Oil prices rise on potential OPEC+ supply cuts; BP shuts US refinery units

SINGAPORE, Aug 25 (Reuters) – Oil prices rose on Thursday on mounting supply tightness concerns amid disruptions to Russian exports, the potential for major producers to cut output, and the partial shutdown of a US refinery.

Brent crude rose 45 cents, or 0.4%, to USD 101.67 a barrel, while US West Texas Intermediate crude was up 32 cents, or 0.3%, at USD 95.21 a barrel.

Both crude oil benchmark contracts touched three-week highs on Wednesday after the Saudi energy minister flagged the possibility that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will cut production to support prices.

“Brent crude oil prices rebounded above the USD 100/barrel mark following Saudi officials showing willingness to defend prices via an OPEC+ production cut if necessary,” Citi analysts said in a note.

Discussions on an agreement on Iran’s nuclear programme remain stalled, calling into question any resumption of its exports.

Talks between the European Union, the United States and Iran to revive the 2015 nuclear deal are continuing, with Iran saying it had received a response from the United States to the EU’s “final” text to resurrect the agreement.

ANZ analysts Daniel Hynes and Soni Kumari said that if a deal eventuates, it will likely weigh on sentiment and lower prices in the short term as the deal raises the prospect of 1 million barrels per day of Iranian oil hitting the market.

“Nevertheless, the market will remain tight as the deal will not offset the fall in Russian supply and the ongoing recovery in demand,” they added.

In the United States, the world’s biggest oil consumer, BP reported shutting some units at its Whiting refinery in Indiana after an electrical fire on Wednesday. The 430,000 barrel-per-day plant is a key supplier of fuels to the central United States and the city of Chicago.

Falling US crude and product stockpiles also added to the upward pressure on prices. Oil inventories fell by 3.3 million barrels in the week to Aug. 19 at 421.7 million barrels, steeper than analysts’ expectations in a Reuters poll for a 933,000-barrel drop.

The bullish impact was countered by a drawdown in gasoline inventories that was less than expected, reflecting tepid demand.

US gasoline stocks fell by 27,000 barrels in the week to 215.6 million barrels, compared with earlier expectations for a 1.5 million-barrel drop.

(Reporting by Jeslyn Lerh in Singapore; Additional reporting by Laura Sanicola in Washington; Editing by Sam Holmes, Christian Schmollinger and Ana Nicolaci da Costa)

BOJ policymaker vows to keep ultra-low rates, dovish guidance

TOKYO, Aug 25 (Reuters) – The Bank of Japan must maintain massive monetary stimulus and its dovish policy guidance until wages show clearer signs of increasing, one of its board members said, reinforcing the central bank’s outlier status in a global wave of monetary tightening.

Board member Toyoaki Nakamura also ruled out the chance of tweaking Japan’s ultra-low interest rates to stem the yen’s falls against the dollar, saying there was not much the BOJ can do to reverse a trend largely driven by US rate hikes.

“We’re not quite there yet,” Nakamura told a news conference, when asked whether the BOJ sees scope to adjust its dovish forward guidance that project interest rates will move at “current or lower levels.”

The BOJ must look at winter bonus payments and next year’s wage negotiations to determine whether it can tweak the guidance to a more neutral one, he said.

“It’s not right for Japan to join the global rate hike competition now,” Nakamura said, stressing the BOJ’s resolve to keep supporting the economy.

The BOJ has refrained from joining a flurry of rate hikes by central banks battling record surges in prices, as it focuses on supporting Japan’s delayed recovery from the pandemic’s hit.

The BOJ has deployed a massive amount of stimulus for nearly a decade to fire up inflation to its 2% target, and continues to cap long-term interest rates around zero to support the economy.

It also maintains a dovish bias on the future monetary policy path. Some analysts speculate the BOJ could tweak the guidance to a more neutral one as inflation creeps up.

In a speech delivered before the news conference, Nakamura said the outlook for Japan’s economy was clouded by a renewed spike in pandemic cases, supply constraints and persistent rises in global commodity prices.

