on China demand fears, dollar strength

SINGAPORE, Nov 21 (Reuters) – Oil prices dropped to trade near two-month lows on Monday, having earlier slid by around USD 1 a barrel, as supply fears receded while concerns over fuel demand from China and US dollar strength weighed on prices.

Brent crude futures for January had slipped 74 cents, or 0.8%, to USD 86.88 a barrel by 0715 GMT.

US West Texas Intermediate (WTI) crude futures for December were at USD 79.40 a barrel, down 68 cents or 0.9%, ahead of the contract’s expiry later on Monday. The more active January contract last fell 59 cents or 0.7% to USD 79.52 a barrel.

Both benchmarks closed Friday at their lowest since Sept. 27, extending losses for a second week, with Brent down 9% and WTI 10% lower.

“Apart from the weakened demand outlook due to China’s COVID curbs, a rebound in the US dollar today is also a bearish factor for oil prices,” said Tina Teng, a CMC Markets analyst.

“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and euro zone,” she said, adding that hawkish comments from the US Federal Reserve last week also sparked concerns over the US economic outlook.

New COVID case numbers in China remained close to April peaks as the country battles outbreaks nationwide and in major cities. Schools across some districts in the capital Beijing buckled down for online classes on Monday after officials asked residents to stay home, while the southern city of Guangzhou ordered a five-day lockdown for its most populous district.

The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into a contango, reflecting dwindling supply concerns.

Meanwhile, tight crude supplies in Europe have eased as refiners have piled up stocks ahead of the Dec. 5 European Union embargo on Russian crude, putting pressure on physical crude markets across Europe, Africa and the United States.

The EU’s energy policy chief told Reuters the EU expected to have its regulations completed in time for the introduction of a G7 plan to cap the price of Russian crude on Dec. 5.

RBC Capital analyst Mike Tran said the weak December WTI contract expiration indicated paper market selling rather than true physical market softness.

“Tight global inventories do not support the traditional surplus of barrels rationale for contango,” he said in a note.

While North Sea and West African spot market indicators are far from strong, they are also not suggesting signs of distress, he added.

Diesel markets remained tight, with Europe and the United States competing for barrels. While China nearly doubled its diesel exports in October from a year earlier to 1.06 million tonnes, the volume was well below September’s 1.73 million tonnes.

Demand in China, the world’s top crude importer, remains bogged down by COVID restrictions while expectations of further interest rate rises elsewhere have elevated the greenback, making dollar-denominated commodities more expensive for investors.

(Reporting by Florence Tan and Emily Chow; Editing by Bradley Perrett and Kenneth Maxwell)

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