Mese: Settembre 2023

(C) Reuters. FILE PHOTO: An Aramco employee walks near an oil tank at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah/File Photo

By Laura Sanicola

(Reuters) -Oil prices settled 1% lower on Friday due to macroeconomic concerns and profit taking, but rose about 30% in the quarter as OPEC+ production cuts squeezed global crude supply.

Front-month Brent November futures settled down 7 cents to $95.31 per barrel at the contract’s expiry, up about 2.2% in the week and 27% in the third quarter. The more liquid Brent December contract was settled down 90 cents to $92.20 per barrel.

U.S. West Texas Intermediate crude (WTI) settled down 92 cents to $90.97, up 1% in the week and 29% in the quarter.

With oil futures inching closer to $100 a barrel, many investors took profits on the rally given ongoing macroeconomic concerns.

“WTI has been the belle of the ball, but today it’s losing its luster,” said John Kilduff, partner at Again Capital LLC in New York, citing profit taking and economic concerns.

Oil and gas activity in three U.S. energy producing states has been rising with the latest jump in prices, according to a survey by the Federal Reserve Bank of Dallas.

In July, U.S. crude production grew to its highest since November 2019, according to data from the Energy Information Administration.

Investors looked ahead to a potential partial U.S. government shutdown on Sunday, an “unnecessary risk” to a resilient U.S. economy, top White House economic adviser Lael Brainard said.

Worries about the Chinese economy also intensified as shares of indebted property developer Evergrande Group were suspended until further notice following a report that its chairman had been placed under police watch.

The U.S. oil and gas rig count, an early indicator of future output, fell by seven to 623 in the week to Sept. 29, the lowest since February 2022, energy services firm Baker Hughes said in its closely followed report on Friday.

While the total rig count fell by 51 in the third quarter, the cuts have slowed compared with a reduction of 81 in the second quarter as oil prices have rebounded due to tightening supplies.

Brent is forecast to average $89.85 a barrel in the fourth quarter and $86.45 in 2024, according to a survey of 42 economists compiled by Reuters on Friday.

The OPEC+ ministerial panel meeting will take place on Oct. 4 and there is “increasing probability the voluntary supply cuts by Aramco (TADAWUL:2222) are reduced,” National Australia Bank (OTC:NABZY) analysts said in a client note, referring to Saudi Arabia’s state oil producer.

The supply cuts announced by Saudi Arabia and Russia are expected to dominate oil prices for the remainder of this year.

However, a run towards $100 per barrel could be short-lived because of “the artificial nature of supply shortages in the system, and the fragile macro environment”, said Suvro Sarkar, energy sector team lead at DBS Bank.

Investing.com – Gold prices fell for a second quarter in a row after losses that began in August and held through September, underscored by the current week’s drop — the worst in more than two years.

Gold’s most-active futures contract on New York’s Comex, December, settled at $1,866.10. an ounce, down $12.50, or 0.7% on the day. The benchmark for U.S. gold futures was down 4% for the week, its biggest weekly decline since a near 6% plunge during the week to June 11, 2021.

For the third quarter, the drop on Comex gold was around 3%, after declines of 2% in August and 5% in September that offset July’s gain of 4%. In the second quarter, gold futures fell almost 4%.

The spot price of gold, more closely watched by some traders than futures, was at $1,850.20 by 14:00 ET (18:00 GMT), versus the prior session’s settlement of $1,864.56. A week ago, spot gold settled at $1,924.99. At the close of June, it was at $1,919.57.

More significantly, gold gave up in September its hold on the key bullish level of $1,900 an ounce that the yellow metal had held since mid-August. That came after some investors found the dollar — the archrival to gold — a better safe-haven as U.S. economic growth remained relatively superior to the rest of the world.

Gross domestic product in the United States grew 2.1% year-on-year in the second quarter, after 2.2% in the first. GDP is projected to expand 2.1% for all of 2023. The euro area economy, in contrast, is projected to grow just 0.7% this year.

Bond yields, dollar seen pressuring gold further despite retreat

But more than all these, gold was negatively impacted by a selloff in U.S. bonds that sent the dollar flying as investors chased yields.

Bond yields, benchmarked to the return on the 10-year U.S. Treasury note, hovered at just under 4.58 on Friday after reaching a 16-year high of nearly 4.69 on Thursday.

“Gold is getting crushed here despite some calm in the bond market as investors pile back into equities. Real yields are not backing away anytime soon and that still has gold on the ropes.

