Brent crude slid nearly 1% in European trade, resuming losses after a two-day attempt to recover from two-week lows, amid renewed concerns about  fuel demand in the short term.

Concerns are focused on the US in particular with expectations the Fed will carry on its rate hikes for a longer duration this year. 

Brent

Brent fell 1% to $82.09 a barrel, with a session-high at $83.21, after rising 0.75% on Friday, the second profit in a row away from two-week lows at $80.27. 

Brent shed 0.25% last week, the second weekly loss in a row on concerns about US oversupply. 

Global Demand

Analysts expect prices to drop more amid weaker demand on crude worldwide, and especially in the US as the Federal Reserve continues to tighten its policies.

US Supplies

Recent EIA official data showed US crude stocks rose for the ninth week in a row to May 2021 highs in a negative sign for demand in the US.

US output pumped 12.3 million bpd last week, the highest since April 2020, with the EIA expecting record output in March from the largest 7 shale oil basins in the country.

Will Brent Relinquish $80 a barrel?

It's very possible for Brent to slide below $80 a barrel if traders continued to shun riskier assets and if the dollar and US treasury yields kept on their march north.

US durable goods orders fell 4.5% in January, missing estimates of a 3.7% drop, and compared to December's 5.1% increase.

Core orders, excluding transportation, rose 0.7%, beating estimates of a 0.1% increase, while analysts expected a 0.2% drop.

Dollar declined in European trade against a basket of major rivals off eight-week highs, on track for the first loss in five days on profit-taking.

Investors await important US data on durable goods orders, which could show another bright spot in the US economy. 

Strong US consumer spending data bolstered bets on multiple more rate hikes by the Federal Reserve as inflationary pressures remain strong.

The Index

The dollar index fell 0.2% to 105.03, with a January 6 high at 105.35, after rising 0.6% on Friday, the fourth profits in a row, following upbeat US consumer spending data.

Latest US data showed personal spending rose 0.6% in January, above estimates of a 0.4% rise.

Analysts believe recent US data is indicative the US is undergoing overheat in activities, raising pressure on the Fed to extend policy tightening in upcoming months.

Fed Rates

Following Friday's data, odds for an at least 0.25% Fed rate hike in March were 100%, while odds for a 0.5% rate hike rose from 27% to 33%.

Futures traders now expect US rates to reach a peak of 5.5% in July and to remain above 5% throughout this year.

Fed Remarks

Cleveland Fed President Loretta Mister said on Friday that more efforts are needed by the Fed to bring inflation back to 2%. 

US Treasury Secretary Janet Yellen said on Saturday that recent data shows another spike in inflation in January, and that battling inflation isn't a linear effort.

Analysis

Major analysts expect that recent consumer spending data will bolster the case for multiple more 0.25% rate hikes in March, May, and June.

Swiss Franc slid in European trade for the fifth straight session against dollar to 2023 lows, particularly two-month lows on concerns about a policy gap between Switzerland and the US.

Uncertainty surrounds the Swiss National Bank's policies following the expected 0.5% rate hike in March, while a batch of bullish US data paved the way for multiple more Fed rate hikes following March.

The dollar rose 0.3% against the franc to 0.9429, the highest since December 7, with a session-low at 0.9398.

The franc closed Friday 0.7% lower, the fourth loss in a row, and the longest such streak of losses since November, following upbeat US consumer spending data. 

The franc lost 1.8% last week against dollar, the largest weekly loss since August 2022.

Swiss Rates

Swiss interest rates are settled at 1%, the highest since 2008, but the second lowest worldwide. 

The latest Swiss inflation data bolstered the case for a 0.5% rate hike by the National Bank in March, the second such a hike in a row. 

Thus Swiss rates will reach 1.5%, compared to an expected 5% US rates following the March Fed meeting, widening the policy gap between both countries.

Fed Rates

Latest US data showed personal spending rose 0.6% in January, above estimates of a 0.4% rise.

Analysts believe recent US data is indicative the US is undergoing overheat in activities, raising pressure on the Fed to extend policy tightening in upcoming months.

Following Friday's data, odds for an at least 0.25% Fed rate hike in March were 100%, while odds for a 0.5% rate hike rose from 27% to 33%.

Futures traders now expect US rates to reach a peak of 5.5% in July and to remain above 5% throughout this year.