The latest Market Talks covering Energy markets. Published exclusively on Dow Jones Newswires throughout the day.
1127 ET - The jump in eurozone energy prices this year due to the Middle East conflict has been smaller in scale than the 2021-22 price shock, helped by a softer link between wholesale prices and consumer bills, ECB economists say in an economic bulletin. The impact of wholesale gas prices on wholesale electricity prices has been damped by a shift toward electricity generated from renewables, they say. It comes as the passthrough of wholesale prices to retail prices has sped up for gas prices overall, but less intensely for electricity, with variation among different countries remaining in both cases, they say. "This implies that wholesale energy price dynamics require close monitoring, as their passthrough to consumer prices remains an important source of near-term volatility in inflation," they add. (edward.frankl@wsj.com)
1030 ET - Gold futures are lower after rising the previous three sessions, with the market focused on U.S. yields and Fed interest-rate policy. "It's a tough environment for gold in the short term, and the macro trends we're seeing in pricing from the typical markets that feed into and influence the gold price suggest investors and traders will shy away from the yellow metal until these dynamics become more favorable," Pepperstone's head of research Chris Weston says in a note. The U.S. dollar is a small headwind, and while oil prices have pulled back from recent highs, any reversal higher that builds inflation expectations would "only intensify the rates story," he adds. Gold for December delivery is off 1.1% in New York at $4,375.50 a troy ounce. Silver is down 0.8% at $66.605 a troy ounce. (anthony.harrup@wsj.com)
1000 ET - The recent renewed rise in natural gas and energy prices leads Morgan Stanley to revise its inflation outlook materially higher, its economists say in a note. The bank adds another European Central Bank rate hike in December to its forecasts, followed by a much shallower easing cycle in 2027. But energy prices don't alone explain the change in outlook. "Euro area activity has proven more resilient than anticipated, reducing concerns that modest additional tightening would derail growth," they say. As a result, the ECB is increasingly focused on preventing higher energy costs from bleeding into other parts of the economy, even as interest rates move further into restrictive territory. The energy shock has changed the inflation conversation, but resilience in growth has changed the policy conversation, the economists add. (edward.frankl@wsj.com)
0939 ET - Oil futures extend their slide to a fourth session on optimism about flows returning soon through Saudi Arabia's damaged East-West pipeline and about efforts to revive talks between the U.S. and Iran. U.S. Central Command head Admiral Brad Cooper said at the weekend that in the past two weeks, the volume of oil and cargo making it through the Strait of Hormuz was the highest of the past six months. WTI is down 3.8% at $96.49 a barrel and Brent falls 3.1% to $100.65 a barrel.(anthony.harrup@wsj.com)
0935 ET - U.S. natural gas futures start of the week lower as weather-driven demand is set to ease with a cooling of temperatures. "The gas market is pulling back partially in sympathy with lower oil prices and continued mild temperature forecasts across key consuming regions," Ritterbusch & Associates says in a note. Prices could find support from the shrinkage in the storage surplus, which is likely to continue through the end of September and "is a significant bullish consideration in our opinion," the firm says. Nymex natural gas is down 2.1% at $2.850/mmBtu.(anthony.harrup@wsj.com)
0740 ET - The goldilocks environment of higher energy prices and buoyant risk sentiment has likely run its course for the Norwegian krone, Deutsche Bank's Shreyas Gopal says in a note. The sharp rise in energy prices has boosted terms of trade for oil-rich Norway. However, the krone is starting to show reduced sensitivity to energy prices, he says. Meanwhile, the krone's yield advantage looks set to narrow even if the Norges Bank raises rates once more as signaled, he says. Futures activity data suggests the krone could be sensitive to a broader unwinding of carry trades where investors borrow in low interest rate currencies to buy currencies with higher rates. "All up, we like buying euro-krone." The euro trades flat at 10.8084 krone. (renae.dyer@wsj.com)
0703 ET - U.S. diesel prices continue to scale new highs, now above $6.50 a gallon as prolonged disruptions to Middle East energy flows and Russian refineries continue to tighten global supplies ahead of winter. The national average price of diesel hit $6.51 a gallon on Monday, the highest on record, according to the American Automobile Association, or AAA. A year ago, prices averaged $3.695 a gallon. (giulia.petroni@wsj.com)
0645 ET - Palm oil prices ended lower on weakness in the Chicago soybean oil market as well as lower crude oil prices, says David Ng, a trader at Kuala Lumpur-based Iceberg X. Ng sees support at 4,800 ringgit a ton and resistance at 4,950 ringgit a ton. The Bursa Malaysia Derivatives contract for June delivery ended 41 ringgit lower to 4,857 ringgit a ton. (jiahui.huang@wsj.com; @ivy_jiahuihuang)
0557 ET - Credit investors rank higher-for-longer energy costs as the number one risk to credit markets, a Bank of America survey shows. Continuing Middle East tensions have led investors to adjust their expectations on energy prices, the BofA says, releasing its credit investor survey for September. Brent crude falls 1.9% to last trade at $101.8 a barrel, having risen above $109.0 a barrel last week as Middle East conflict widened. (miriam.mukuru@wsj.com)
0549 ET - Kuehne + Nagel's long-term Amazon partnership is consistent with the company's efforts to deepen its relationships with customers, analysts at J.P. Morgan say in a note. Amazon has reportedly made similar agreements with other key suppliers, such as Qualcomm, to ensure it captures secondary benefits from expansion plans, the analysts say. The deal overall will likely be supportive of K+N's business, with the air logistics area benefiting the most, while remaining cautious on its sea logistics exposure, they say. Kuehne + Nagel shares are up 5.3% at 227.30 Swiss francs. (aimee.look@wsj.com)
0524 ET - Oil prices are largely unchanged in midmorning European trading despite persistent supply disruptions as the focus shifts to the U.N. General Assembly this week. Brent crude is down 1.9% to $101.95 a barrel, while front-month WTI futures fall 1.8% to $98.52 a barrel. "Profit-taking after recent gains, together with hopes for constructive discussions at this week's U.N. General Assembly and the upcoming Trump-Xi meeting, helped improve market sentiment," analysts at ING say. Still, disruptions to Saudi supply due to attacks to its East-West pipeline continue to fuel concerns. "The pipeline could take several weeks to fully restart," the analysts say. "Reduced Saudi supply has tightened the European market, with some North Sea crude grades trading at steep premiums to benchmark prices." (giulia.petroni@wsj.com)
0513 ET - U.S. Treasury yields ease as lower oil prices temper inflation concerns and limit the dollar's upside, FFA Kings' Fadi Al Kurdi says in a note. "Hopes of diplomatic progress in the Middle East have contributed to the decline in crude, making this week's U.N. General Assembly an important catalyst," he says. "Credible progress toward de-escalation could drag oil lower, ease pressure on yields and reduce safe-haven demand for the dollar," he says. The two-year Treasury yield falls 2 basis points to 4.721%, while the 10-year yield declines 3.7 basis points to 4.957%, according to Tradeweb. The DXY dollar index is stable at 100.262.
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