Market jitters over aggressive rate hikes by major central banks to rein in rampant inflation could also trigger an outflow of capital from emerging economies, and hurt global growth, Nakamura added.

Such risks, and the fact Japan’s output gap remains negative, justify keeping monetary policy ultra-loose, he said.

Japan’s consumer inflation, at 2.4%, is much lower than the rate of over 8% seen in the United States and Europe due largely to sluggish wage growth, Nakamura said.

With recent price gains driven mostly by rising raw material costs, Japan must deal with the impact through targeted fiscal measures rather than monetary tightening, he added.

On the yen, Nakamura said the currency’s declines have been “quite sharp” this year and the high volatility likely has had a significant impact on Japan’s economy.

“The pros and cons of a weak yen vary depending on changes in the economic environment,” he added.

(Reporting by Leika Kihara; Editing by Himani Sarkar, Shri Navaratnam and Kim Coghill)

US recap: EUR/USD holds off new lows before ECB, Fed events

Aug 24 (Reuters) – The dollar index hung onto small gains on Wednesday but surrendered most of its earlier advance after attempts to test 20-year highs at 109.27/29 met with rejection before the London close, with markets hesitant to push for a breakout ahead of Friday’s Jackson Hole central bankers symposium.

That rejection unraveled the broad dollar bid resulting from Minneapolis Fed President Neel Kashkari’s comments late on Tuesday, which supported more rate hikes to quash inflation and avoid the possibility of a more persistent strain of elevated price growth.

Markets have positioned for Fed Chair Jerome Powell to echo those sentiments in his Jackson Hole speech, though mixed and mediocre economic data — including Wednesday’s US durable goods and pending home sales — raise the risks of a more nuanced message that investors interpret as dovish.

EUR/USD encountered a strong bid at Wednesday’s 0.9910 low by Tuesday’s nearly 20-year trough at 0.99005 on EBS, but offers at parity squelched the spike higher, with the recent rebound in 2-year bund-Treasury yields spreads unsupportive in the face of soaring European energy prices and ECB hesitance to fight inflation more forcefully.

EUR/USD must break and close below 0.9900 to embark toward support by 0.9600.

Investors will scrutinize Thursday’s release of minutes from the ECB’s July 21 meeting, which resulted in a 50bp rate hike. Another 50bp hike is favored at the Sep. 8 meeting, but the terminal rate is currently priced in just below 2%, seemingly short of neutral or restrictive with euro zone inflation at 8.9%.

Sterling fell 0.35%, deriving no support from the 24.4bp surge in 2-year gilt yields to their highest since 2008 — up an incredible 139bp just since Aug. 2 — with UK inflation expected to peak at least three times as high as the 4.3% terminal policy rate markets are projecting next year.

The technical objective for sterling’s slide from its pandemic peak is right by the March 2020 pandemic nadir at 1.1413.

USD/JPY gained 0.2% on the back of higher Treasury yields, but it will need Powell’s hawkish help to have a go at its 24-year highs.

The dollar was broadly higher against high-beta currencies.

Reports that a Chinese regulator has warned banks against yuan selling had little immediate impact, as it was perceived as aimed at slowing, rather than reversing, USD/CNH gains.

German August Ifo readings and US jobless claims are also among Thursday’s events.

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

Gold steadies as dollar stalls; focus on Jackson Hole event

Aug 24 (Reuters) – Gold steadied on Wednesday as the dollar gave up some gains from earlier in the session, while investors await the Jackson Hole central bankers’ event for clues on rate hikes.

Spot gold was up 0.1% at USD 1,749.35 per ounce by 2:29 p.m. ET (1829 GMT). It rose as much as 1% in the previous session.

US gold futures settled unchanged at USD 1,761.5.

Helping gold reverse some initial declines, the dollar stalled around the 108.6 level, after climbing as high as 109.112 earlier in the session.

A stronger dollar tends to dull appetite for gold among overseas buyers.

“The market is relatively quiet. Metal traders are waiting to see what comes out of the Jackson Hole meet and want to know more about Fed’s rate hike path,” said Bob Haberkorn, senior market strategist at RJO Futures.

