Oil prices edge higher on US crude stockpiles draw

NEW YORK – Oil prices inched up on Thursday, bouncing back from two-week lows, after data showed falling crude and fuel inventories in the United States.

Brent crude futures settled at USD 74.45 a barrel, up 23 cents, or 0.31%. US West Texas Intermediate crude futures settled down 28 cents, or 0.4%, at USD 70.67 a barrel.

Both benchmarks had settled down on Wednesday, closing at their lowest levels since Oct. 2 for a second day in a row, after OPEC and the International Energy Agency cut demand forecasts for 2024 and 2025.

US crude inventories fell by 2.2 million barrels to 420.6 million barrels in the week ended Oct. 11, the Energy Information Administration said on Thursday, compared with analysts’ expectations in a Reuters poll for a 1.8 million-barrel rise. Gasoline and distillate inventories also fell last week.

“This tells me operational efficiencies are still improving,” said Tim Snyder, chief economist at Matador Economics. “Markets are normalizing.”

Oil output in North Dakota, the third-largest producing state in the US, fell by around 500,000 barrels through October, after wildfires crossed into key producing counties this month, a state regulator said.

The European Central Bank cut interest rates for the third time this year on Thursday, indicating that inflation in the euro zone is now increasingly under control and the economic outlook has worsened.

That decision is expected to boost oil prices as it makes borrowing cheaper, potentially boosting demand.

But fears that a retaliatory attack by Israel on Iran for the latter’s Oct. 1 missile strike could disrupt oil supplies kept prices steady, though uncertainty remains over how the conflict in the Middle East will develop.

“The country’s forthcoming retaliatory measures against Iran are still not clear,” said John Evans of oil broker PVM.

Evans added that the Middle East “will certainly provide enough reason to move oil prices again soon enough and investors today will also be preoccupied with an abundance of financial data.”

The dollar jumped to an 11-week high on Thursday, also offsetting some gains. A firmer US currency can hurt demand for dollar-denominated oil from buyers using other currencies.

Investors are also waiting for further details from China on broad plans announced on Oct. 12 to revive its ailing economy, including efforts to shore up the ailing property market.

(Reporting by Nicole Jao in New York, Paul Carsten and Ahmad Ghaddar in London and Florence Tan and Emily Chow; Editing by Mark Potter, Daren Butler, Jane Merriman. Will Dunham, and Susan Fenton)

Waiting for the big one… China GDP

Anyone hoping for a quiet end to the trading week in Asia will be disappointed, as investors brace for a batch of top-tier economic data on Friday that includes Japanese inflation, Malaysian GDP, and the main event – Chinese GDP.

Other Chinese indicators – September’s retail sales, house prices, industrial production, unemployment, and investment – will also be released. But all eyes will be on third quarter growth and how close it is to the 5.0% mark.

That’s Beijing’s 2024 target, but most analysts say it will be missed. The wave of fiscal stimulus measures announced recently has come too late to boost growth this year but has prompted some economists to raise their 2025 forecasts.

Overall, however, analysts remain pretty glum. Their consensus forecast in a Reuters poll is that gross domestic product expanded 4.5% in the third quarter from a year earlier, slowing from 4.7% in the previous quarter.

For 2024 as a whole they forecast growth of 4.8%, undershooting the government’s target, and expect a further deceleration next year to 4.5%.

Citi’s Chinese economic surprises index has been inching higher in recent weeks but remains firmly in negative territory, where it has been since June. Investors are realizing that Beijing’s fiscal, monetary and liquidity support, however successful they prove to be, will take time to bear fruit.

This is perhaps reflected in Chinese stocks’ third decline in a row on Thursday – Shanghai’s blue chip index is down 15% from its October 8 peak, although still up around 18% since the first stimulus measures were unveiled last month.

Elsewhere in Asia on Friday Japan releases September inflation figures, with economists expecting a marked slowdown in the annual core rate to 2.3% from 2.8% in August. That would be the biggest month-to-month decline since February last year.

