U.S. oil settles below $100 a barrel on economic worries, strong dollar

HOUSTON, May 10 (Reuters) – U.S. crude oil price settled below USD 100 a barrel on Tuesday to its lowest level in two weeks as the demand outlook was pressured by coronavirus lockdowns in China and growing recession risks, while a strong dollar made crude more expensive for buyers using other currencies.

U.S. West Texas Intermediate crude settled down USD 3.33, or 3.2%, to USD 99.76 a barrel, while Brent crude was down USD 3.48, or 3.28%, at USD 102.46 a barrel. Both benchmarks were down for a second straight day and fell by more than USD 4 a barrel earlier on Tuesday.

Wall Street’s main indexes also turned lower in volatile trading on concerns over aggressive monetary policy tightening and slowing economic growth.

Early in the session, comments from the Saudi and UAE energy ministers boosted Brent and WTI up by more than USD 1 a barrel.

“These are volatile times, the daily price bars are outsized these days,” said John Kilduff, a partner at Again Capital LLC.

“As the EU continues to dither over whether or not they are going to embargo that Russian oil, that changes the calculus very much as well in both directions,” he added.

The European Union Commission has delayed acting on the proposal. Unanimity is required to ban oil imports from Russia, and while a French minister said EU members could reach a deal this week, Hungary has dug in its heels opposing an embargo.

Also, some European economies could suffer distress if Russian oil imports were curtailed further. If Russia retaliated by cutting off gas supplies, economies in emerging Europe, Central Asia and North Africa might slide back to pre-pandemic levels, the European Bank for Reconstruction and Development (EBRD) warned.

In addition to the recent G7 gradual import ban on Russian oil, Japan, which obtained 4% of its oil imports from Russia last year, has agreed to phase out those purchases. The timing and method have yet to be decided.

“The combination of COVID-related lockdowns in China and worldwide interest rate increases to battle inflation put equity investors on the back foot, strengthened the dollar and significantly raised concerns of economic slowdown,” said Tamas Varga of broker PVM Oil Associates.

With a steep fall in demand in China due to the lockdowns and discounted Russian barrels in the market, China gets to be more selective in the crude oil it buys, said Robert Yawger, executive director of energy futures at Mizuho.

Cleveland Federal Reserve President Loretta Mester said raising U.S. interest rates in half-percentage-point increments “makes perfect sense” for the next couple of U.S. central bank policy meetings, while Bundesbank chief Joachim Nagel said the European Central Bank should raise interest rates in July.

The dollar held near a two-decade high ahead of a reading on inflation that could hint at the outlook for Fed policy.

On the supply side, the U.S. Energy Information Administration trimmed its U.S. crude oil production forecasts for 2022 and 2023. It now expects output in 2022 to average 11.9 million barrels per day (bpd) compared with its previous estimate of 12 million bpd.

Crude stocks rose by 1.6 million barrels for the week ended May 6, according to market sources citing American Petroleum Institute figures, while analysts polled by Reuters had expected a draw of 500,000 barrels.

European refiners’ crude and oil products stocks stood at about 1 billion barrels in April, down 10.3% on a year-on-year basis but nearly the same level as in March, Euroilstock data showed. Middle distillate stocks fell by 15.4% on the year in April, and by almost 3% from March, the data showed.

(By Arathy Somasekhar; Additional reporting by Rowena Edwards in London, Florence Tan in Singapore and Laura Sanicola in New York; editing by Jason Neely, David Evans, David Gregorio, Paul Simao and Cynthia Osterman)

Equities bounce back while yields, oil prices drop

NEW YORK, May 10 (Reuters) – Wall Street closed higher on Tuesday as investors waited for inflation data and worried about the prospects of slowing economic growth and the impact of policy tightening.

U.S. Treasuries rallied, with the yield on the benchmark 10-year note tumbling from a more than three-year high to below 3% as investors reassessed the inflation outlook before U.S. consumer price index (CPI) data is released Wednesday.