Market participants await US Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Economic Policy Symposium on Friday. The speech could throw some light on the Fed’s monetary policy tightening path.

Gold tends to perform poorly if rates rise, as it yields no interest.

“Whether gold breaks USD 1,730 or not may well depend on what Powell has to say as well as whether traders are in the mood to listen, should he stick to his colleague’s hawkish script,” Craig Erlam, senior market analyst at OANDA wrote in a note.

Investors also await estimates for US second-quarter gross domestic product, and July consumer spending data due later this week.

Spot silver fell 0.7% to USD 19.03 per ounce.

“A mix of negative factors, including fear of recession, rising interest rates and a strong dollar, hit the price of the industrial metal hard,” aid Carlo Alberto De Casa, external analyst for Kinesis Money.

Platinum fell 0.6% to USD 874.64 per ounce while palladium rose 2.5% to USD 2,029.21.

(Reporting by Ashitha Shivaprasad and Seher Dareen in Bengaluru; Editing by Shinjini Ganguli and Vinay Dwivedi)

China regulator warns banks against yuan selling – sources

SHANGHAI/BEIJING, Aug 24 (Reuters) – China’s foreign exchange regulator phoned several banks on Wednesday to warn them against aggressively selling the Chinese currency, people with direct knowledge of the matter said, in a new sign of official discomfort with recent yuan weakness.

The Chinese yuan has been dropping against the dollar, and market participants said the telephone calls suggested authorities may be getting uncomfortable with the speed of the slide. The yuan jumped to 6.8605 per dollar in offshore trade after Reuters published news of the calls.

The currency hit a two-year low at 6.8704 earlier on Wednesday and is down about 1.8% in August so far, partly a reflection of gains in the greenback as U.S. interest rates rise, but also in response to China’s slowing economy.

“Buying too heavily in the dollar ended up with a call from the central bank,” said one of the sources at a bank.

Four people familiar with the calls requested anonymity as they were not authorized to discuss them publicly. They did not provide further details about the calls, either.

Responding to a Reuters request for comment about the regulator contacting banks earlier on Wednesday, the State Administration of the Foreign Exchange (SAFE) said it had not seen institutions unreasonably buying large amounts of foreign exchange in August, when market supply and demand were stable.

It added the yuan remained resilient compared with other non-dollar currencies, following recent rapid dollar gains, while China’s robust trade surplus and utilisation of foreign capital continued to play a fundamental role in stabilising cross-border flows.

“Foreign exchange expectations are stable, which helps to keep the yuan exchange rate basically stable at reasonable and balanced levels,” the SAFE said in an emailed statement to Reuters.

The yuan’s August’s slide is the steepest since April, when China cut banks’ currency reserve requirements to support the yuan.

Earlier on Wednesday, Chinese state media cited market analysts as saying that the yuan has no basis for long-term depreciation, but officials have thus far been publicly quiet on the market moves.

Ken Cheung, chief Asian FX strategist at Mizuho Bank, said the regulator’s move suggested that yuan depreciation expectations had started to pick up.

“The authorities may want to stabilise the market expectations before guiding the yuan to weaken in an orderly manner,” Cheung said.

Recent economic indicators showed that the Chinese economy is in the doldrums, with the latest alarm bell a record surge in unemployment payouts for June.

The country’s robust exports – the sole bright spot – could also face pressure from faltering global demand.

Outflows from the bond market and surprise cuts to two key interest rates last week also have put mounting pressure on the yuan, as yields and policy rates diverge from other big economies, where inflation is prompting hikes.

(Reporting by the Shanghai and Beijing Newsroom; Editing by Toby Chopra and Hugh Lawson)

Euro edges back towards two-decade low as energy supply crunch adds to growth fears

LONDON, Aug 24 (Reuters) – The US dollar recouped some data-inspired losses on Wednesday and edged back towards recent peaks, while the euro remained under pressure amid growing recession fears fuelled by a possible energy supply crunch.

