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Oil prices up over 3pc for the week

Oil prices up over 3pc for the week

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Oil prices up over 3pc for the week

Crude prices eased on Friday on worries that global oil demand growth could be hit by a strong US dollar and negative economic news from some parts of the world.

Prices declined despite signs of improving US oil demand and falling fuel inventories that helped boost crude prices to a seven-week high a day earlier.

Brent futures fell 47 cents, or 0.6pc, to settle at $85.24 a barrel, while US West Texas Intermediate (WTI) crude (WTI) ended 56 cents, or 0.7pc, lower at $80.73.

The decline pushed WTI out of technically overbought territory for the first time in four days, while Brent futures remained overbought for a fourth day in a row for the first time since early April.

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For the week, Brent was up 3.41pc and WTI by 3.68oc after gaining about 4pc last week.

The US currency rose to a seven-week high versus a basket of other currencies with the Federal Reserve’s patient approach to cutting US interest rates contrasting with more dovish stances elsewhere.

The Fed hiked interest rates aggressively in 2022 and 2023 to tame a surge in US inflation. The higher rates boosted borrowing costs for consumers and businesses, which can slow economic growth and reduce demand for oil.

A stronger US dollar can also reduce demand for oil by making greenback-denominated commodities like oil more expensive for holders of other currencies.

In the world’s biggest oil consumer, US business activity crept up to a 26-month high in June amid a rebound in employment, but price pressures subsided considerably, offering hope that a recent slowdown in inflation was likely to be sustained.

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Existing US home sales, however, fell for a third straight month in May as record-high prices and a resurgence in mortgage rates sidelined potential buyers.

Data from the US Energy Information Administration on Thursday showed total product supplied, a proxy for oil demand, rose by 1.9 million barrels per day last week to 21.1 million barrels per day.

Despite the decline in crude prices, US gasoline futures climbed for a fourth day to a one-month high on rising demand during the summer driving season and a drop in inventories.

MIXED GLOBAL DEMAND SIGNALS

In India, refiners processed nearly 1.3pc more crude oil in May than a year earlier, provisional government data showed, while the share of Russian supplies in imports to India, the world’s third biggest oil consumer, increased.

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“Signs of stronger demand in Asia also boosted sentiment. Oil refineries across the region are bringing back some idled capacity after maintenance,” analysts at ANZ Research said.

But in the eurozone, business growth slowed sharply this month as demand fell for the first time since February.
In China, the world’s second biggest oil consumer, Beijing warned that escalating frictions with the European Union over electric vehicle imports could trigger a trade war.

Geopolitical tensions added to the mixed picture.

Ukraine’s military said its drones struck four oil refineries, radar stations and other military objects in Russia.

The head of Lebanon’s Hezbollah this week pledged a full-on conflict with Israel in the event of a cross-border war and also threatened EU member Cyprus for the first time.

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In Ecuador, state oil company Petroecuador has declared force majeure over deliveries of Napo heavy crude for exports following the shutdown of a key pipeline and oil wells due to heavy rains.

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Oil market likely to be in surplus next year, Morgan Stanley says

Oil market likely to be in surplus next year, Morgan Stanley says

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Oil market likely to be in surplus next year, Morgan Stanley says

The crude oil market is currently tight but next year will likely be in surplus, with Brent prices declining into the mid-to-high $70s range, Morgan Stanley said.

The tightness will hold for most of the third quarter, the bank said in a note dated on Friday, but equilibrium will return by the fourth quarter, “when seasonal demand tailwinds abate and both OPEC and non-OPEC supply return to growth.”

Three sources told Reuters last week that OPEC+ is unlikely to recommend changing the group’s output policy at a mini-ministerial meeting next month, leaving in place a plan to start unwinding one layer of oil output cuts from October.

Morgan Stanley said it expects OPEC and non-OPEC supply to grow by about 2.5 million barrels per day (bpd) in 2025, well ahead of demand growth.

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Refinery runs are set to reach a peak in August this year, and unlikely to return to that level until July 2025, it said.

Morgan Stanley left its forecast for Brent crude prices for the third quarter of 2024 unchanged at $86 per barrel. Earlier this month, Goldman Sachs also maintained its projection for the quarter at an average Brent price of $86 a barrel.

Brent crude prices on Monday were up 0.54% at $83.08 a barrel by 0535 GMT, and US West Texas Intermediate crude futures were up 0.54% at $80.56. 

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Asia stocks skid as China trims rates; Biden steps aside

Asia stocks skid as China trims rates; Biden steps aside

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Asia stocks skid as China trims rates; Biden steps aside

Asian shares slid anew on Monday, getting little lift from a surprise rate cut by China’s central bank, while Wall Street futures firmed in the wake of President Joe Biden’s decision to bow out of the election race.