U.S. crude oil futures dipped below USD 100 a barrel to their lowest level in two weeks as the demand outlook was clouded by coronavirus lockdowns in China and growing recession concerns, while a strong dollar made crude more expensive for buyers using other currencies.

Markets have been volatile across asset classes due to a combination of surging inflation and fears that monetary tightening aimed at slowing price increases would cause a slowdown in global economic growth.

Last week, central banks in the United States, Britain and Australia raised interest rates and investors girded for more tightening as policymakers fought soaring inflation.

After turning red for a few hours earlier in the session, the S&P closed up slightly while Nasdaq added almost 1%. Technology, the market’s biggest growth sector, was leading gains as investors reacted to falling bond yields and bounced back after a furious sell-off on Monday.

“If we’ve seen the worst of the rate of change from long-term interest rates, it may create room for equities to do a little bit better,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis.

The Dow Jones Industrial Average fell 84.96 points, or 0.26%, to 32,160.74, the S&P 500 gained 9.81 points, or 0.25%, to 4,001.05 and the Nasdaq Composite added 114.42 points, or 0.98%, to 11,737.67.

MSCI’s gauge of stocks across the globe gained 0.08%.

Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, was reassured by policy makers including Cleveland Federal Reserve Bank President Loretta Mester. While Mester said unemployment may increase and growth may slow, she added that tightening should not cause a “sustained downturn.”

“They’ve been so hawkish so any slight move off that the market wants to sniff that out,” said Miskin. “Sentiment wise, a lot of people are looking for capitulation. The dots aren’t completely connecting yet for that.”

The U.S. dollar was choppy on Tuesday but held near a two-decade high ahead of the hotly anticipated inflation data which could provide insight on the Fed policy path.

The dollar index , which measures the greenback against a basket of other major currencies, was last up 0.193%, with the euro down 0.24% to USD 1.053.

“It’s the calm before inflation data tomorrow, so this is allowing a breather for risky assets,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, D.C. with trader positioning that was “working in the favor of risk assets.”

The Japanese yen weakened 0.10% versus the greenback at 130.40 per dollar, while Sterling was last trading at USD 1.2314, down 0.14% on the day.

Oil prices fell in volatile trade as the market balanced impending European Union sanctions on Russian oil with demand concerns related to coronavirus lockdowns in China, a strong dollar and growing recession risks.

U.S. crude recently fell 3.35% to USD 99.64 per barrel and Brent was at USD 102.26, down 3.47% on the day.

Earlier data showed China’s export growth slowed to its weakest in almost two years, as the central bank pledged to step up support for the slowing economy.

Benchmark 10-year notes last rose 22/32 in price to yield 2.9947%, down from 3.079% late on Monday.

“It’s a risk recalibration. There’s no other catalyst, other than it’s gone too far, too fast,” George Goncalves, head of U.S. macro strategy at MUFG Securities said, referring to yields. “Maybe we’re going to get a period of inflation that won’t be just heading higher unabatedly.”

Spot gold dropped 1.0% to USD 1,835.86 an ounce as investors eyed the rising dollar and waited for Wednesday’s inflation data.

Elsewhere, bitcoin was up 3.7% after earlier falling to its lowest level since July 2021. Tuesday’s gain recovered some losses from its 11.8% plunge on Monday.

(Reporting by Sinéad Carew; Additional reporting by Herbert Lash and Chuck Mikolajczak in New York, Elizabeth Howcroft in London; Editing by Alexander Smith, Nick Macfie and Lisa Shumaker)

UPDATE 2-Turkish lira weakens against dollar for fifth day

Adds Erdogan comment

ISTANBUL, May 11 (Reuters) – The Turkish lira eased a further 0.85% against the dollar on Wednesday, weakening for a fifth session and bringing the currency back towards the lows it hit in late December after a series of unorthodox interest rate cuts.

The lira TRYTOM=D3 weakened as far as 15.38 in morning trade from a close of 15.2490 on Tuesday. It stood at 15.3405 at 1157 GMT.

