Oil steadies after sell-off as U.S. stockpiles rise less than expected
Oil prices steadied on Thursday after a two-day slump, reflecting the world’s mixed economic recovery from the pandemic, with U.S. demand expected to keep rising, while a second coronavirus wave raging in India has led to more curbs on movement.
Brent crude was up 11 cents, or 0.2%, at $66.77 a barrel by 0657 GMT, having fallen 3% on Wednesday. U.S. oil gained 25 cents, or 0.%, to $63.61 a barrel, after a 3.3% drop in the previous session.
“U.S. gasoline demand is holding up well ahead of the driving season,” ANZ Research said in a note. Also, “U.S. airport footfalls increased to 1.85 million, boding well for jet fuel demand.”
Crude inventories in the United States increased by 1.3 million barrels last week, against analysts’ expectations in a Reuters poll for a 1.6 million-barrel rise. [EIA/S]
Dollar bounces as Fed minutes revive tapering jitters
The dollar bounced off three-month lows against European currencies on Thursday after minutes from the Federal Reserve’s last policy meeting revealed there was more talk of tapering its bond purchases than investors had expected.
In the Fed minutes, several policymakers said that a discussion about reducing the pace of asset purchases would be appropriate “at some point” if the U.S. economic recovery continues to gain momentum.
That surprised investors, given Fed Chair Jerome Powell had said right after that meeting last month that it is not time yet to begin discussing any change in policy.
“The minutes contained wordings that appear to seek to start discussion on tapering at an earlier timing than expected,” said Takafumi Yamawaki, head of fixed income research at JPMorgan (NYSE:JPM).
“If the next jobs data due on June 3 is strong, markets will start bracing for the Fed making a specific mention on tapering at its next meeting in June.”
Gold Holds Near Four-Month High as Investors Weigh Fed Minutes
Gold steadied near the highest level in more than four months as investors assessed the minutes from the Federal Reserve’s meeting in April that flagged the possibility of a debate on scaling back asset purchases.
“A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” according to minutes published Wednesday. Treasury yields and the dollar rose after the release. In a press conference following last month’s meeting, Chair Jerome Powell had said that it was premature to start talking about tapering.
Rising inflation expectations and a resurgence of coronavirus cases in some countries has revived interest in gold as a hedge and haven asset, with a rebound seen in holdings in bullion-backed exchange-traded funds. While U.S. policy makers have signaled they intend to maintain an accommodative stance for a prolonged period, any hints of a timeline for paring back exceptional stimulus could weigh on the precious metal.
Legal disclaimer: The material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instruments. UR Trade Fix Ltd accepts no responsibility for any use that may be made of these comments and for any consequences resulting in it. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. The analysis does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it. Past performance does not constitute a reliable indicator of future results and future forecasts do not constitute a reliable indicator of future performance.
It has not been prepared in accordance with legal requirements designed to promote the independence of research, and as such it is considered to be marketing communication. Although we are not specifically constrained from dealing ahead of the publication of our research, we do not seek to take advantage of it before we provide it to our clients. We aim to establish, maintain and operate effective organizational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. We operate a policy of independence, which requires our employees to act in our clients’ best interests when providing our services