The latest Market Talks covering Energy markets. Published exclusively on Dow Jones Newswires throughout the day.
0907 ET - Oil futures are returning some of yesterday's gains with the market still expecting some sort of deal to reopen the Strait of Hormuz. "While the reopening of the Strait of Hormuz is likely to drive a period of short-term market rebalancing and restore some confidence in global oil flows, any sense of stability is likely to be temporary," Joanne Salih, head of energy and resources strategy at Baringa, says in a note. "Even in the absence of active conflict, the possibility that Iran could again choose to restrict or close the strait will remain an enduring feature of the market." WTI is down 0.6% at $76.85 a barrel and Brent is off 0.8% at $81.87. (anthony.harrup@wsj.com)
0839 ET - Despite the 0.2% rise in output in June, German industrial production is still moving sideways at a low level, Commerzbank economist Marco Wagner says in a note. Data released earlier this week showed that, excluding large orders that are volatile on a monthly basis, manufacturing orders returned to their sideways trend after a brief upward breakout, he says. Due to low water levels in the River Rhine, the situation is unlikely to change over the summer. Any recovery after that will be slow, as Middle East developments stabilize and river levels rebound, Wagner says. However, the global economy is growing, from which German industry should also benefit, as it will from the government's continuing investment in defense and infrastructure projects, he says. (edward.frankl@wsj.com)
0704 ET - The dollar trades steady while Treasury yields turn slightly lower ahead of the U.S. nonfarm payrolls report at 1230 GMT. The probability of a U.S. interest-rate rise in September will depend heavily on data along with ongoing developments in the Middle East and price action in the Treasury market, MUFG Bank's Lee Hardman says in a note. "If the long end of the Treasury market becomes unanchored with yields marching higher ahead of the September FOMC meeting it would increase pressure on the Fed to hike rates to reinforce their inflation-fighting credibility," he says. The DXY dollar index trades flat at 99.919. The 10-year Treasury yield falls 0.6 basis points to 4.664%, Tradeweb data show.(renae.dyer@wsj.com)
0701 ET - German industry has proved resilient amid high energy prices, and the rebound in business surveys in July suggests the immediate outlook is relatively good, Capital Economics' chief Europe economist Andrew Kenningham says in a note. The 0.2% rise in German industrial production in June was the third consecutive monthly increase, allowing output to rise 0.7% in the second quarter. Production in energy-intensive sectors declined in June but over the second quarter it rose quite sharply, despite rising global energy prices, Kenningham says. Surveys such as the manufacturing output PMI and Ifo index suggest positive momentum in manufacturing may continue, although record-low water levels in the Rhine could dampen output in the coming weeks, he says. (edward.frankl@wsj.com)
0657 ET - German industrial production saw a slight increase in the three months through June, and given full order books, that recovery is likely to continue in the third quarter of the year, Deutsche Bank's Marc Schattenberg says. Production was up 0.7% in the second quarter, with production rising 0.2% on month in June. June's production was helped by a jump in automotive output, though it weakened in manufacture of machinery, the data show. Looking ahead, sentiment indicators, such as Ifo's business-climate index and the PMIs are also sending improving signals, Schattenberg says. However, in the short term, transport problems due to the Rhine River's low water levels could create challenges for industrial firms, he notes. (edward.frankl@wsj.com)
0654 ET - The Polish zloty would probably only temporarily recover if the Middle East conflict de-escalates in coming months and risk appetite improves, Commerzbank's Tatha Ghose says in a note. Some gradual depreciation in the zloty should resume next year as Poland's central bank could switch back to signalling interest-rate cuts quite quickly if the geopolitical impasse ends, he says. Political uncertainty also looks set to return with the 2027 general election and there's a risk the Law and Justice party or broader right-wing bloc wins, he says. Commerzbank expects the euro to fall to 4.25 zloty by December before rising to 4.40 a year later, compared to 4.2967 currently. (renae.dyer@wsj.com)
0643 ET - Palm oil closed lower, as market sentiment remains subdued ahead of key industry supply and demand data from Malaysian Palm Oil Board, Kenanga Futures analysts say. Expectations of higher palm oil inventories are also weighing on prices, they add. Kenanga Futures sees support and resistance for the October futures contract at 4,650 ringgit a metric ton and 4,740 ringgit a ton, respectively. The Bursa Malaysia Derivatives contract for October delivery fell 8 ringgit to 4,678 ringgit a ton. (jason.chau@wsj.com)
0610 ET - Inflation-linked bonds look favorable as inflation pressures could be more prevalent than markets expect, RBC BlueBay Asset Management's Mark Dowding says in a note. Supply disruptions from the Middle East conflict could keep energy prices elevated and push up inflation, Dowding says. Long-dated bonds look less appealing over the medium term due to inflation concerns, he says. (miriam.mukuru@wsj.com)
0608 ET - Climate change is becoming a key economic risk, Berenberg analysts say in a note. Still, while drought in Germany has created supply disruptions, the European Central Bank is likely to look through this for now, they say. The Rhine's low water levels mean ships can only pass through carrying very little cargo, if at all, creating supply bottlenecks, the analysts say. The situation is driving up costs and could hit growth by up to 0.2 percentage points in the third quarter, they say. However, only a fraction of German freight passes along the Rhine, while companies have already begun adapting. The Middle East conflict overshadows these temporary supply bottlenecks and the ECB is unlikely to attach much importance to them, they say. (don.forbes@wsj.com)
0606 ET - The euro could rise modestly against the dollar if markets trim U.S. interest rate-rise expectations and Middle East tensions ease, Commerzbank's Thu Lan Nguyen says in a note. Markets continue to expect one rate rise by the Federal Reserve this year. This looks "overly optimistic" and a reassessment of the rate outlook over the coming quarters is likely, she says. Rate-rise expectations for the European Central Bank also appear somewhat stretched, although the euro should benefit more than the dollar if U.S.-Iran tensions ease by year-end due to potentially lower energy prices supporting the eurozone economy, she says. Commerzbank expects the euro to rise to $1.17 by December and $1.19 a year later, from $1.1524 currently. (renae.dyer@wsj.com)
0602 ET - The U.S. has resumed crude imports from the Middle East after a 50-day pause, with August arrivals expected to reach their highest levels in months, says Richard Ro from Kpler. Tracking data shows the supertanker Maran Mira delivered nearly 1.5 million barrels of Kuwaiti crude to the Louisiana Offshore Oil Port. "The U.S.-Iran war has redirected crude flows, where the U.S. saw its last import of Middle East crude in mid June and where imports in July were zero," Ro says. Kpler is tracking eight additional VLCCs carrying Middle Eastern crude to the U.S., which could lift August imports above 600,000 barrels a day. Most cargoes are heading to the Gulf Coast, while a Murban crude shipment is awaiting discharge in Los Angeles, according to the data provider. (giulia.petroni@wsj.com)
0523 ET - Saudi Arabia's decision to further lower the price of its flagship crude grade for Asia comes as buyers face higher shipping costs, with Red Sea disruptions forcing some tankers onto longer routes around southern Africa, analysts at ING say. "There has been a push by Asian buyers for the Saudis to cut their official selling prices amid the escalation in the Red Sea," they say. "It means that some tankers are taking the longer and more expensive shipping route around Africa." Saudi Arabia on Thursday lowered the official selling price for September shipments of its Arab Light crude to Asia--the largest market for Middle Eastern oil--by $0.50 a barrel to a discount of $2 a barrel to the Oman/Dubai benchmark. Prices for grades sold to Northwest Europe and the Mediterranean were reduced by $3 a barrel, respectively, while U.S. customers saw a $1-a-barrel decrease.
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