It would also support the thinking of Bank of Japan officials who favor a more cautious approach to tightening monetary policy.

The BOJ will forgo raising interest rates again this year, according to a very slim majority of economists in a Reuters poll published this week, although nearly 90% still expect rates to rise by end-March.

Japanese interest rate swaps traders are pricing in a 15 basis points rate hike from the BOJ in January, and only 35 bps of tightening in total next year.

The global market picture looks fairly positive though. On Thursday chip-making giant TSMC delivered an upbeat outlook and US economic data was strong, lifting the Dow to a new high.

Treasury yields and the dollar also rose on Thursday, which is not so positive for emerging markets, however. The dollar is its strongest in two and a half months and has appreciated in all but two of the last 14 trading days.

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

– China GDP (Q3)

– Japan inflation (September)

– Malaysia GDP (Q3)

(Reporting by Jamie McGeever)

Inflows into Asian bonds slow on caution over US rate cuts, elections

Asian bond markets attracted overseas investments for the fifth consecutive month in September, though the pace of inflows slowed due to diminished expectations for further rate cuts by the US Federal Reserve and caution ahead of US elections.

Cross-border investors bought local bonds in Indonesia, India, Malaysia, South Korea, and Thailand, totaling a net USD 4.99 billion, which was less than USD 14.09 billion worth of net purchases the prior month, data from regulatory authorities and bond market associations showed.

Analysts anticipate a further decline in flows into Asian bonds due to the recent strengthening of the US dollar and the increase in US bond yields this month.

The US dollar index hit a two-month high of 103.397, this week, while the yield on US 10-year notes reached a two-and-a-half-month high of 4.12% after strong jobs data and higher-than-expected September inflation reduced expectations for large Fed rate cuts.

Saktiandi Supaat, an analyst at Maybank, noted that near-term risks for emerging market currencies persist, with a potential win by Republican presidential candidate Donald Trump possibly triggering de-risking due to his tariff proposals, while a victory by Democrat Kamala Harris might support a global soft landing and gradual Fed rate easing.

In September, foreigners purchased a net USD 2.76 billion worth of South Korean bonds, less than half the amount received in the previous month, while Indonesian bonds attracted about USD 1.4 billion in overseas capital.

Additionally, foreigners pumped about USD 427 million, USD 253 million, and USD 156 million respectively into Thai, Malaysian, and Indian bonds last month.

However, analysts are optimistic about the inclusion of Asian bonds in global bond indexes, which should bolster inflows.

Indian government securities were added to JPMorgan’s Government Bond Index-Emerging Markets in June 2024 and will join Bloomberg Index Services’ Emerging Market Local Currency Index in January 2025.

Additionally, FTSE Russell will include South Korean government bonds in the World Government Bond Index and Indian bonds in the Emerging Markets Government Bond Index starting in November 2025 and September 2025, respectively.

“Hopefully, the KTB yields’ upward march could be somewhat offset by the capital inflow amid its inclusion into the WGBI Index. The changing rate cut expectations will particularly weigh on higher yielders like IDR rates,” said Samuel Tse, an analyst at DBS Bank.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Chizu Nomiyama)

Inflation cools, TSMC offers AI weather vane

Markets across Asia should open on a firm footing on Thursday, supported by a rebound on Wall Street and softer Treasury yields the day before, and growing signs that global inflationary pressures are broadly easing.

Asia’s economic calendar on Thursday sees the release of the latest international trade data from Japan and Singapore, and Australian unemployment.

The main three US indices all closed in the green on Wednesday with banks and small caps leading the rise. Big Tech, however, remains under pressure, which may intensify the spotlight even more on TSMC’s third quarter results on Thursday.

Taiwan Semiconductor Manufacturing Co, the main producer of advanced chips used in artificial intelligence applications, is expected to report a 40% leap in profit to TUSD 298.2 billion (USD 9.27 billion) thanks to soaring demand.