A currency crisis late last year sent the lira to a record low of 18.4 on Dec. 20, triggering state measures to underpin the lira through a scheme to protect lira deposits against depreciation and major forex market interventions.

Following a 44% slide in 2021, the lira has dipped another 14% this year after a long period of stability was upset by concerns about economic fallout from the war in Ukraine, which sent Turkey’s already-hefty energy import bill soaring.

The Turkish central bank sold $3.296 billion in foreign currency in April to Turkey’s state economic enterprises, primarily energy importer Botas, reflecting the rising cost of energy imports. nI7N2W500F

The currency crisis last year was sparked by a series of rate cuts long sought by President Tayyip Erdogan, who supports the unorthodox view that higher interest rates cause inflation. The lira’s depreciation stoked inflation, which hit 70% in April.

Erdogan said on Wednesday that Turkey had been fighting against “attacks” through exchange rates and interest rates for a long time. He said Turks were facing a high cost of living, adding that economic problems were temporary.

(Reporting by Ezgi Erkoyun; Editing by Daren Butler and Bernadette Baum)

((ezgi.erkoyun@thomsonreuters.com; +90-212-350 7051; Reuters Messaging: ezgi.erkoyun.thomsonreuters.com@reuters.net;))

Japan’s 10-year bond yields flat ahead of U.S. inflation data

TOKYO, May 11 (Reuters) – Japan’s 10-year government bond yields were flat on Wednesday as investors maintained a cautious stance ahead of US inflation data and a domestic 30-year bond auction.

The 10-year JGB yield was flat at 0.245%, hovering just below the upper limit of the Bank of Japan’s yield target.

Investors closely eye the April consumer price index reading later on Wednesday for any signs that inflation may be starting to cool, with expectations calling for an 8.1% annual increase compared with the 8.5% rise recorded in March.

“If US yields fall on expectations that consumer prices have peaked out, that could drive demand for the yen bonds,” said a market participant at a domestic brokerage.

The 20-year JGB yield fell 0.5 basis point to 0.770%.

The 30-year JGB yield dipped 0.5 basis point to 1.025%. The government will hold an auction for the bonds with the same maturity on Thursday.

The two-year JGBs were not traded and the yield remained at -0.050% and the five-year yield was flat at 0.015%.

The 40-year JGB yield was flat at 1.130%.

Benchmark 10-year JGB futures rose 0.09 point to 149.28, with a trading volume of 10,557 lots.

(Reporting by Tokyo marekts team; Editing by Sherry Jacob-Phillips)

RPT-Soaring food, fuel ramp up social unrest risk for emerging markets -report

Repeats story with no changes to text

By Jorgelina do Rosario

LONDON, May 11 (Reuters) – Rising fuel and food prices look set to stoke an “inevitable” rise in civil unrest, with developing middle-income countries such as Brazil or Egypt particularly at risk, a report by a risk consultancy said.

Three quarters of nations expected to be at high-risk or extreme risk of civil unrest by the fourth quarter of 2022 were middle-income countries, as defined by the World Bank, Verisk Maplecroft said in an update to its political risk monitor.

“Unlike low-income countries, they were rich enough to offer social protection during the pandemic, but now struggle to maintain high social spending that is vital to the living standards of large sections of their populations,” the report found.

Argentina, Tunisia, Pakistan and Philippines were also among the countries to watch in the next six months, the authors said, pointing to their high dependency on food and energy imports.

Russia’s war in Ukraine has accelerated a rise in food prices, which hit an all-time record in February and again in March. Energy prices also rose sharply. nL2N2X12RV O/R

“With no resolution of the conflict in sight, the global cost of living crisis will continue deep into 2023,” the report said.

Lebanon, Senegal, Kenya and Bangladesh face similar pressures.

The report pointed to Sri Lanka and Kazakhstan as examples of middle income countries that have already suffered unrest this year. The former saw rising food and fuel prices contribute to escalating tensions, while an attempt to cut fuel subsidies sparked protests in Kazakhstan. nS0N2VC00E

Civil unrest could hamper a potential economic recovery but also deter investors focused on environmental, social and governance (ESG) factors, it said.