The Dollar Index remained stubbornly at around 106 — adding to the weight on gold — after a 10-month high of 106.84 on Wednesday.

The dollar held up despite latest inflation data that raised hopes that the Federal Reserve might extend its hold on interest rates at its November policy meeting. The Personal Consumption Expenditure (PCE) Index, a price gauge closely followed by the Fed, rose 0.4% last month, just below Wall Street expectations for a 0.5% rise.

The Fed left rates unchanged when it last met on September 20, after adding a quarter point in July. It has hiked rates 11 times since March 2022, adding 5.25 percentage points to a prior base that peaked at just 0.25%. While the central bank paused on an increase this month, it maintained projections that a quarter point increase was possible at either one of its remaining two meetings for this year, scheduled in November and December.

Gold also couldn’t catch a safe-haven bid from a looming shutdown of the U.S. government after Republicans in Congress delayed funding to keep public agencies running.

(Ambar Warrick contributed to this item)

(C) Reuters.

Investing.com – Crude prices fell on the last trading day of September on growing uneasiness over how the world might cope in the coming months with exploding energy costs, even as the U.S. economy and inflation appeared to have escaped the worst of such impact right away. Those long oil also won big on the month and quarter, helped largely by chokes on Saudi and Russian supply.

New York-traded West Texas Intermediate, or WTI, crude for delivery in November settled at $90.79 per barrel, down 92 cents, or 1%, on the day.

While WTI fell on the day, it rose 0.8% on the week, resuming its rally from the end of August after a one-week hiatus last week. For the month, the U.S. crude benchmark rose 8.5%, making September its best since July’s gain of nearly 16%.

The July-September period, where WTI rose 26.5%, also marked the best quarter for the U.S. benchmark since the first three months of 2022. Then WTI traded as high as $130 a barrel as Russia’s invasion of Ukraine opened the way for Western sanctions on Moscow that began the long-running disruption in global commodity flows. Now, WTI is within striking range of triple-digit pricing, reaching a 13-month high of $95.03 on Sept. 28.

London-traded Brent for the most-active December contract settled at $92.20 a barrel, down 90 cents, or 1%, on the day. The global crude benchmark rose 0.3% on the week, 6.8% on the month and 23% for the quarter. The global crude benchmark reached a 10-month high of $95.35 on Sept. 28.

“After an amazing week, month and quarter, oil was ready for some profit-taking,” said Ed Moya, analyst at online trading platform OANDA. “Energy traders quickly realized this wasn’t the time for oil to rally above the $100 a barrel level, so they are cautiously locking in some profits.”

Oil prices have gained between $25 and $30 from May lows of beneath $64 for WTI and $72 for Brent. The rally was largely in response to cumulative production squeezes of at least 1.3 million barrels per day by Saudi Arabia and Russia. The two say they are trying to “balance” the market — though the reality is they are creating a supply deficit so great versus stagnant demand that prices would have no choice but to rise.

The two prime movers of OPEC+ — an alliance which bands the 13-member Saudi-led Organization of the Petroleum Exporting Countries with 10 independent oil producers steered by Russia — have also benefited from tacit collusion on output from U.S. oil producers.

While antitrust laws forbid U.S. energy companies from participating in OPEC-like schemes that are against the spirit of free-market competition, American oil firms, lured by the Saudi bent in getting a barrel back to above $100, have restrained production too whenever possible in the name of returning cash to shareholders.

The Saudis, Russians and rest of OPEC+ will meet again next week to review the impact of their production cuts on the market and what to do going forward.

Demand for U.S. crude has, meanwhile, exploded internationally as it begins to fill some pockets underserved by the Saudi-Russian squeeze. That has led to a plunge in inventory levels at the Cushing, Oklahoma hub that serves as a central delivery and storage point for U.S. crude. This is especially so with the pick up in shipments of a new U.S. crude grade called WTI Midland — which is comparable to the viscosity of the heavier Arab and Russian oils versus the typically light-grade that’s WTI.

Analysts: Overbought oil market needs to correct

OANDA’s Moya isn’t the only one who thinks the oil rally will have to cool with the global economy.

Reuters’ market analyst John Kemp says oil traders have placed so many bullish bets on crude prices that the trade has become overcrowded and was due for a correction.

In his latest column on oil buying among institutional traders, Kemp pointed out that over the past four weeks, traders had bought a total of 183 million barrels of crude and fuel futures. That has brought the total up to 525 million barrels. More importantly, the ratio of bullish to bearish bets on oil and fuels had risen to almost 8:1.