The world’s largest contract chipmaker, whose customers include Apple, Nvidia, and ASML, has benefited from the global surge towards AI. A miss or weak guidance, however, could trigger another wave of selling across Big Tech.

But assuming analysts’ estimates are met or even exceeded, the backdrop to Thursday’s session in Asia looks favorable, despite the dollar’s tick higher. The VIX index of US stock market volatility dipped back below 20.0 on Wednesday and oil fell for a fourth day in a row.

Falling oil prices are often a warning of weak global economic activity and demand. A huge miss and surprising slump in Japanese machinery orders on Wednesday will only have strengthened those concerns.

But the disinflationary pull from oil’s weakness cannot be ignored, and if investors like one thing it’s lower interest rates. In that light, investors will have been encouraged by the price signals from around the world over the last 24 hours.

Inflation in New Zealand was slightly weaker than expected, inflation in Britain was much weaker than expected and sure to cement UK rate cut expectations, while the Bank of Thailand delivered a surprise rate cut.

With the European Central Bank widely expected to cut rates on Thursday by 25 basis points for a second meeting, to 3.25%, global financial conditions are loosening. Rates traders currently expect the Fed, ECB, and Bank of England each to cut rates another 50 bps and the Bank of Canada to cut at least another 75 bps by the end of the year.

That’s a lot of easing, especially without a recession, at least in the US. Indeed, if there is a US recession coming, someone forgot to tell the corporate bond market, where spreads are now the tightest in nearly 20 years.

This is usually where the first hints of recession are seen as investors move to price the impending impact of rising unemployment, slowing growth, and consumer weakness on companies’ debt loads.

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

– Australia unemployment (September)

– Japan trade (September)

– Taiwan’s TSMC earnings (Q3)

(Reporting by Jamie McGeever)

Pullback in US yields spurs gold’s march toward record peak

Gold advanced towards record highs on Wednesday as gains in non-yielding bullion were bolstered by weakness in US bond yields and expected rate cuts by major central banks, with additional safe-haven support from ongoing geopolitical conflicts.

Spot gold rose 0.5% to USD 2,673.24 per ounce by 5:30 p.m. ET (2130 GMT), inching close to a record high of USD 2,685.42 it hit on Sept. 26. US gold futures settled 0.5% higher at USD 2,691.3.

“Expectations of a 25-basis-point rate cut by the US Federal Reserve in November are solidifying, weaker inflation data in Europe and the UK have increased expectations for more aggressive ECB and BoE easing, leading to generally lower yields which have lifted gold,” said Peter A. Grant, vice president and senior metals strategist at Zaner Metals.

“There’s even an outside chance we could see close to USD 3,000, and that’s probably more of a Q1 2025 target,” Grant said.

US Treasury yields fell to their lowest in over a week, making gold more attractive as it tends to thrive in a low interest rate environment.

Traders currently see about a 94% chance of a 25-basis-point US rate cut in November, according to the CME FedWatch tool.

The European Central Bank looks set to deliver another rate cut on Thursday, while a drop in British inflation indicated a rate cut next month by the Bank of England.

The main bullish drivers for gold include the risk of fiscal instability, safe-haven appeal, geopolitical tensions, de-dollarization, US Presidential election uncertainties, and rate cuts by central banks, said Ole Hansen, head of commodity strategy at Saxo Bank.

Delegates to the London Bullion Market Association’s annual gathering predicted gold prices would rise to USD 2,941 over the next 12 months and silver prices would jump to USD 45 per ounce.

Spot silver firmed about 0.6% to USD 31.67. Platinum rose 1% to USD 994.43 and palladium climbed 1.5% to USD 1,024.76.

(Reporting by Anushree Mukherjee in Bengaluru, additional reporting by Swati Verma; Editing by Krishna Chandra Eluri and Tasim Zahid)

US Treasury yields decline as Fed-cut expectations firm

NEW YORK – US Treasury yields dipped on Wednesday, with the benchmark 10-year note yield down for a third-straight session as investors dialed in expectations for the path of interest rates ahead of data on consumer strength.