Disappointing US services and manufacturing surveys released on Tuesday and a plunge in new home sales saw the dollar take a breather, after a run that pushed the US currency to its strongest level against the euro in two decades.

But Europe has its own growth concerns, stemming from its greater exposure to Russian gas supplies as the region seeks to refuel ahead of winter.

Front-month Dutch gas, the benchmark for Europe, rose again on Wednesday morning as the prospect of a halt to supplies from the Nord Stream 1 pipeline kept investors on edge.

On Friday, Russian state energy firm Gazprom said Russia will halt natural gas supplies to Europe for three days through Nord Stream 1 due to unscheduled maintenance.

The euro briefly bought USD 1 on Tuesday, but was back under pressure at USD 0.9950 in early European trade – barely above Tuesday’s low of USD 0.99005.

“It’s very difficult for the market to push the euro back above parity,” said Simon Harvey, head of FX analysis at Monex Europe, citing Europe’s energy supply concerns and the prospect of a hawkish Federal Reserve later in the week.

The Kansas City Federal Reserve’s Jackson Hole Symposium kicks off on Thursday with all eyes on a speech from Fed Chair Jerome Powell scheduled on Friday.

The dollar index, which measures its performance against a basket of six currencies, was last up 0.1% at 108.66, within touching distance of July’s two-decade peak of 109.29.

“Market participants remain squarely focused on Friday’s Jackson Hole Symposium as this week’s main event,” said Michael Brown, head of market intelligence at Caxton in London.

“With a hawkish Chair Powell likely on Friday, I’d expect the buck to resume its recent rally before too long,” Brown added, saying he expects the dollar index to breach its July high.

Overnight, Minneapolis Fed Bank President Neel Kashkari repeated the need for more aggressive rate hikes to control inflation.

Meanwhile, cyclical currencies such as the Australian and New Zealand dollars were under pressure amid fears of a global growth slowdown.

The Aussie was down 0.15% at USD 0.6920 and the kiwi slumped 0.23% to USD 0.6199.

The British pound hovered above the 2-1/2 year low of USD 1.1718 reached on Tuesday, while the Japanese yen traded up 0.2% at 136.48 per dollar.

(Reporting by Samuel Indyk in London, additional reporting by Rae Wee in Singapore, Editing by Tomasz Janowski)

Oil steady as fears of imminent OPEC+ output cut fade

Aug 24 (Reuters) – Oil prices were little changed on Wednesday as the market grappled with supply concerns amid the sanctioning of Russian shipments and the initial shock of comments that major producers would cut output wore off.

Brent crude futures for October settlement were down 6 cents, or 0.06%, to USD 100.16 a barrel, after rising 3.9% on Tuesday.

US West Texas Intermediate crude for October delivery were up 9 cents, or 0.1%, at USD 93.83 a barrel, having jumped 3.7% the previous day.

Both contracts soared after the energy minister of Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), flagged the possibility the group would cut supply to balance a market he described as “schizophrenic”, with the paper and physical markets becoming increasingly disconnected.

“While Abdulaziz bin Salman’s comment may have achieved more than putting a floor under crude prices, we expect it to follow the law of diminishing returns, unless it is followed up by more signals or action from OPEC+ to restrain output,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

With OPEC+ already delivering about 2.8 million barrels-per-day less than its monthly target, the maths of cutting production is going to be more complicated than usual, not to mention the politics of it, Hari added.

Potential output cuts from OPEC and its allies, known as OPEC+, may not be imminent and are likely to coincide with the return of Iran to oil markets should that country clinch a nuclear deal with the West, nine OPEC sources told Reuters on Tuesday.

A senior US official told Reuters on Monday that Iran had dropped some of its main demands on resurrecting a deal.

“Tuesday’s rally was overdone as many investors knew it would take several months for Iranian oil to flow into the international market even if an agreement to revive Tehran’s 2015 nuclear deal was made, meaning OPEC+ would not trim output so quickly,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

“Still, there is not much room for the market’s downside due to robust heating fuel demand for the winter,” he said, citing that the recent rally in the US heating oil market and surging natural gas prices boosted expectations for stronger heating oil demand and tighter crude supply.

