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HOUSTON – Oil prices closed slightly higher in choppy trading on Thursday, as a steep draw in US fuel stocks outweighed oversupply concerns and demand worries stemming from a stronger dollar.

Brent crude futures settled 28 cents, or 0.4% higher at USD 72.56 a barrel, while US West Texas Intermediate crude futures rose 27 cents, or 0.4% at USD 68.70. Both benchmarks had briefly dipped into negative territory during the trading session.

Brent was on track to lose about 1.7% for the week, while WTI was set to end the week over 2% lower due to a stronger US dollar and worries about rising supply amid slow demand growth.

US gasoline stocks fell by 4.4 million barrels last week, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel build.​ The stockpile of 206.9 million barrels for the week ended Nov. 8 was the lowest since November 2022.

Distillate stockpiles, which include diesel and heating oil, fell by 1.4 million barrels, versus expectations for a 200,000-barrel rise.

US gasoline futures settled 0.8% higher, while heating oil futures closed down about 0.3% after briefly spiking on the data.

Capping oil-price gains, however, was a 2.1-million barrel rise in US crude inventories last week, much more than analysts’ expectations for a 750,000-barrel rise.

Meanwhile, the International Energy Agency forecast global oil supply will exceed demand in 2025 even if cuts remain in place from OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, as rising production from the US and other outside producers outpaces sluggish demand.

The Paris-based agency raised its 2024 demand growth forecast by 60,000 barrels per day to 920,000 bpd, and left its 2025 oil demand growth forecast little changed at 990,000 bpd.

The premium of the front month WTI contract over the second month contract also narrowed this week to its smallest since June. The narrowing of the premium, or backwardation, indicates that a perception of tight supply for prompt delivery has eased.

The dollar surged to a one-year high, and headed for a fifth-straight daily gain fuelled by higher yields and President-elect Donald Trump’s election victory in the United States.

A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies, which can reduce demand.

A rally in US 10-year Treasury yields and a surge in the 10-year break-even inflation rate to 2.35% added to demand worries, said Kelvin Wong, senior market analyst at OANDA.

“(This) increases the odds of a shallow Fed interest-rate-cut cycle heading into 2025 (and) overall, there is less liquidity to stoke an increase in demand for oil,” he added.

OPEC on Tuesday cut its forecast for global oil demand growth for this year and next, highlighting weakness in China, India and other regions, marking the producer group’s fourth-consecutive downward revision in the 2024 outlook.

“Crude futures are trying to establish an equilibrium pricing, as a rising US dollar index is creating a further headwind, along with a Trump administration that will now have control of Congress, which is likely to roll back most of the Biden administration’s energy policies,” Dennis Kissler, senior vice president of trading at BOK Financial, said in a note.

Brent crude is expected to average USD 80 across 2025, down from a forecast at the end of September for UD 85, UBS Switzerland AG’s oil strategist Giovanni Staunovo wrote in a note, citing lowered demand growth estimates, particularly from China.

“Overall, we see the oil market as balanced to marginally oversupplied next year,” Staunovo said.

(Reporting by Arathy Somasekhar in Hosuton, Paul Carsten and Ahmad Ghaddar in London and Katya Golubkova and Trixie Yap; Editing by Marguerita Choy, Ros Russell and Rod Nickel)

An uptick in US consumer price inflation last month that was in line with forecasts propped up Wall Street indexes on Wednesday, and lifted the dollar close to levels against the yen that had been concerning to the Bank of Japan.

The CPI report, especially an increase in the 12-month rate, hardened thinking that while the Fed had justification to ease another 25 basis points at its December meeting, 2025 could see it rethink the pace of easing if inflation readings keep moving in the wrong direction. After all, it has approved a full percentage point of reductions since September.

Markets could get insight into how the Fed will process October’s fourth straight 0.2% CPI increase — and the year-on-year inflation rise to 2.6% from 2.4% in September — when Fed Chair Jerome Powell delivers a speech on the economic outlook on Thursday at 3:00 p.m. EST (1700 GMT), which will be followed by a question and answer session.

By then, the Fed chief will have also had time to digest the October producer prices report that comes out on Thursday morning and feeds more directly into the central bank’s preferred inflation indicator, the personal consumption expenditures price index that arrives later in the month.

Meanwhile, bitcoin vaulted above USD 93,000, and crypto currencies still looked like the trade of the week, continuing to outshine other asset classes.

US President-elect Donald Trump embraced digital assets during his campaign, promising to make the United States the “crypto capital of the planet” and to accumulate a national stockpile of bitcoin.

It was last up 4.08% at USD 91,910, marking a 32% rise since the Nov. 5 election. Smaller peer ether has risen 37% since election day, while dogecoin, an alternative, volatile token promoted by billionaire Trump-ally Elon Musk was up more than 150%.

The dollar rose to 155.62 yen, its highest since July 24 and a level that many market participants consider a trigger point for verbal intervention by Japanese authorities.