“Some countries risk falling into a vicious cycle, whereby worsening governance and social indicators make them ESG investment pariahs, impeding the inflows needed to improve economic performance and address societal needs.”

The report found that more than 50% of the almost 200 countries covered by the index have experienced an increase in civil unrest since the COVID-19 pandemic hit.

Ten countries to watchhttps://tmsnrt.rs/3MZX8iu

(Reporting by Jorgelina do Rosario; Editing by Karin Strohecker and Richard Pullin)

((jorgelina.dorosario@thomsonreuters.com;))

Philippines raises $481 mln from T-bond auction

MANILA, May 11 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of re-issued 2027 T-bonds on Wednesday:

* BTr accepts bids of 25.1 billion pesos ($480.57 million), below offer of 35 billion pesos and against total tenders of 55.297 billion pesos

* Average yield at 5.772%

* The bonds were first issued in May, 2017

* Details on the BTr’s website www.treasury.gov.ph

($1 = 52.23 Philippine pesos)

(Reporting by Enrico Dela Cruz)

((enrico.delacruz@tr.com))

REFILE-China committed to friendship and working with Philippines under Marcos – embassy

Refiles to correct day from Tuesday to Wednesday

MANILA, May 11 (Reuters) – China will continue to work together with the Philippines under its incoming president, Ferdinand Marcos Jr, who won this week’s election by a landslide, its embassy in Manila said on Wednesday.

China will remain committed to a friendship with its neighbour, and focus on post-COVID growth, expand win-win cooperation, and bring more tangible benefits to both peoples, said the statement, quoting China’s foreign ministry spokesperson Zhao Lijian.

(Reporting by Neil Jerome Morales; Editing by Martin Petty and Kanupriya Kapoor)

((neiljerome.morales@thomsonreuters.com; +632 8841 8914;))

Soaring food, fuel ramp up social unrest risk for emerging markets -report

By Jorgelina do Rosario

Argentina, Tunisia, Pakistan and Philippines were also among the countries to watch in the next six months, the authors said, pointing to their high dependency on food and energy imports.

Russia’s war in Ukraine has accelerated a rise in food prices, which hit an all-time record in February and again in March. Energy prices also rose sharply. nL2N2X12RV O/R

“With no resolution of the conflict in sight, the global cost of living crisis will continue deep into 2023,” the report said.

Lebanon, Senegal, Kenya and Bangladesh face similar pressures.

Civil unrest could hamper a potential economic recovery but also deter investors focused on environmental, social and governance (ESG) factors, it said.

The report found that more than 50% of the almost 200 countries covered by the index have experienced an increase in civil unrest since the COVID-19 pandemic hit.

Ten countries to watchhttps://tmsnrt.rs/3MZX8iu

(Reporting by Jorgelina do Rosario; Editing by Karin Strohecker and Richard Pullin)

((jorgelina.dorosario@thomsonreuters.com;))

UPDATE 9-Oil up more than 5%, as Russia-EU energy quarrel intensifies

Crude rallies after nearly 10% slide over two days

Hungary digs heels in over EU embargo on Russian oil

Ukraine halts some Russian gas flows

Big build in U.S. crude stocks, drop in gasoline

New throughout, updates prices, market activity and comments to settlement

By David Gaffen

NEW YORK, May 11 (Reuters) – Oil prices rose more than 5% on Wednesday after flows of Russian gas to Europe fell and Russia sanctioned some European gas companies, adding to uncertainty in world energy markets.

Oil and gas prices have risen since Moscow invaded Ukraine in February and the United States and allies subsequently imposed heavy sanctions on Russia. Crude trade has been curtailed, and Russia has threatened to cut off gas supply to Europe, though it has stopped short of that move.

