FX168 Financial News (North America) News On Friday (May 24), crude oil prices were under pressure for most of this week due to concerns about the Federal Reserve's long-term restrictive policy and rising crude oil inventories that dampened demand prospects, and then rose slightly. Brent crude oil closed down 2.1% this week and has been falling for four consecutive trading days this week, the longest decline since January 2. WTI closed the week down 2.8%. #原油收盘 #
WTI crude oil futures for July closed up $0.85 per barrel, or 1.11%, to close at $77.72 per barrel. As of press release, it is currently reported at $77.77 per barrel, an increase of 1.17%.
(US West Texas Intermediate (WTI) crude oil futures chart, source: FX168)
The July contract for Brent crude oil closed higher at $0.76 per barrel and closed at $82.12 per barrel. As of press release, it is currently reported at $81.89 per barrel, an increase of 0.96%.
(Brent crude oil futures chart, source: FX168)
[Market News Analysis]
This week, the minutes of the Federal Reserve's latest policy meeting showed a hawkish tone. Steady economic data suggests that inflation may rise.
After the minutes of the Federal Reserve meeting were released on Wednesday, investors increasingly accepted the statement that interest rates would remain high for a long time, and policymakers made cautious remarks, questioning whether inflation is indeed on a reliable downward trajectory.
The financial market currently expects to cut interest rates only once in 2024, which is far from the six rate cuts predicted earlier this year.
On the economic side, new orders for durable goods in the US increased more than expected, and the final consumer confidence value for May, as announced by the University of Michigan, rose sharply.
“The perception that the economy is not slowing down has delayed any summer interest rate cuts,” said Ryan Detrick, chief market strategist at Carson Group. “It is likely that interest rates will not be cut in July, but as (Federal Reserve Chairman) Jerome Powell said, as summer inflation data improves, it is unlikely that interest rates will be cut in September.”
Reports confirm that the US economy remains resilient. This may persuade the Federal Reserve to suspend interest rate cuts this year, so US Treasury yields have mixed ups and downs.
The price of the benchmark 10-year treasury bond recently rose, and the yield rose to 4.4669% from 4.475% late Thursday. The price of 30-year bonds recently rose 4/32, and the yield rose to 4.5729% from 4.58% late Thursday.
The dollar fell against a basket of world currencies, but the dollar is still expected to resume its rise as better-than-expected economic data prompted the market to lower expectations of interest rate cuts.
Dennis Kissler, senior vice president of trading at BOK Financial, said that US summer demand is expected to pick up starting this weekend, and some investors doubt whether this sell-off has been exaggerated.
Independent energy analyst Tim Evans said that concerns about the Federal Reserve's interest rate policy and the increase in US crude oil inventories last week weighed on market sentiment.
The minutes of the latest policy meeting released by the Federal Reserve on Wednesday showed that policymakers questioned whether interest rates would be sufficient to curb stubborn inflation. If inflation soars, some officials are willing to raise borrowing costs again.
Federal Reserve Chairman Jerome Powell and other policy makers have since said they don't think further rate hikes are likely.
Higher interest rates increase borrowing costs, which may slow economic activity and dampen oil demand.
Consumer confidence also fell to its lowest point in five months as concerns about high borrowing costs intensified. On the face of it, household pessimism means consumer spending is slowing down, although the relationship between the two has always been weak.
In a broader perspective, demand for oil remains strong, and total liquid oil consumption is expected to increase by about 1.5 million b/d this year, analysts at Morgan Stanley wrote in a report.
Analysts said the weak demand for gasoline in the US was offset by an unexpected rise in global demand, particularly at the beginning of this year.
The US Energy Information Administration (EIA) said on Wednesday that for the week ending May 17, the supply of gasoline products in the US (an indicator reflecting demand) reached its highest level since November.
Energy services company Beck Hughes (BKR.O) said that on the supply side, the number of oil drills (an early indicator of future production) remained unchanged at 497 this week.
Meanwhile, the market is awaiting an online meeting of the OPEC+ production group formed by the Organization of Petroleum Exporting Countries and its allies on June 2 to discuss whether to extend the voluntary oil production reduction agreement of 2.2 million barrels per day.
Analysts generally expect the current production cuts to be extended until at least the end of September.
Russia said this week that due to “technical reasons,” the country's April oil production exceeded OPEC+ production quotas, a rare case of admitting excess oil production. Analysts and industry sources said the news was surprising and showed that Moscow is facing challenges in controlling production.
Venezuelan oil minister Pedro TelleChea said that with the increase in drilling platforms, Venezuela's oil production plan for December will reach 1.23 million b/d, an increase of about 290,000 b/d over the beginning of the year.
The US Commodity Futures Trading Commission (CFTC) said on Friday that fund managers increased net long positions in U.S. crude oil futures and options for the week ending May 21. The speculators' net long positions on NYMEX WTI crude oil increased by 43,540 lots to 172,286 lots.
[Focus on financial data and events next week]
Tuesday: US Economic Council Consumer Confidence Index
Thursday: Preliminary US GDP for the first quarter, weekly unemployment claims, home sales for sale
Friday: US Personal Consumption Expenditure (PCE) and Personal Income and Expenses