US gas prices shot above USD 10 for the first time in about 14 years due to a surge in prices in Europe, where tight supplies persist.

Underlining tight supply, US crude stockpiles fell by about 5.6 million barrels for the week ended Aug. 19., according to market sources citing American Petroleum Institute figures on Tuesday, against analysts’ estimate of a drop by 900,000 barrels in a Reuters poll.

But gasoline inventories rose by about 268,000 barrels, while distillate stocks increased by about 1.1 million barrels.

(Reporting by Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; Editing by Christopher Cushing, Kim Coghill and Christian Schmollinger)

Oil ends higher on US response to Iran nuclear deal comments

Aug 24 (Reuters) – Oil prices ended Wednesday higher after a volatile trading session on concerns that the United States will not consider additional concessions to Iran in its response to a draft agreement that would restore Tehran’s nuclear deal – and potentially the OPEC member’s crude exports.

Iran said it had received a response from the United States to the EU’s “final” text for revival of Tehran’s 2015 nuclear deal with major powers.

Brent crude settled up USD 1.00 to USD 101.22 while US crude settled up USD 1.15 to USD 94.89 a barrel. Both benchmarks fell by more than USD 1 earlier in the session.

Oil was also supported after Saudi Arabia suggested this week that the Organization of the Petroleum Exporting Countries could consider cutting output, though bearish economic signals from central bankers and falling equities weighed.

Both crude oil benchmark contracts touched three-week highs earlier on Wednesday after the Saudi energy minister flagged the possibility of cutting production.

OPEC sources later told Reuters that any cuts by the producer group and its allies, known collectively as OPEC+, are likely to coincide with a return of Iranian oil to the market should Tehran secure a nuclear deal with world powers.

A US official on Monday said that Iran had dropped some of its main demands in negotiations to resurrect a deal to rein in Tehran’s nuclear programme.

OPEC+ is already producing 2.9 million barrels per day less than its target, sources said, complicating any decision on cuts or how to calculate the baseline for an output reduction.

“The oil price and supply outlook suggest that an OPEC+ cut is not currently warranted,” PVM analyst Stephen Brennock said.

“Global oil supply could take a hit as peak US hurricane season approaches. Elsewhere, future supply outages in Libya cannot be discounted while Nigeria’s oil fortunes show little sign of improving.”

Earlier in the session oil prices fell after US government data showed lackluster demand for gasoline, which augurs for a notable slowdown in economic activity. Gasoline demand data showed the four-week average of daily gasoline product supplied 7% below the year-earlier period.

“The plummeting demand for gasoline is dragging the market down,” said Andy Lipow, president of Lipow Oil Associates in Houston, Texas.

(Additional reporting by Shadia Nasralla in London, Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; Editing by David Goodman, Marguerita Choy and Hugh Lawson)

Gold tepid as dollar firms with focus on Jackson Hole symposium

Aug 24 (Reuters) – Gold prices were subdued on Wednesday, as the US dollar strengthened after hawkish comments from a Federal Reserve official kept investors cautious ahead of Jackson Hole symposium due later this week.

Spot gold was down 0.1% at USD 1,746.18 per ounce, , after rising 0.7% in the previous session.

US gold futures eased 0.1% to USD 1,769.20.

The dollar firmed near recent peak against its rivals, making gold more expensive for buyers holding other currencies.

Fed Chair Jerome Powell’s speech at the annual global central banking conference in Jackson Hole, Wyoming on Friday will be keenly watched for more cues on future interest rate hikes.

“We’re seeing the market digest the correction after six days of losses with speech from Powell on Friday being an important thing to markets at this point, expecting some kind of a guidance, or framework about the Fed policy,” said Ilya Spivak, a currency strategist at DailyFX.

“Overall, macro environment is materially not very much different. At this stage, the bias remains very much bearish for gold.”

Minneapolis Federal Reserve Bank President Neel Kashkari was the latest official to reiterate the US Fed’s focus on controlling inflation ahead of all else.

The US central bank has raised its benchmark overnight interest rate by 225 basis points in total since March to contain inflationary pressures and has noted that further tightening would depend on economic data points.