According to Kemp, this is a sign that oil prices may start reversing their gains before too long.

Others, however, anticipate even higher prices, with JP Morgan saying this week that Brent could reach $150 per barrel. Other commodity analysts see Brent hitting $100 before this year’s end.

But Wall Street’s forecasters are often too caught up in chasing a market one way that they ignore counteracting forces. And one of the bigger risks to the oil rally remains the Federal Reserve and its higher-for-long regime for U.S. interest rates.

Energy-driven inflation, economic worries ahead for Q4

Fed Chair Powell told a news conference last week that energy-driven inflation was one of the central bank’s bigger concerns.

The Fed has raised interest rates 11 times between March 2022 and July 2023, adding a total of 5.25 percentage points to a prior base rate of just 0.25%. It could add another quarter point in November or December and more likely in 2024.

U.S. Treasury yields, benchmarked to the U.S. 10-year note, shot to fresh 16-year highs on Thursday, on expectations over Fed hikes. That bond market selloff could do the oil rally in ultimately, say analysts.

The US Dollar Index remained stubbornly at around 106 on Friday — adding to the weight on gold — after a 10-month high of 106.84 on Wednesday.

The dollar has been little changed despite latest inflation data that raised hopes that the Federal Reserve might extend its hold on interest rates at its November policy meeting. The Personal Consumption Expenditure Index, a price gauge closely followed by the Fed, rose 0.4% last month, just below Wall Street expectations for a 0.5% rise.

(Peter Nurse and Ambar Warrick contributed to this item)

(C) Reuters. U.S. House Speaker Kevin McCarthy (R-CA) speaks with reporters as the deadline to avert a partial government shutdown approaches on Capitol Hill in Washington, U.S., September 28, 2023. REUTERS/Craig Hudson/ File Photo

By Moira Warburton and David Morgan

WASHINGTON (Reuters) – Hardline Republicans in the U.S. House of Representatives on Friday rejected a bill proposed by their leader to temporarily fund the government, making it all but certain that federal agencies will partially shut down beginning on Sunday.

In a 232-198 vote, the House defeated a measure that would extend government funding by 30 days and avert a shutdown. That bill would have slashed spending and restricted immigration, Republican priorities that had little chance of passing the Democratic-controlled Senate.

The defeat left Republicans – who control the chamber by 221-212 – without a clear strategy to avert a shutdown that would close national parks, disrupt pay for up to 4 million federal workers and hobble everything from financial oversight to scientific research if funding is not extended past 12:01 a.m. ET (0401 GMT) on Sunday.

After the vote, House Speaker Kevin McCarthy said the chamber might still pass a funding extension without the conservative policies that had alienated Democrats. But he declined to say what would happen next. The chamber is expected to hold more votes on Saturday.

“It’s only a failure if you quit,” he told reporters.

It was not clear whether the Senate would act in time, either. The chamber was due on Saturday afternoon to take up a bipartisan bill that would fund the government through Nov. 17, but procedural hurdles could delay a final vote until Tuesday.

U.S. Treasury Secretary Janet Yellen said on Friday that a government shutdown would “undermine” U.S. economic progress by idling programs for small businesses and children and could delay major infrastructure improvements.

The shutdown would be the fourth in a decade and just four months after a similar standoff brought the federal government within days of defaulting on its $31 trillion debt. The repeated brinkmanship has raised worries on Wall Street, where the Moody’s (NYSE:MCO) ratings agency has warned it could damage U.S. creditworthiness.

HEAVY TOLL ON MILITARY, SAYS BIDEN

Biden warned that a shutdown could take a heavy toll on the armed forces.

“We can’t be playing politics while our troops stand in the breach. It’s an absolute dereliction of duty,” Biden, a Democrat, said at a retirement ceremony for Mark Milley, a senior general.

McCarthy had hoped the Republican spending bill’s border provisions would have won over holdouts who so far have defied efforts to avert a shutdown.

In the end, 21 hardline House Republicans sided with Democrats to defeat the measure.

“There are members who don’t care whether the government stays open or it shuts down,” said Republican Representative Kat Cammack told reporters. “The ones that I believe are OK with a shutdown have never been through a shutdown.”

Holdouts say Congress should focus on writing detailed spending bills that would cover the entire fiscal year, rather than temporary extensions, even if doing so prompts a shutdown. The House has passed four full-year bills so far, though they stand no chance of winning Senate approval.