At this point it looks like prospects for the Fed to ease up on its easing is a more prominent factor than whatever the timetable will be for the Bank of Japan’s decision to hike rates. A jump in Japan’s October wholesale inflation reported Wednesday does not make that call any easier.

Until recently Japan faced a greater risk of deflation than inflation. The BOJ ended negative rates in March and its Governor Kazuo Ueda has stressed it is ready to raise them again, having last done so in July because of inflation and the risk of a weak yen.

The euro fell to its lowest in almost a year against the dollar, and euro/yen was almost flat at 164.33.

Senior US officials said on Wednesday that US President Joe Biden will meet Chinese counterpart Xi Jinping in Peru for likely the final time on Saturday, as Beijing prepares for a potentially more confrontational period with Washington under Trump.

Worries of Trump stacking his administration with China hardliners like Florida Senator Marco Rubio – who has now been tapped to become secretary of state, and Representative Mike Waltz – who was picked for national security adviser – have weighed on Chinese markets, although the blue chip CSI 300 and Shanghai Composite managed firmer closes on Wednesday.

The offshore yuan was little changed at 7.243 per dollar, after the People’s Bank of China pulled the currency off a three-month low versus the dollar by setting a firmer-than-expected official guidance for the exchange rate, signaling growing discomfort over the currency’s recent rapid decline.

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

– New Zealand Manufacturing PMI (Oct)

– Japan GDP (Q3)

– China industrial output (Oct)

– Indonesia trade balance (Oct)

– US Producer Price Index (Oct)

– Fed Chairman Powell’s speech

(Editing by Deepa Babington)

 

The Federal Reserve’s policy rate continues to act as a brake on the resilient labor market and on inflation that is still above the 2% target, two US central bankers said on Tuesday, a view that appears to argue for more interest rate cuts, even as both signaled they were not ready to judge how fast or by how much.

“In my judgment we are still in a modestly contractionary stance, but ultimately the economy will guide us, in terms of how far we are needing to go” in cutting the Fed’s benchmark for short-term borrowing costs, Minneapolis Fed President Neel Kashkari said at a Yahoo Finance event.

Speaking earlier, Richmond Fed President Thomas Barkin called the current level of rates “somewhat less restrictive” than it had been, and said he could see scenarios where demand rises and the central bank needs to focus on containing inflation, and others where businesses start laying off workers and it needs to turn more to protecting the job market.

“With the economy now in a good place and interest rates off their recent peak but also off their historic lows, the Fed is in position to respond appropriately regardless of how the economy evolves,” Barkin said at an event in Baltimore.

The Fed cut its policy rate last week by a quarter of a percentage point to the 4.50%-4.75% range. Short-term borrowing costs are now 75 basis points below where they were two months ago, just before the central bank started reducing rates to bring them more in line with falling inflation and what appeared to be a quickly cooling labor market.

In September, Fed policymaker projections were consistent with another quarter-percentage-point rate cut in December, and four more like-sized reductions next year, bringing the policy rate to the 3.25%-3.50% range.

Since then, a lot has happened that could complicate the central bank’s next steps.

Inflation by the Fed’s targeted measure was 2.1% in September, just above its target, but measures of underlying inflation that strip out volatile energy and food prices have been stuck higher, with little sign of recent progress. Economists expect more of the same when the US Labor Department releases the consumer price index for October on Wednesday.

Monthly job gains have dropped, but unemployment, at 4.1%, is low by historical standards. Policymakers are watching for signs of further weakening – which would suggest the need for more rate cuts – or of continued resilience, and they will get just one more monthly employment report before their Dec. 17-18 meeting.

New administration

Republican President-elect Donald Trump’s victory in last week’s election also creates fresh uncertainty. Trump, who will take over from Democratic President Joe Biden in January, has promised to cut taxes, impose new tariffs on imports, and deport a record number of immigrants. While financial markets have generally moved to price in faster economic growth and fewer interest rate cuts as a result, central bankers say they can’t plan a response until it’s clear exactly what policies will be enacted.

Asked what could prompt the Fed to pause rate cuts at the December meeting, Kashkari said he feels there is too little time between now and then for the data to show a reheating of the labor market.

“I think there’d have to be a surprise on the inflation front to change the outlook so dramatically,” Kashkari said. “The bigger question long run is where are we going to settle?”

Kashkari said he believes the level of borrowing costs that neither stimulates nor restricts the economy – the so-called neutral rate – is likely higher than in the past, perhaps because productivity has increased.

Although a higher neutral rate could be one argument for fewer rate cuts ahead, Kashkari steered clear of making predictions, as did Barkin.

“I think we all agree we are above neutral now,” Kashkari said. “But over the course of the next year, we’re going to get a lot more information about where neutral is.”

(Reporting by Ann Saphir; Editing by Paul Simao)