Oil prices slide to 3-month trough on grim outlook for global demand
Global oil prices skidded in American trade on Wednesday to three-month lows, sharpening losses for the second straight session on grim outlook for global demand, after the International Energy Agency reduced its outlook for global demand this year.
Such developments overshadowed initial data that showed a large US crude inventory drawdown last week.
Prices
US crude fell 2.2% to $72.72 a barrel, the lowest since February 26, with a session-high at $78.71.
Brent fell 2% today to $81.08 a barrel, the lowest since February 26, with a session-high at $83.03.
US crude lost 1% on Tuesday, while Brent shed 0.8% amid growing concerns about global demand.
Global Demand
The International Energy Agency said in its April report that it expects global oil demand to grow by 1.1 million bpd this year, down 140 thousand bpd from the previous month’s forecasts as demand from developed economies decline.
The EIA also reported an increase of global crude inventories in March by 34.6 million barrels as trade disruptions led to a sharp increase in oil stocks inside cargo ships.
Conversely, OPEC expects global oil demand to increase by 2.25 million bpd this year, same as March forecasts.
The organization also expects total OPEC+ production to fall by 48 thousand bpd in April to 26.575 million bpd.
US Stocks
Initial data from the American Petroleum Institute showed US crude stocks fell by 3.1 million barrels in the week ending May 10, passing estimates of a 1.4 million barrels drawdown.
Now traders await official data on US crude stocks from the EIA later today, expected to show a drop of 0.4 million barrels.
Gold moves in a positive zone ahead of US inflation data
Gold prices rose in European trade on Wednesday, extending gains for the second straight day and heading for multi-week highs as both the dollar and US treasury yields lose ground.
It comes ahead of important US consumer prices data which will cast light on the future of US interest rates.
The data comes following producer prices data released yesterday, which included sharp downward revisions for March, in turn boosting the odds of a Fed rate cut in the summer.
Prices
Gold prices rose 0.6% today to $2372 an ounce, with a session-low at $2355.
The precious metal rose 0.95% yesterday, resuming gains and moving away from two-week highs at $2378.
The Dollar
The dollar index fell 0.25% on Wednesday, extending losses for the third straight session and plumbing two-week lows at 104.81 against major rivals.
A weaker dollar makes gold-denominated futures cheaper to holders of other currencies.
US Yields
US 10-year treasury yields fell by 0.5% today to a five-week low at 4.418%, underpinning non-yielding assets, following US producer prices data.
US Producer Prices
US producer prices rose 0.5% m/m in April, passing estimates of 0.3%, however, March’s reading was revised to show a contraction of 0.1% instead of a 0.2% increase.
Core producer prices rose 0.5% m/m in April, above estimates of 0.2%, with the March reading revised to show a 0.1% decline.
On a yearly basis, US producer prices rose 2.2% in April, with the March reading reduced to show a 1.8% increase.
US Rates
Following the data, the odds of a Fed interest rate cut in July rose to 30%, and the odds of such a cut in September rose to 70%.
According to the Fedwatch tool, investors are expecting two interest rate cuts overall by the Federal Reserve this year.
US Producer Prices
Now investors await US producer prices data later today, expected to clock in at 3.4% for April, down from 3.5% in March.
The SPDR
Gold holdings at the SPDR Gold Trust remained flat yesterday at a total of 831.93 tonnes, the lowest in a week.
Aussie parks at two month highs even as Australian wages slow down
The Australian dollar rose in European trade on Wednesday against a basket of major rivals, extending gains for the third straight session against the US dollar and hitting a two-month high amid mounting risk appetite.
Such considerations overshadowed earlier data that showed Australian wages slowed down in the first quarter of the year, in turn reducing pressures on the Reserve Bank of Australia and boosting the odds of a rate cut this year.
The Price
The AUD/USD pair rose 0.4% to 0.6651 today, the highest since March 8, with a session-low at 0.6622.
The pair rose 0.3% yesterday, the second profit in a row as most major currencies advance on the US dollar.
Positive Sentiment
Markets are dominated by a wave of positive sentiment as US long-term treasury yields tumbled following producer prices data.
Even as US producer prices rose past estimates last month, the surprise was in the revisions to the March reading.
US Producer Prices
US producer prices rose 0.5% m/m in April, passing estimates of 0.3%, however, March’s reading was revised to show a contraction of 0.1% instead of a 0.2% increase.
Core producer prices rose 0.5% m/m in April, above estimates of 0.2%, with the March reading revised to show a 0.1% decline.
On a yearly basis, US producer prices rose 2.2% in April, with the March reading reduced to show a 1.8% increase.
US Rates
Following the data, the odds of a Fed interest rate cut in July rose to 30%, and the odds of such a cut in September rose to 70%.
According to the Fedwatch tool, investors are expecting two interest rate cuts overall by the Federal Reserve this year.
Australian Wages
Earlier Sydney data showed quarterly wages rose by 0.8% in the first quarter, below estimates of 0.9%.
Such data reduces inflationary pressures on the RBA and paves the way for a likely interest rate cut this year.