“What does work is rolling up our sleeves and getting onto these single subject bills and moving them,” Representative Matt Gaetz said on a podcast after voting against the stopgap bill on Friday.

Other Republicans said they would probably have to work with Democrats to pass a stopgap bill that could win approval in the Senate and from Biden. “Some people are missing the obvious,” said Republican Representative Don Bacon.

McCarthy said he was considering that approach but would not accept additional aid to Ukraine that Biden has requested and lawmakers in the Senate are including in their stopgap bill.

Former President Donald Trump, Biden’s likely election opponent in 2024, criticized Senate Republicans for working with Democrats.

Gaetz and a handful of other hardliners have threatened to oust McCarthy from his leadership role if he relies on Democratic votes.

“We’re in the middle of a Republican civil war that has been going on for months, and now threatens a catastrophic government shutdown,” top House Democrat Hakeem Jeffries told reporters.

McCarthy and Biden in June agreed to a deal that would have set agency spending at $1.59 trillion in fiscal 2024, but hardliners like Gaetz say that figure should be $120 billion lower. Lawmakers are not considering cuts to popular benefit programs such as Social Security and Medicare that make up a larger portion of the government’s $6.4 trillion budget.

(C) Reuters.

Investing.com — The Dow closed lower Friday, ending September and the third quarter with a loss as mounting fears about higher for longer Federal Reserve interest rates and a government shutdown rattled investor sentiment.

The Dow Jones Industrial Average fell 0.5%, 158 points, taking losses to about 2.7% for the third quarter. The Nasdaq rose 0.1%, and the S&P 500 fell 0.2%, but ended the quarter about 3.6% and 3.7% respectively.

Government shutdown nears

The House of Representatives failed to pass a short-term spending measure Friday that would have kept the government open until Oct. 31, stoking fears that a government shutdown on Oct. 1 is increasing likely.

A government shutdown is now almost priced in, Morgan Stanley says, and could dent fourth-quarter economic growth.

“A government shutdown is near-consensus in DC, but the question is how long it will last. We “A government shutdown presents the risk that 4Q GDP growth could be negative. They continue to see the Fed on extended hold into 1Q24,” Morgan Stanley added.

Cooling Inflation helps push Treasury yields lower

The core personal consumption expenditures price index, the Fed’s preferred inflation measure, slowed to 0.1% from 0.2%, stoking investor optimism that the tide is starting to turn in the Fed’s fight to bring down inflation.

The ongoing slowdown in “core inflation, the basis for guiding monetary policy, continues on a disinflationary trend, perpetuating the notion the Fed is at or near its terminal level,” Stifel said in a note.

The inflation data pressured Treasury yields, but they still remain supported by expectations that the Fed is set to keep rates higher for longer. The 10-year yield soaredabout 20% on the quarter after dropping below 4% in early July.

Big tech trades mixed despite easing Treasury yields

Big tech, which has suffered a hit from rising Treasury yields in recent weeks, traded mixed, with Alphabet (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) leading to the downside, despite the retreat in yields.

Tech stocks ended the quarter nearly 6% lower.

Big three US automakers slip as UAW expands strikes at GM, Ford, but spares Stellantis

The United Auto Workers, or UAW, union expected strikes against General Motors Company (NYSE:GM) and Ford Motor (NYSE:F) on Friday, but not at Stellantis NV (NYSE:STLA), citing progress in recent talks.

“Stellantis is made significant progress on the 2009 cost of living allowance, the right not to cross a picket line, as well as the right to strike over product commitments and plant closures and outsourcing moratoriums,” said UAW President Shawn Fain.

After averting a expanded strike at its plants last week, Ford are back “on the bad side of the UAW,” Wedbush says.

The expanded strikes will target Ford’s Assembly plant in Illinois and GM’s Lansing plant, adding “another 7,000 union workers to strike joining the current 18k UAW workers across the US,” it added.

Nike jumps after earnings blowout Q1 earnings

Nike Inc (NYSE:NKE) reported blowout fiscal first-quarter earnings that offset a miss on revenue, stoking optimism among Wall Street and sending the athletic apparel giant more than 6% higher.

Nike also forecast fiscal Q2 revenue to be up slightly form the same period last year, which if it manages to achieve will positively shift investor sentiment on the stock.

“Investors likely become less concerned around China macro, running category share loss, and elevated inventory levels in favor of getting excited about a stabilizing top-line trajectory with an accelerating rate of margin expansion,” UBS said if it becomes clear that Nike can achieve its Q2 revenue guidance.