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What’s happening: Crude oil prices settled higher on Tuesday, as investors assessed supply disruptions.
What happened: Crude output from the US Gulf of Mexico had to be paused last week due to Hurricane Francine.
The US Federal Reserve is scheduled to announce its monetary policy decision today and markets widely expect a cut in its benchmark interest rate.
Why it matters: Over 12% of crude output was offline at the Gulf of Mexico, following Hurricane Francine. This provided a boost to oil prices towards the end of last week, after Brent fell to its weakest level in around three years last Tuesday.
Oil prices also rose due to renewed geopolitical concerns. Supply disruptions in Libya has resulted in a decline in oil output and exports from the country. Libya’s crude exports stood at around 550,000 bps (barrels per day) last week, down sharply from more than 1 million bpd last month.
The US Federal Reserve began its 2-day meeting yesterday and is widely expected to announce an interest rate cut today. There are growing speculations of the Fed trimming rates by as much as 50 basis points (bps). A rate cut would exert pressure on the US dollar, which makes oil cheaper for foreign currency holders and boosts demand.
Imports from China are tracking to cross 11 million bpd in September, the highest in a year. China has been struggling to revise its economy, which has significantly impacted demand from the world’s biggest oil importer.
Data released by the API (American Petroleum Institute) on Tuesday showed US crude oil inventories had risen by 1.96 million barrels in the week ending September 13, following a decline of 2.79 million barrels in the previous week. The increase in inventories came against expectations of a decline of 0.1 million barrels.
WTI crude oil futures gained $1.10, or 1.6%, to settle at $71.41 per barrel on Tuesday, while Brent crude futures added 95 cents, or 1.3%, to finish at $73.70 per barrel. Both oil contracts closed at their strongest levels so far in September.
What to watch: Investors await the release of the EIA’s (Energy Information Administration) data on crude oil stockpiles from the US today. Crude oil inventories in the US, which rose by 0.833 million barrels in the week ended September 6, are expected to decline by 0.1 million barrels in the latest week.
Analysts expect stockpiles of gasoline in the US to rise by 0.61 million barrels, after adding 2.311 million barrels in the week ending September 6.
Context: The GBP/USD forex pair edged higher this morning, as investors assessed the BoE’s monetary policy outlook.
Details: The Bank of England is scheduled to announce its policy decision on Thursday. The UK central bank is widely expected to keep interest rates unchanged, after cutting rates by 25 basis points (bps) last month. There are, however, growing speculations of a surprise rate cut.
The European Central Bank had lowered rates by 25 bps last week, while the US Federal Reserve is to announce its rate decision at the end of its policy meeting today.
Some weakness in the US dollar lent support to the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 100.83 this morning.
The GBP/USD pair rose slightly to 1.3166 this morning. The sterling has added around 3.4% against the US dollar year to date and is on course to record gains for the second straight year.
London’s FTSE 100 gained 0.38% to close at 8,309.86 on Tuesday.
What to watch: Investors await the release of economic data on inflation data, producer price inflation and retail price index from the UK today. The annual inflation rate in the UK, which accelerated to 2.2% in July from 2% in June, is expected to remain at 2.2% in August.
Analysts expect factory gate prices of goods produced by UK manufacturers to remain flat in August. The Retail Price Index is projected to increase by 3.4% year-over-year in August, following a 3.6% rise in July.
Other Markets: US trading indices closed mixed on Tuesday, with the S&P 500 and Nasdaq 100 up by 0.03% and 0.05%, respectively, and the Dow Jones index down by 0.04%.
During her visit to Moldova, Germany’s Foreign Minister Annalena Baerbock announced plans to provide further aid worth €100 million to Ukraine this winter. The news sent the safe-haven US dollar index slightly lower in forex trading this morning.
Japan’s trade deficit narrowed to ¥695.30 billion in August, versus ¥940.10 billion in the year-ago month, which lent support to the JPY/USD forex pair.
New Zealand’s Westpac McDermott Miller Consumer Confidence Index rose to 90.8 in the third quarter, from 82.2 in the previous quarter, sending the NZD/USD pair higher in forex trading this morning.
Canada’s annual inflation rate fell for the third month to 2% in August. The figure also came in better than market expectations of 2.1% and lent support to the CAD/USD forex pair.
US NAHB/Wells Fargo Housing Market Index climbed to 41 in September, from 39 in August and topped market estimates of 40, which sent the Nasdaq 100 higher on Tuesday.
Indonesia’s loan growth and Bank of Indonesia interest rate decision, South Africa’s inflation rate and retail sales, Eurozone’s inflation rate and construction output, US MBA mortgage applications, building permits, housing starts, net purchases of treasury bonds and notes, and net treasury international capital flows, India’s money supply M3, Mexico’s GDP aggregate demand and consumer spending, Canada’s foreign investment in securities, Russia’s producer price inflation, as well as Argentina’s GDP growth rate.
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