Crude oil prices proved immune to fears over the conflict in the Middle East and the prospect of OPEC+ production cuts as they slumped to a five-month low overnight, while heading to the steepest yearly fall since the pandemic triggered global lockdowns in 2020.
Following a bigger than expected increase in US gasoline inventories, which indicated demand over the Thanksgiving holiday was dull, Brent crude futures dropped over 20% off their highs late in September, as prices dropped to the lowest since late June.
The fall in oil overshadowed the meeting Wednesday between Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, where the two leaders discussed their nation’s cooperation with regard to oil prices.
Brent is down 13% so far for the year, and at $74.64 per barrel, is in the process of settling into a longer-term range. Analysts indicate that will benefit inflation, bonds, and the chances of the Fed beginning a series of interest rate cuts in 2024.
On Thursday, Treasury yields were inching up in Asian trading, which is consistent following a robust rally in bonds in New York. Ten year yields reached three-month lows overnight before they rose 2 basis points in Asia to 4.14%.
Still to come are US weekly job claims and German industrial data, followed by US non-farm payrolls to be released Friday.
A release of data Wednesday showed US labor costs declined last quarter, private hiring ahd stabilized, and pay increases slowed down – all of which add to the body of evidence pointing to a US economic slowdown.
In the coming weeks, the market will see central bank meeting in Europe, the US and Japan. Both will help to illuminate the thinking of the central banks, and offer some possible insight into the timelines surrounding any potential future rate cuts.
Chinese data released Thursday in Asia showed an increase in exports in November, for the first time in six months, although there was an unexpected reduction in imports.
Meanwhile, Chinese stocks continued to decline, reaching new lows following the downgrade of China’s sovereign debt by Moody’s this week, which only added pressure to Chinese assets.
The Hang Seng, which has fallen nearly 9% over just 10 trading days, hit a 13-month low, as the blue chip CSI300 index was at its weakest since the beginning of 2019.