The 10-year yield had risen four straight weeks, reaching 4.12% last week, its highest since July 31, in the wake of a strong payrolls report that diminished expectations for another outsized rate cut of 50 basis points from the Fed at its November policy meeting.

Labor Department data on Wednesday showed import prices slipped 0.4% last month, the biggest drop since December 2023, after a revised 0.2% decrease in August, amid a sharp decrease in the cost of energy products and indicating a benign inflation outlook that keeps the Fed on course to continue cutting interest rates.

The data comes ahead of retail sales figures on Thursday that will provide insight on the health of the consumer.

“Most likely if they come around expectations, it’s supportive of a still resilient and strong consumer, so not pointing to the need for super-fast rate cuts,” said JoAnne Bianco, BondBloxx partner and client portfolio manager in Chicago.

“We translate this into our view of where we think value is in the markets and we think the backup in yields that we’ve seen really has represented an opportunity for investors to increase their allocation to fixed income.”

Markets are now pricing in a 94.2% chance for a cut of 25 bps at the Fed’s next meeting, with only a 5.8% chance the central bank will hold rates steady, according to CME’s Fedwatch Tool. Expectations for a 50-bps cut were at 29.3% a month ago.

The yield on the benchmark US 10-year Treasury note fell 2.6 basis points to 4.012% after dipping to 3.995%, its lowest since Oct. 7.

Comments from Fed officials, including Chair Jerome Powell, have signaled a shift in focus from combating inflation to labor-market stability while also being deliberate in the path of future rate cuts.

The yield on the 30-year Treasury bond slipped 3.3 basis points to 4.295%.

Atlanta Federal Reserve President Raphael Bostic said late on Tuesday he penciled in just one more interest-rate reduction of 25 basis points this year when he updated his projections for September’s US central bank meeting.

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 positive 7.7 basis points.

The two-year US Treasury yield, which typically moves in step with interest-rate expectations, lost 2.3 basis points to 3.933%.

The breakeven rate on five-year US Treasury Inflation-Protected Securities was last at 2.219% after closing at 2.226% on Oct. 15.

The 10-year TIPS breakeven rate was last at 2.273%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Andrea Ricci and Rod Nickel)

Oil prices hold at 2-week low on lower oil demand growth forecasts

NEW YORK – Oil prices held near a two-week low on Wednesday after dropping about 7% over the prior three days on forecasts for less oil demand growth and reduced concerns that Middle East conflicts will disrupt supply.

Brent futures fell 3 cents to settle at USD 74.22 a barrel, while US West Texas Intermediate (WTI) crude fell 19 cents, or 0.3%, to settle at USD 70.39.

Both crude benchmarks closed at their lowest levels since Oct. 2 for a second day in a row.

Earlier this week, crude prices fell in response to a weaker demand outlook and a media report that Israel would not strike Iranian nuclear and oil sites, easing fears of supply disruptions.

Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and produced about 4.0 million barrels per day (bpd) of oil in 2023, US Energy Information Administration (EIA) data showed.

Iran was on track to export around 1.5 million bpd in 2024, up from an estimated 1.4 million bpd in 2023, according to analysts and US government reports.

Iran is backing several groups fighting Israel, including Hezbollah in Lebanon, Hamas in Gaza and the Houthis in Yemen.

Concern about an escalation in the conflict between Israel and Iran-backed militant group Hezbollah persists. Supply curbs by OPEC and its allies including Russia, a group known as OPEC+, remain in place until December when some members are scheduled to start unwinding one layer of cuts.

On the demand side, OPEC and the International Energy Agency this week cut their 2024 global oil demand growth forecasts, with China accounting for the bulk of the downgrades.

The IEA forecast global oil demand would peak before 2030 at less than 102 million bpd and then fall to 99 million bpd by 2035.

