Oil Slips for Third Day on Likely ‘Higher for Longer’ US Sates 

Equinor's Johan Sverdrup oilfield platforms and accommodation jack-up rig Haven are pictured in the North Sea, Norway December 3, 2019. (Reuters)
Equinor's Johan Sverdrup oilfield platforms and accommodation jack-up rig Haven are pictured in the North Sea, Norway December 3, 2019. (Reuters)
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Oil Slips for Third Day on Likely ‘Higher for Longer’ US Sates 

Equinor's Johan Sverdrup oilfield platforms and accommodation jack-up rig Haven are pictured in the North Sea, Norway December 3, 2019. (Reuters)
Equinor's Johan Sverdrup oilfield platforms and accommodation jack-up rig Haven are pictured in the North Sea, Norway December 3, 2019. (Reuters)

Oil prices fell over 1% on Wednesday, retreating for a third straight day on expectations the Federal Reserve might keep US interest rates higher for longer due to sustained inflation, potentially impacting fuel use in the world's largest consumer.

The market also slipped as US crude oil and gasoline inventories rose last week, according to market sources citing American Petroleum Institute (API) figures on Tuesday. Analysts expected them to decline.

Brent crude futures were down $1.03, or 1.2%, to $81.85 a barrel, while US West Texas Intermediate crude (WTI) dropped $1.25, or 1.6%, to $77.41 as of 0802 GMT.

"The view on the fundamental outlook remains grim," said Tamas Varga of oil broker PVM, adding that "the timing of a Fed rate cut is ambivalent at best".

Oil settled about 1% lower on Tuesday.

Physical crude markets have been weakening and in another sign that concern of tight prompt supply is easing, the premium of Brent's first-month contract over the second, known as backwardation, is close to its lowest since January.

Fed policymakers said on Tuesday the US central bank should wait several more months to ensure that inflation really is back on track towards its 2% target before cutting interest rates.

Higher borrowing costs can slow economic growth and pressure oil demand.

Investors are awaiting minutes from the Fed's last policy meeting and, following the API data, the latest official US oil inventory figures from the Energy Information Administration (EIA) due later on Wednesday.

"The Federal Open Market Committee (FOMC) minutes will be scrutinized for Fed's assessment of bumpy Q1 inflation and clues on the timing and extent of potential interest rate cuts in 2024," ANZ analysts said in a report.

Inflation in Britain fell by less than expected in April and a key core measure barely dropped, figures showed on Wednesday, prompting investors to pull bets on a rate cut next month.



Japan's Nikkei Falls, Australia and New Zealand Dollars Tumble amid Israel's Strike on Iran

Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Rouble pictured in Warsaw, January 26, 2011. REUTERS/Kacper Pempel
Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Rouble pictured in Warsaw, January 26, 2011. REUTERS/Kacper Pempel
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Japan's Nikkei Falls, Australia and New Zealand Dollars Tumble amid Israel's Strike on Iran

Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Rouble pictured in Warsaw, January 26, 2011. REUTERS/Kacper Pempel
Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Rouble pictured in Warsaw, January 26, 2011. REUTERS/Kacper Pempel

The Australian and New Zealand dollars tumbled on Friday as Israel's strike on Iran hammered global stocks and drove investors into safe-haven assets, with domestic bond yields diving to over a month lows.

The commodity-sensitive currencies often track global risk sentiment and tend to take a hit when equity markets slide.

The Aussie plunged 0.9% to $0.6474, having risen 0.5% overnight to as high as $0.6534. It was already showing signs of fatigue as the currency has been unable to break a key resistance level of $0.6550 overnight even as the greenback slid due to another round of soft data.

For the week, it is down 0.3%.

The kiwi dollar dropped 1% to $0.6011. It gained gaining 0.7% overnight, hitting a high of $0.6071. Support comes in around $0.5990, while resistance is at the multi-month top of $0.6080. For the week, it is down 0.1%.

Israel said early on Friday that it struck Iran. Oil prices jumped over 6%, Wall Street futures dropped over 1%, while safe-haven currencies like the Japanese yen and Swiss franc rose.

Local bonds also rallied. Australia's ten-year government bond yields slid 11 basis points to 4.133%, the lowest since May 1, while New Zealand's ten-year government bond yields dived 8 bps to a six-week low of 4.529%.

Sean Callow, a senior analyst at ITC Markets, said the trend for the Aussie is still up given the pressure on the US dollar from a sluggish US economy and investor unease over the U. policy outlook.

"Investors are likely to expect that Israel's strikes will be contained to a relatively short period, not something that will dictate market direction multi-week," he said.

Also, Japan's Nikkei share average fell on Friday, mirroring moves in US stock futures, oil and other stock markets on news that Israel had conducted a military strike on Iran.

As of 0106 GMT, the Nikkei was down 1.5% at 37,584.47.

The broader Topix fell 1.28% to 2,7473.9.

"The market was selling stocks on caution for geopolitical risks, but the news was not driving a fire sale because investors still wanted to monitor the development of the attacks," said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management.

Chip-making equipment maker Tokyo Electron fell 5.5% to drag the Nikkei the most. Uniqlo-brand owner Fast Retailing lost 2.1%.

Exporters fell as the yen strengthened, with Toyota Motor and Nissan Motor falling 2.75% and 1.5%, respectively.

All but three of the Tokyo Stock Exchange's 33 industry sub-indexes fell.

Energy sectors rose as oil prices jumped, with oil explorers and refiners gaining 3.6% and 2.2%, respectively.

The utility sector rose 0.7%.