The People’s Bank of China cut short-term rates by 10 basis points, which pulled down long-term borrowing costs and bond yields. The move follows Beijing’s release of a policy document on Sunday outlining its ambitions for the economy.

Investors seemed underwhelmed with the move, in part as it only emphasised how weak the economy was, and Chinese blue chips slipped 0.9% along with the yuan.

“Basically all the fundamental factors point to the fact that China needs a lower rate environment, especially the real rate is really high…in this kind of disinflationary environment,” said Gary Ng, Asia-Pacific senior economist at Natixis in Hong Kong.

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“I think the general trend is that it’s pretty much in line with the fact that the economy is not that great, and it seems that there’s a bit of urgency from the authorities to stimulate it now.”

MSCI’s broadest index of Asia-Pacific shares outside Japan lost another 0.7%, having shed 3% last week.

Japan’s Nikkei dropped 1.2% and South Korea’s benchmark index fell 1.3%. Taiwan was having another tough session with a loss of 2.3% amid concerns about US restrictions on chip sales.

Investors seemed much better prepared for news President Biden would drop out of the election race and endorse Vice President Kamala Harris for the Democratic ticket.

Online betting site PredictIT showed pricing for a victory by Donald Trump had fallen 4 cents to 60 cents, while Harris climbed 12 cents to 39 cents. California governor Gavin Newsom, another possible Democratic challenger, trailed at 4 cents.

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Markets took the news in their stride, with S&P 500 stock futures nudging up 0.1%, while Nasdaq futures added 0.2%. Futures for 10-year Treasuries rose 2 ticks, while 10-year bond yields dipped 2 basis point to 4.22%.

EUROSTOXX 50 futures added 0.5%, while FTSE futures firmed 0.4%.

“As Trump’s polling results have lifted, markets have favoured positions that anticipate more trade barriers and possibly higher inflation,” ANZ analysts said.

“Some polls have Harris performing better than Biden against Trump, and the Democrats will be hoping the next polls feature a Harris-driven bump.”

EYE ON EARNINGS

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A packed week of corporate earnings will see Tesla and Google-parent Alphabet kick off the season for the “Magnificent Seven” megacap group of stocks.

Others reporting include General Electric, General Motors, Ford and Lockheed Martin.

The tech sector is projected to increase year-over-year earnings by 17%, while profit for the communication services sector is seen rising about 22%.

Such gains would outpace the 11% estimated rise for the S&P 500 overall, according to LSEG IBES.

Europe’s biggest banks also report this week, with eyes on whether the gains from higher interest rates have run out of steam and if recent political drama is weighing on sentiment.

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A busy week for economic news will culminate with the Federal Reserve’s favoured inflation measure out on Friday. The core personal consumption expenditures index is seen rising 0.1% in June, pulling the annual pace down a tick to 2.5%.

Markets are wagering heavily that a benign outcome will firm the case for a September rate cut, which futures are pricing as a 97% chance.

Also due are figures for advance gross domestic product that are forecast to show growth picking up to an annualised 1.9% in the second quarter, from 1.4% in the first.

The closely watched Atlanta Fed GDPNow indicator points to growth of 2.7%, suggesting some risk to the upside.

The Bank of Canada meets on Wednesday and is considered almost certain to cut its rates by a quarter point to 4.5%.

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In currency markets, the dollar gave back just a little of last week’s safe haven gains as the euro edged up 0.1% to $1.0886. The dollar was a fraction softer on the Japanese yen at 157.27.

In commodity markets, gold held at $2,406 an ounce and short of last week’s record high of $2,483.60.

Oil prices inched higher, with scant sign of progress on a ceasefire deal in Gaza as Israeli forces battled Palestinian fighters in the southern city of Rafah on Sunday.

Brent gained 44 cents to $83.07 a barrel, while US crude rose 41 cents to $80.54 per barrel.

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FinMin Aurangzeb set to visit China to reschedule $15 loans

FinMin Aurangzeb set to visit China to reschedule $15 loans

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FinMin Aurangzeb set to visit China to reschedule $15 loans

 In order to reschedul energy loans worth $15 billion, Finance Minister Muhammad Aurangzeb is all set to visit China for three days tomorrow.

The minister will discuss the loan rescheduling with the Chinese authorities. The minister will also discuss China’s energy circular debts worth Rs500 billion.

Read more: Finance Minister Aurangzeb leads delegation to US for IMF talks on new bailout package

The minister will also discuss Panda Bonds during the visit to get the $30 million bonds in China.

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