Fiscal stimulus announced in China has failed to give oil prices much support. China may raise an additional 6 trillion yuan (USD 850 billion) from special treasury bonds over three years to stimulate a sagging economy, local media reported.

Positive economic news from the US and Europe helped limit the oil price slide on Wednesday.

In Europe, the eurozone economy showed some signs of life with a raft of indicators pointing to lukewarm but still positive growth for a bloc that has been skirting a recession for over a year. US import prices fell by the most in nine months in September as energy product costs fell sharply, signaling a benign inflation outlook that keeps the Federal Reserve on course to keep cutting interest rates.

After hiking rates aggressively in 2022 and 2023 to tame a surge in inflation, the Fed started to lower rates in September.

Lower rates decrease borrowing costs, which can boost economic growth and demand for oil.

US OIL STORAGE DATA

Weekly US oil storage data is due from the American Petroleum Institute (API) trade group later on Wednesday and the EIA on Thursday. The reports were delayed by one day for the US Indigenous Peoples’ Day holiday on Monday.

Analysts projected US energy firms added about 1.8 million barrels of crude into storage during the week ended Oct. 11.

If correct, that would be the first time energy firms boosted stockpiles for three weeks in a row since April and compares with a withdrawal of 4.5 million barrels in the same week last year and an average increase of 1.1 million barrels over the past five years (2019-2023).

(Reporting by Scott DiSavino, Alex Lawler, Arunima Kumar, Jeslyn Lerh, and Sudarshan Varadhan; Editing by Paul Simao, Andrea Ricci, and Richard Chang)

Gold gains on lower yields, traders await more US data

Gold edged higher on Tuesday lifted by retreating Treasury yields, while investors cautiously awaited more data that could offer fresh clues on the Federal Reserve’s monetary easing cycle.

Spot gold rose 0.5% to USD 2,663.83 per ounce at 2:00 p.m. ET (1800 GMT). US gold futures settled 0.5% higher at USD 2,678.9.

The Benchmark 10-year note yields slipped following a soft reading of manufacturing activity in New York State, making non-yielding gold more attractive, while the dollar hovered near its highest in more than two months.

“We’re seeing a little pullback in yields as bond prices rally here. That’s offering a little stability, a little support to the gold market,” said David Meger, director of metals trading at High Ridge Futures.

“There is an expectation that gold would be going through a bit of a pause or a bit of a consolidation. We’re leaning now more towards a sideways to higher uptrend as we do think that yields are going to retrace a bit. We’re going to see a little bit of a pullback in the dollar.”

Currently, traders see about a 90% chance of a 25-basis-point cut in November, according to the CME FedWatch tool.

Markets’ attention will be on upcoming US retail sales, industrial production data, and weekly jobless claims due later this week.

Gold, which yields no interest on its own, also gains in times of political and economic uncertainties.

Should the media reports prove to be true and Israel refrains from targeting Iran’s oil and nuclear sites in the expected retaliatory strike, geopolitical risks would decrease, and support for the gold price from this side would also fade, Commerzbank said in a note.

“We see slight downside risks for the gold price and expect the gold price to be USD 2,600 at the end of the year.”

Spot silver rose 1% to USD 31.49 per ounce and platinum fell 0.5% to USD 988.45. Palladium was down 1.6% to USD 1,012.98.

(Reporting by Anushree Mukherjee in Bengaluru, Editing by Franklin Paul, Vijay Kishore, and Shailesh Kuber)

Yields fall after manufacturing data, Fed comments

NEW YORK – US Treasury yields declined on Tuesday, easing after a recent run to the upside that sent the benchmark 10-year note to a 2-1/2 month high, following a soft reading of manufacturing activity in New York State.

The New York Fed’s monthly gauge of factory activity in the state fell to a negative 11.9 in October from the prior 11.5 in September. Readings above zero indicate expanding activity.

