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Oil prices decline after surprise buildup in US crude stocks
- Another round of weak Chinese data
- Fed about to cut interest rates
Global oil prices fell in American trade on Wednesday with US crude extending its losses for the second session away from two-week highs, while Brent gave up two-week highs on profit-taking, following a surprise buildup in US crude stocks according to initial data.
Global oil prices are also weighed down by concerns about weakness in Chinese demand.
Prices
US crude fell 1.85% today to $68.61 a barrel, with a session-high at $69.97.
Brent fell 1.8% today to $72.34 a barrel, with a session-high at $73.73.
On Tuesday, US crude lost 0.85% after moving away from two-week highs at $70.66.
Brent rose 1.1% yesterday to December 4 highs at $72.24.
US Stocks
Initial data from the American Petroleum Institute showed commercial crude stocks in the US rose by 2 million barrels in the week ending December 13, while analysts expected a drop of 0.1 million barrels.
It’s the first such weekly buildup in the past month, and a sign of slowing demand in the world’s largest fuel consumer.
Now investors await official inventory data from the Energy Information Administration later today.
Chinese Data
Recent Beijing data showed industrial production fell to five-month lows in August, while retail sales and new home sales softened as well.
Weak Chinese data is hurting market sentiment and casting a negative outlook for growth and demand on fuel in the world’s largest crude importer.
China’s refinery production also declined for the fifth straight month in another sign of slower demand.
US Rates
Traders expect the Federal Reserve to cut interest rates by 50 basis points today instead of the original 0.25% cut that was expected a few weeks ago.
Lower US interest rates usually improve economic growth and activities, and will likely increase fuel demand.
Bitcoin gives up three-week high ahead of Fed decisions
- Fed prepares to ease monetary policies
- Strong odds of 0.5% rate cut
Bitcoin lost ground on Wednesday away from three-week highs on active profit-taking and risk aversion ahead of the Federal Reserve’s monetary decisions today.
The Federal Reserve is widely expected to cut interest rates for the first time since 2020, with a likely aggressive pace.
Price
Bitcoin fell 1.5% at Bitstamp today to $59,388, with a session-high at $60,758.
On Tuesday, Bitcoin rose 3.6%, the first profit in four sessions, scaling a three-week high at $61,331.
Crypto Market Value
The market value of cryptocurrencies fell by $25 billion to a total of $2.150 trillion as both bitcoin and ethereum lost ground.
The Fed
The Federal Reserve is wrapping up its two-day policy meeting today, widely expected to cut interest rates and commence a new cycle of policy easing.
The Fed’s statement, and press conference by Fed Chair Jerome Powel will likely provide important clues on the future path of US monetary policies.
Dollar resumes losses ahead of Fed decisions
- Fed prepares to ease monetary policies
- Strong odds of 0.5% Fed rate cut
The US dollar lost ground in European trade on Wednesday against a basket of major rivals, resuming losses and about to plumb three-week lows ahead of the Federal Reserve’s policy decisions today.
The Federal Reserve is widely expected to cut interest rates for the first time since 2020, with a likely aggressive pace.
The Index
The dollar index fell 0.3% today to 100.70, with a session-high at 101.02.
The index closed up 0.3% on Tuesday, marking the first profit in four days away from three-week lows at 100.57.
The dollar was boosted by stronger than expected US retail sales data for August.
US Rates
Earlier data showed US retail sales rose unexpectedly by 0.1% in August, showing the economy remains on an expansionary pace.
According to the Fedwatch tool, the odds of a 0.5% Fed rate cut today slipped from 69% to 65%, with the odds of a 0.25% cut inching up to 35%.
The Fed
The Federal Reserve is wrapping up its two-day policy meeting today, widely expected to cut interest rates and commence a new cycle of policy easing.
The Fed’s statement, and press conference by Fed Chair Jerome Powel will likely provide important clues on the future path of US monetary policies.
Sterling gains ground after hot inflation data
- BOE faces persistent inflationary risks
- Odds of UK rate cut recede
The pound rose in European trade on Wednesday against a basket of major rivals, moving near two-week highs against the US dollar following hot UK inflation data in August.
The data showcases the mounting inflationary risks on the Bank of England policymakers before Thursday's policy meeting, which hurt the odds of a UK rate cut this week.
The Price
The GBP/USD pair rose 0.3% today to $1.3200, with a session-low at $1.3156.
The pair fell 0.45% on Tuesday on profit-taking away from two-week highs at $1.3230.
UK Inflation
Earlier government data showed UK consumer prices rose 2.2% y/y in August, same as July.
Core prices rose 3.6% y/y in August, accelerating from 3.3% in July.
Services inflation surged 5.6% in August, above estimates of 5.4%, and up from 5.2% in July.
UK Rates
Following the data, the odds of a UK interest rate cut in September fell from 37% to just 28%, with less than a 50% chance of a November rate cut.
BOE
The Bank of England is convening on Thursday to discuss latest developments, with most analysts expecting no changes to policies or interest rates.
BOE Governor Andrew Bailey said recently it’s too early to declare victory on inflation in the country, in turn dragging the odds of a September rate cut down.