Sales of new US single-family homes plunged to a 6-1/2-year low in July, while a survey from S&P Global showed its measure of private sector business activity fell to a 27-month low, suggesting Fed efforts to tame inflation were working.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% to 984.38 tonnes on Tuesday.

Spot silver fell 0.6% to USD 19.05 per ounce, platinum slipped 0.4% to USD 875.95, while palladium eased 0.2% to USD 1,976.28.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu, Sherry Jacob-Phillips and Rashmi Aich)

S&P 500 seen a little higher by end of 2022 – strategists

NEW YORK, Aug 24 (Reuters) – The S&P 500 will end the year a little above its current level after a recent rally that has lifted the index from its bear market lows, according to a new Reuters poll of strategists.

Stronger-than-expected corporate earnings and forecasts, along with optimism the US Federal Reserve may avoid crippling the economy as it hikes interest rates in its fight against decades-high inflation, have lifted the S&P 500 about 13% from lows in mid-June.

The benchmark will end this year at 4,280, according to the median forecast of nearly 50 strategists polled by Reuters during the last two weeks. That is 3.4% higher than Monday’s close of 4,137.99.

That median forecast for 2022 was down from a forecast of 4,400 in a Reuters poll conducted in late May.

Strategists in the latest Reuters poll expected the S&P 500 to continue to rise in 2023, and hit 4,408 by mid-year, according to the poll’s median forecast.

Professional investors and analysts have historically had poor track records predicting stock market returns, but their forecasts provide a valuable glimpse of sentiment on Wall Street.

The S&P 500 remains down about 13% this year so far after tumbling into its second bear market since the 2020 global sell-off caused by the coronavirus pandemic.

Slightly over half the strategists in the poll expected more downside risks to their forecast than upside, while most strategists polled expected market volatility to rise rather than decline in the coming three months.

“Going into September, that’s a murky month for equities,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “I would suggest we could then see a pullback somewhat, but nothing that would suggest we would make new lows, because I believe the market has made a low.” Cardillo sees the S&P 500 ending the year at 4,350.

“Toward the end of the year, we could begin to rally. The Fed is not going to get overly aggressive. I see signs of inflation coming down, and I believe the labor market will soon begin to weaken, and that should alleviate the Fed from getting overly aggressive.”

The Fed has lifted its benchmark overnight interest rate by 2.25 percentage points this year as it tries to curb decades-high inflation, and investors continue to weigh how aggressive the US central bank may need to be going forward.

Investors are hoping the Fed may shed light on how big future rate hikes might be and how strong the economy is when central banking heavyweights, including Fed Chair Jerome Powell, meet this week for their annual symposium in Jackson Hole, Wyoming.

“We say there’s a 50/50 chance there’s going to be recession next year. Will the Fed stay active if we go into a recession? That’s what we don’t know,” said John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio. “We have to hear more from Powell.”

Recent corporate earnings have supported stocks. With results in from most of S&P 500 companies, second-quarter earnings are expected to have climbed 8.8% from a year ago, above the 5.6% estimated on July 1, according to IBES data from Refinitiv IBES.

Analysts’ estimates for full-year profit growth have come down slightly since the start of July, but they still forecast growth of 8% for 2022, the data showed.

Investors have worried whether profits can grow fast enough to support stock valuations, especially with the recent rally. The S&P 500’s forward 12-month price-to-earnings ratio is now at about 18 compared with 22 at the end of December and its long-term average of about 16, according to Refinitiv data.

Based on the poll, the Dow Jones industrial average will finish the year at 34,200, up about 3.4% from Monday’s close.

(Reporting by Noel Randewich in San Francisco, and Caroline Valetkevitch, Stephen Culp, Sinead Carew, Chuck Mikolajczak and Alden Bentley in New York; additional polling by Sujith Pai, Mumal Rathore and Sarupya Ganguly in Bengaluru; Editing by Tomasz Janowski)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Inflation Update: Weak demand softens shocks

Monthly Economic Update: Fed cuts incoming