The latest Market Talks covering Energy markets. Published exclusively on Dow Jones Newswires throughout the day.
1532 ET - U.S. natural gas futures inch down in rangebound trade, with the Nymex front month settling down 0.4% at $2.747/mmBtu for a 16% monthly loss. Demand firmed with power-sector use near 49.5 Bcf/d and exports to Mexico rising to 8.4 Bcf/d,while LNG held steady around 18.1 Bcf/d, Gelber & Associates says in a note. "That pickup in demand is running into a supply side that's still comfortably ahead of it, though," the firm adds. (anthony.harrup@wsj.com)
1333 ET - The number of rigs drilling for oil in the U.S. rose by one this week to 451 and was up by 41 from a year ago, oil services company Baker Hughes reports. Higher crude oil prices stemming from the conflict in the Middle East have prompted this year's increase in drilling. In Canada, which tends to see greater week-to-week swings, oil rigs rose by 12 this week to 150 and were up 26 from a year ago. Rigs drilling for natural gas were unchanged at 127 in the U.S. and up by one in Canada at 63. (anthony.harrup@wsj.com)
1212 ET - OPEC+ is expected to agree to raise output by an additional 188,000 barrels a day at its meeting Sunday, completing the unwinding of 1.65 million b/d in voluntary cuts made in 2023. While it may look like a big shift on paper, "right now we're living in a physical market where quotas and actual barrels that make it to market are two very different things," says Baron Lamarre, co-founder of Index Litro and former head of trading at Petronas. Some members are already producing below quota, and the group maintains the flexibility to pause, roll it back, or even deepen cuts again, he adds. "So this is more of a signal that they see the market as manageable for now--not some big, game-changing flood of supply." (anthony.harrup@wsj.com)
1137 ET - OPEC+ is expected to approve another production increase of around 188,000 barrels a day for September, matching the hikes agreed for June, July and August, according to market watchers. Capital Economics says the increase has limited immediate significance because the conflict in the Middle East is constraining OPEC+ members' ability, rather than willingness, to expand exports and production. However, it says the resetting of members' production baselines could revive internal tensions within the group once the Hormuz crisis subsides, skewing the balance of risks toward lower oil prices over time. (farhan.rafid@wsj.com)
1131 ET - Oil prices may not fully reflect continuing supply risks in the global crude market, according to Capital Economics. The group says investors are pricing in an improvement in energy flows through the second half of the year, but warns there is little room for complacency as geopolitical risks remain elevated. It says the global oil market is much closer to a tipping point than at the start of the Middle East conflict, meaning further disruptions could drive prices sharply higher. September Brent is up 1.2% at $90.1 ahead of its expiry, while the October contract gains 1.9% to $88.5. (farhan.rafid@wsj.com)
1105 ET - The yield difference between short-dated gilts and their long-dated equivalents could widen further, Bank of America strategists say in a note. This week's BOE policy meeting indicated that there are no signs of second-order inflation effects so far, easing concerns about the prospects of rapid BOE rate increases in the coming months. Short-term gilt yields are expected to fall as markets adjust their BOE rate expectations, while long-dated gilt yields could remain elevated due to global geopolitical concerns and U.K. fiscal uncertainty. Two-year gilt yields last trade at 4.388%, while 30-year gilt yields last trade at 5.753%, Tradeweb data show. (miriam.mukuru@wsj.com)
1017 ET - U.S. natural gas futures are returning gains that followed a below-estimate weekly storage injection, while weather-driven demand from the power sector is seen strong over the coming week. "Cooling demand may build into the end of next week--but as shown by yesterday's lackluster response to a bullish EIA surprise, higher gas prices are more likely in the medium term," Eli Rubin of EBW Analytics says in a note. The premium in January 2027 over October 2026 prices gives marketers an incentive to fill regional storage, he says. "This demand for injection could support pricing into the fall--particularly if producers eyeing the same contango shape production to better capture higher realized pricing." Nymex gas for September delivery is off 1.1% at $2.729/mmBtu. (anthony.harrup@wsj.com)
0951 ET - Oil futures turn higher in early U.S. trading and are on track for hefty gains for July, which saw the U.S.-Iran Memorandum of Understanding fall apart and Iran resume attacks on shipping in the Strait of Hormuz. "All things held equal, the market should go a lot higher and led by diesel and gasoline as refinery run rates arejust too low on a lack of crude," Scott Shelton of TP ICAP says in a note. "The reality is that we areback to a very small amount of crudeversus what is needed." WTI is up 2.2% at $85.42 a barrel. September Brent is 1.5% higher at $90.36 ahead of today's expiry, while the October contract gains 1.8% to $88.47.(anthony.harrup@wsj.com)
0854 ET - Treasury yields edge higher, alongside the dollar, as Middle East tensions linger while central banks struggle to curb inflation. WTI crude rises 2%, after falling yesterday. The Bank of Japan holds rates, as expected, while indicating a hike may be upcoming. U.S. employment costs rise 0.9% in 2Q, beating WSJ consensus of 0.8%. The July University of Michigan Consumer Sentiment Index is forecast to increase. The WSJ Dollar Index rises 0.3% as the greenback strengthens 0.5% against the yen. The 10-year yield is at 4.696%, up from yesterday's settle of 4.662%. The two-year rises to 4.283% from 4.227%. (paulo.trevisani@wsj.com; @ptrevisani)
0843 ET - The Bank of England has suggested that the bar to a near-term interest-rate increase is high, Morgan Stanley's Bruna Skarica and Fabio Bassanin say in a note. During Thursday's rate decision, the BOE said that so far there is little evidence of second-order effects of inflation. Nonetheless, the BOE could be pushed to raise rates if energy costs stay elevated for a prolonged period, Skarica and Bassanin say. Markets price in a 28% probability of a BOE rate increase in September, and fully price in the possibility of one quarter-point rate hike by the end of 2026, LSEG data show. (miriam.mukuru@wsj.com)
0841 ET - Bitcoin edges lower amid uncertainty over key U.S. crypto legislation and the Middle East conflict. The Clarity Act, which aims to establish a framework for regulating digital assets, has stalled in the Senate and it's unclear whether the bill will receive a vote before summer recess starts on August 8. Meanwhile, U.S. officials said Hamas and other Palestinian militant groups agreed to disarm but Israel is yet to comment. Investors are also digesting a batch of U.S. tech earnings this week. Apple shares fell after forecasting weaker sales growth while Amazon gained after posting stronger-than-expected revenue. Elsewhere, crypto-hoarding firm Strategy swung to a quarterly loss, citing bitcoin's decline. Bitcoin falls 1.4% to $63,811, according to LSEG. (renae.dyer@wsj.com)
0840 ET - Eurozone inflation remains above target with significant risks ahead, says Iain Simmons at Oxford Economics. Headline inflation rose 0.1 percentage points to 2.9% in July amid high energy prices due to escalation in the Middle East. Since the ceasefire in Iran collapsed, the risk of broader inflation effects has risen substantially, strengthening the case for a rate hike in September, he says. "Inflation remains above target and yesterday's upside GDP surprise suggests that the eurozone economy may be more able to absorb tighter policy more easily than previously thought." Still, the inflation data show a relatively muted reaction to the Middle East escalation, and second-round wage effects are likely to be limited later this year, Simmons says.
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