Russian gas flows to Europe via Ukraine fell by a quarter after Kyiv halted use of a major transit route, blaming interference by occupying Russian forces. It was the first time exports via Ukraine have been disrupted since the invasion. nL2N2X30NR

That move raised concerns that similar interruptions could follow even as prices are already soaring. Russia on Wednesday sanctioned 31 companies based in countries that imposed sanctions on Moscow after Russia invaded Ukraine in February. nL5N2X37FL

Brent crude LCOc1 settled up $5.05, or 4.9%, to $107.51 a barrel, while U.S. West Texas Intermediate crude CLc1 climbed $5.95 a barrel to $105.71, a 6% increase.

The European Union has threatened a full embargo of Russian oil, though negotiations are continuing. Because of Russia’s role as the biggest exporter of crude and fuel, the disruptions – which are expected to worsen – have caused markets to tighten around the world, especially for refined products like diesel.

“Prices are going to continue to move on up especially if the European Union comes to an agreement to phase out Russian oil purchases over the balance of this year,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

The EU is still haggling over an embargo on Russian oil, which analysts say would further tighten the market and shift trade flows. The vote needs unanimous support, but it has been delayed as Hungary has dug in its heels in opposition. nL5N2X23UQ

The latest figures on U.S. inventories underscored the dynamics pushing prices higher. Even though U.S. crude stocks grew by more than 8 million barrels – largely due to another release of strategic reserves – gasoline stocks were down by 3.6 million barrels and stocks of distillates fell also.

Refining capacity has dwindled in the United States and the nation has ramped up exports to meet demand from buyers overseas. So far in 2022, the United States is exporting, on net, roughly 4 million barrels of fuel daily. EIA/S

“The 90% utilization rate numbers aren’t what they used to be because overall capacity is down,” said Tony Headrick, energy market analyst at CHS Hedging. “We are seeing refiners not able to keep up with demand for gasoline.”

The price of crude has surged in 2022 as Russia’s invasion of Ukraine added to supply concerns, with Brent reaching $139, the highest since 2008, in March. Worries about growth caused by China’s COVID curbs and U.S. interest rate hikes have prompted this week’s slump.

(Additional reporting by Alex Lawler in London, Laura Sanicola and Arathy Somasekhar in New York; editing by Jason Neely, Louise Heavens, Tomasz Janowski and David Gregorio)

((alex.lawler@thomsonreuters.com; +44 207 542 4087; Reuters Messaging: alex.lawler.reuters.com@reuters.net))

UPDATE 2-S.Korea’s finmin signals extra budget unlikely to need major bond issuance

Adds bond repayment plan, tax revenue

SEOUL, May 11 (Reuters) – South Korea’s new finance minister indicated on Wednesday the government would issue few bonds, if any, to fund an upcoming supplementary budget aimed at defraying losses at small businesses due to COVID-19 restrictions.

“As for the funding, we have made all efforts to secure resources, including readjustment of existing spending plans and carried-over tax revenue surplus,” Choo Kyung-ho said at the beginning of a meeting with the ruling party.

Choo, appointed finance minister on Tuesday on the same day President Yoon Suk-yeol was inaugurated, made no reference to bond issuance as a funding source, in contrast to his previous remarks that bond issuance would be minimised.

A senior ruling party lawmaker said later the government has told his party that this year’s tax revenue projection would be raised sharply enough to fund the budget and even repay existing government bonds ahead of maturity.

“The government now estimates this year’s tax revenue would be some 53 trillion won ($41.56 billion) more than earlier projected,” People Power Party’s policy committee chief Sung Il-jong said on YTN channel.

“The government has reported (to the party) that it would use it in funding the budget and repaying some 8 trillion won worth of government bonds,” he added.

In the local bond market, the yield on the benchmark 10-year treasury bond KR10YT=RR extended its decline to as much as 11.6 basis points after the comment. It was now trading down 11.0 basis points at 3.293%.

Choo said the government would finalise the supplementary budget bill, widely expected to be about 35 trillion won ($27.4 billion), on Thursday and send it to the parliament on Friday for approval.

($1 = 1,275.3100 won)

(Reporting by Choonsik Yoo; Editing by Stephen Coates, Bradley Perrett and Sam Holmes)

((choonsik.yoo@thomsonreuters.com; +822 6936 1464;))

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