Oil prices dropped slightly in Asian trade on Thursday, influenced by a waning risk premium due to easing tensions in the Middle East and mixed U.S. inventory data. Brent oil futures for June delivery declined by 0.2% to $87.88 per barrel, while West Texas Intermediate (WTI) crude futures for June delivery fell 0.2% to $82.66 per barrel.
Oil prices rose slightly on Wednesday due to an unexpected decline in U.S. crude inventories last week, signaling improved demand. However, ongoing tensions in the Middle East kept markets on edge.
Brent crude futures increased by 0.06% to $88.47 per barrel, while West Texas Intermediate crude futures gained 0.1% to $83.44 per barrel. The American Petroleum Institute reported a 3.237 million barrel drop in U.S. crude stocks, contrasting analysts’ expectations of an 800,000 barrel increase.
Official U.S. data on oil and product stockpiles, due later today, will provide further confirmation of the drawdown.
Meanwhile, U.S. business activity slowed in April, suggesting that interest rate cuts may be necessary to support the economy. Lower interest rates could boost economic growth and ultimately increase oil demand from the world’s largest consumer.
Analysts continue to monitor conflicts in the Middle East, although their impact on oil supplies remains limited for now.
A delegation from North Korea, led by the minister for international trade, has arrived in Iran. This visit raises concerns about the ongoing suspicions of covert military ties between the two nations. Both North Korea and Iran have been under scrutiny for potentially collaborating on ballistic missile programs, including the exchange of technical expertise and production components. The visit occurs amid heightened tensions in the Middle East, following recent attacks and retaliations between Israel and Iran.
In a tense escalation of the ongoing conflict, Hezbollah launched drone attacks into Israel on Tuesday, prompting panicked beachgoers to seek shelter. The militant group’s actions came as part of their ongoing retaliation against Israeli airstrikes in Lebanon. Despite Israel’s claims that no facilities were hit, Hezbollah continued its barrage later that day with rocket attacks on Margaliot, a northern Israeli community. The exchange of fire between Israel and Hezbollah has intensified since the start of the Israel-Hamas War, with both sides engaging in almost daily skirmishes. Israel’s attacks in Lebanon have resulted in significant casualties among Hezbollah fighters and civilians, while Hezbollah’s drone and rocket attacks have caused widespread fear and disruption in Israel.
Gold prices continued their downward trajectory, reaching a two-week low on April 23 as investors cashed in on profits ahead of key economic data from the United States. The de-escalation of tensions in the Middle East, particularly following Iran’s declaration against retaliation in response to an Israeli drone attack, has led to a shift in investors’ risk appetite, away from safe-haven assets like gold. Furthermore, signals from the US Federal Reserve, hinting at no immediate interest rate cuts in June, have reduced the allure of non-interest-yielding gold. The market now anticipates the first Fed rate cut in September at the earliest. Investors await the release of US GDP data on Thursday and Personal Consumption Expenditures (PCE) figures on Friday for insights into the economy’s health and the timing of potential rate cuts.
UBS has revised its forecast for the USD/PLN currency pair, expecting the exchange rate to reach 4.10 in the second quarter of 2024, with a gradual decrease to 3.92 by the first quarter of 2025. The updated forecast reflects changes in the Federal Reserve’s interest rate outlook and escalating tensions in the Middle East.
Asian equity markets predominantly climbed on Tuesday, continuing the momentum from the previous session. This rally was influenced by a positive lead from Wall Street and eased concerns over a broader Middle East crisis. However, the Japanese yen faced a setback, weakening against the US dollar and reaching its lowest level in 34 years. Meanwhile, China announced the creation of over 3 million new urban jobs in the first quarter, while Hong Kong and India’s stock markets experienced gains. In Australia, private sector growth surpassed expectations, while U.S. stock futures showed a slight dip after a strong rebound in the previous session.
Brent crude futures have witnessed a significant surge of 13.4% year-to-date, reaching $87.26 per barrel. This increase is primarily attributed to escalating tensions in the Middle East, production cuts by OPEC, attacks on energy infrastructure, and increased oil demand from major consuming nations. The market has experienced further volatility due to heightened tensions between Iran and Israel, with Brent futures soaring by 4% following an attack on April 19. Geopolitical uncertainties, particularly the potential closure of the Strait of Hormuz, could lead to a substantial increase in crude oil prices. Additionally, rising inflation and the challenges faced by central banks in guiding inflation towards target levels are exacerbating economic dynamics and adding pressure on policymakers.
Antony Blinken’s talks with Chinese officials come at a critical time for U.S.-China relations, which face numerous challenges. From the Russia-Ukraine war to tensions in the Middle East and the Indo-Pacific, Blinken is expected to raise concerns about China’s support for Russia, its role in regional conflicts, and its human rights record.
Canada’s TSX Composite Index rebounded from early losses on Monday, following a positive day in U.S. stock markets. The recovery was attributed to reduced concerns over tensions between Israel and Iran. The volatility index eased below 17, indicating a shift towards a more risk-tolerant trading day.
