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TOKYO: Oil prices fell on Thursday for the first time in three days after San Francisco Federal Reserve President Mary Daly sounded a note of concern about the strength of U.S. economy.
Brent crude was down 30 cents, or 0.5%, at $60.19 a barrel by 0202 GMT while U.S. crude was down 15 cents, or 0.3%, at $55.63 a barrel. Oil prices rose around 1.5 percent in the previous session.
Concerns about a slowdown in economic growth due to the trade war raging between the United States and China, along with the potential hit to oil demand, are keeping prices in check.
Daly said on Thursday she believes the U.S. economy has “strong” momentum, but uncertainty and a global growth slowdown are having an impact.
Daly was speaking to reporters after a speech in Wellington, New Zealand and said she was in “watch and see” mode in assessing the need for another U.S. interest-rate cut.
U.S. President Donald Trump said on Monday he believed China was sincere about wanting to reach a trade deal, but concerns arose on Tuesday after China’s foreign ministry declined to confirm a telephone call between the two countries on trade.
“Trade tensions (are) hanging like a dark cloud threatening to rain over oil prices,” said Jeffrey Halley, senior market analyst at OANDA.
The market shrugged of a big drop in U.S. inventories, which fell last week by 10 million barrels, compared with analysts’ expectations for a decrease of 2.1 million barrels, the Energy Information Administration said.
U.S. gasoline stocks fell by 2.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 388,000-barrel drop.
Distillate stockpiles, which include diesel and heating oil, fell by 2.1 million barrels, versus expectations for a 918,000-barrel increase, the EIA data showed.
The crude drawdown confirms “that OPEC supply cuts are effectively working by depleting U.S. reserves,” said Stephen Innes, managing partner at Valour Markets.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers have been restraining supply for most of the period since Jan. 1, 2017. The alliance, known as “OPEC+”, in July renewed the pact until March 2020.
U.S. weekly crude production also rose 200,000 barrels per day to a new record at 12.5 million bpd in the week to Aug. 23. – Reuters
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NEW YORK: Plunging bond yields jolted global markets Wednesday as interest rate cuts by three central banks and grim German economic data underscored worries about a weakening global economy amid the protracted US-China trade war.
Wall Street opened the day in sell-off mode, a familiar theme in August as the US and China have announced new measures targeting each other.
But after a bruising start, US stocks gradually pushed higher throughout the day while Treasury yields recovered from their lows. Two of the three major Wall Street indices finished in positive territory.
Decisions by more central banks to cut interest rates and weak German industrial data “reminded investors that economic growth in several other regions of the world remain at risk as the US and China trade dispute drags on,” said CFRA strategist Lindsey Bell in a note.
“While uncertainty is driving upside in defensive asset classes, we don’t think stocks should be abandoned at this time. A near-term recession is unlikely.”
Still, most banks were under pressure, with Italy’s UniCredit and Germany’s Comemrzbank both sharply lower following warnings on the hit from lower interest rates. Large US banks such as JPMorgan Chase and Wells Fargo also lost more than two percent.
Bond prices rise as more investors seek safe investments, and that pushes their yield or return lower. The benchmark US government 10-year note dropped to multi-year lows, while French and German bond yields, already in negative territory, set new record lows.
“Nobody wants to be vulnerable, everybody is in risk aversion mode, and all ingredients are in place to push yields lower,” Aurelien Buffault, bond manager at Meeschaert, told AFP.
Rates falling everywhere
Markets now believe that the world’s key central banks will cut interest rates further to stave off, or at least alleviate, any coming recession, analysts said.
“Rates falling everywhere,” analysts at Moneycorp said.
“They may not exactly be competing but the world’s central banks all seem to be pointing in the same direction towards lower rates. In every case there is concern, to a greater or lesser degree, about the global economy.”
Commodity markets also followed the logic of economic worry, with safe-haven investment gold surging and oil, the fuel of economic growth, falling.
Gold went above $1,500 per ounce for the first time since 2013.
Oil extended already steep weakness after the US Department of Energy reported a surprise increase in inventories — a sign of flagging demand.
European stocks had a rollercoaster session which started on an upbeat note but then turned sour when US stocks fell sharply at the New York opening bell as “escalated US-China trade concerns continuing to weigh on sentiment,” Charles Schwab analysts said.
But as Wall Street came off its morning lows, European equities regained their poise to close mostly higher. – AFP