Economists polled by Reuters had expected another month of expanding activity with a median forecast of 3.85.

“Yield to the upside kind of ran its course at this point and you just needed a small catalyst to kind of create a soft cap at this point, that’s all it is,” said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania.

“You’d probably need to have some type of material catalyst in order for it to keep running higher and since we really haven’t had that at this point now, it’s probably just going to be range-bound until we can get evidence as to what might factor into what the Fed will do going forward.”

The yield on the benchmark US 10-year Treasury note fell 3.9 basis points to 4.034%.

The 10-year yield has risen for four straight weeks, reaching 4.12% last week, its highest since July 31 in the wake of a strong payrolls report that diminished expectations for another outsized rate cut of 50 basis points (bps) from The Federal Reserve at its November policy meeting.

The yield on the 30-year bond declined 5.8 basis points to 4.324%.

Markets are now pricing in a 94.1% chance for a cut of 25 bps at the Fed’s next meeting, with only a 5.9% chance the central bank will hold rates steady, according to CME’s Fedwatch Tool. Expectations for a 50 bps cut were at 27% a month ago.

Comments from Fed officials, including Chair Jerome Powell, have signaled a shift in focus from combating inflation to labor market stability while also being deliberate in the path of future rate cuts. Investors will eye data on the health of the consumer on Thursday with retail sales numbers for September.

Federal Reserve Bank of San Francisco President Mary Daly said the central bank remains on track for more rate cuts this year as long as data meets expectations, while noting that even with last month’s rate cut, monetary policy is still working to bring inflation pressure down.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, edged up 1.1 basis points to 3.982%.

Federal Reserve Bank of Atlanta President Raphael Bostic is scheduled to speak later on Tuesday.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.239% after closing at 2.283% on October 11.

The 10-year TIPS breakeven rate was last at 2.291%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak, Editing by Nick Zieminski and Chizu Nomiyama)

Oil plunges 4% as Iran supply disruption concerns ease, demand outlook weakens

HOUSTON – Oil prices tumbled more than 4% to a near two-week low on Tuesday due to a weaker demand outlook and after a media report said Israel would not strike Iranian nuclear and oil sites, easing fears of a supply disruption.

Brent crude futures settled down USD 3.21, or 4.14%, at USD 74.25 a barrel. West Texas Intermediate futures finished down USD 3.25, or 4.4%, at USD 70.58 a barrel.

Both benchmarks had earlier fallen by USD 4, reaching their lowest since the beginning of October, after settling about 2% lower on Monday.

“We’re seeing an unwinding of the war premium we built up last week,” said Phil Flynn, senior analyst at Price Futures Group. “What we’re seeing, it’s not really about supply, it’s about the risk to supply and demand.”

Brent and WTI are down about USD 5 so far this week, nearly wiping out cumulative gains made after investors became concerned Israel could strike Iran’s oil facilities in retaliation for Tehran’s Oct. 1 missile attack.

Israeli Prime Minister Benjamin Netanyahu told the United States that Israel was willing to strike Iranian military targets and not nuclear or oil ones, the Washington Post reported late on Monday.

Both the Organization of the Petroleum Exporting Countries and the International Energy Agency this week cut their forecasts for global oil demand growth in 2024, with China accounting for the bulk of the downgrades.

OPEC has projected a much stronger expansion of global demand for the year than the IEA. But its “run of lower adjustments is something of an admission of wishful thinking,” said John Evans at oil broker PVM.

OPEC and its allies, known as OPEC+, may change production plans for late this year, said Andrew Lipow, president of Lipow Oil Associates.

“I think OPEC+ is going to defer raising production later this year,” Lipow said.

Current crude prices are below levels needed for many of those countries to meet their national budgets, Lipow added.

(Reporting by Erwin Seba, additional reporting by Paul Carsten, Sudarshan Varadhan, and Emily Chow; Editing by Christina Fincher, Emelia Sithole-Matarise, and Chizu Nomiyama)

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