US crude oil gains on supply cuts

2023-07-06
Summary:

MSCI's global equities index lost ground on Wednesday after weaker-than-expected overseas data as investors awaited upcoming U.S. inflation readings.

MSCI's global equities index lost ground on Wednesday after weaker-than-expected overseas data as investors awaited upcoming U.S. inflation readings.


In currencies, the U.S. dollar edged higher after Fed minutes reinforced expectations of another interest rate hike at the end of the month. Gold prices was weighed down by an uptick in the U.S. Treasury yields.


U.S. crude oil gained about 3%, narrowing the price gap with global benchmark Brent in a post-holiday response to supply cuts announced on Monday by Saudi Arabia and Russia.


Commodities

A united Fed agreed to hold interest rates steady at the June meeting, according to meeting minutes released on Wednesday, even as the vast bulk expected they would eventually need to tighten policy further.

XBRUSD

Russia-Saudi oil cooperation is still going strong as part of the OPEC+ alliance, which will do ‘whatever necessary’ to support the market, Saudi energy minister Prince Abdulaziz bin Salman said.


‘The July voluntary cuts and the extension into August should considerably tighten the oil market, but investors will stay on the sidelines until oil inventories will show substantial draws,’ said UBS analyst Giovanni Staunovo.


Morgan Stanley lowered its oil price forecasts, predicting a market surplus in the first half of 2024 with non-OPEC supply growing faster than demand next year.


Forex

The U.S. dollar will hold its ground for the rest of the year despite expectations of narrowing interest rate differentials as the U.S. economy stays resilient, according to FX strategists polled by Reuters.


‘The tightness of the U.S. labour market may help the economy and the dollar in the very short term,’ said Kit Juckes, chief FX strategist at Societe Generale. ‘Even if we see (interest) rate convergence, it seems unlikely a new major euro uptrend will start without stronger growth.’


Meanwhile, net USD short positions have eased since hitting a two-year high in May, according to data from the CFTC. Recent data showed the world's largest economy has remained stronger than expected and has fared better than the euro zone.

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