The latest Market Talks covering Energy markets. Published exclusively on Dow Jones Newswires throughout the day.
1913 ET - CBA now estimates that global oil markets have 5 to 10 weeks before oil and refined product inventories deplete. That compares with estimates of closer to 15 to 20 weeks just two weeks ago. Inventory depletion raises the risk that Brent oil futures rise to $US150 per barrel, it adds. The leverage that Iran and their proxies have exerted via their control of key straits and their attack on Saudi Arabia's pipeline infrastructure has caused oil and refined product prices to surge and condensed the timeline for inventory depletion, says Vivek Dhar, economist at CBA. Dhar is now more confident that the U.S. will seek to make a deal with Iran. (james.glynn@wsj.com; @JamesGlynnWSJ)
1600 ET - U.S. natural gas futures give back most of last week's gains as the heat than has kept up power-sector demand is set to dissipate. NatGasWeather.com notes "the same bearish factors that were in play last week," including strong U.S. production, weaker LNG exports and a bearish coming weather pattern. National demand will drop to "low to very low" for the 3-15 day period with the southern U.S. cooling several degrees while the rest of the country "will remain perfect temperaturewise," the forecaster adds. Nymex natural gas settles down 2.6% at $2.836/mmBtu.(anthony.harrup@wsj.com)
1548 ET - Oil futures extend their slide to four sessions on easing concerns about oil flows out of the Middle East and expectations for renewed diplomatic efforts to bring the U.S. and Iran back to the negotiating table. "Prospects for renewed U.S.-Iran engagement during this week's U.N. General Assembly have created a potential path toward de-escalation, despite the absence of a formal breakthrough," Gelber & Associates says in a note.Continued Houthi attacks and shipping constraints "indicate that the selloff reflects improving expectations rather than normalized Middle Eastern flows." WTI settles down 4.5% at $95.78 a barrel and Brent falls 3.4% to $100.34 a barrel. (anthony.harrup@wsj.com)
1412 ET - Gold futures settle lower, snapping a three-session winning streak. "Several conflicting fundamental factors are shaping the market between support and pressure," Rania Gule of XS.com says in a note. Higher interest rates and U.S. yields have become a direct headwind for gold, but "I do not believe that higher interest rates necessarily mark the beginning of a prolonged bearish trend," she says.A decisive break above $4,400 would show buyers able to absorb the impact of a stronger dollar and higher yields, while failure to break through that level keeps open the possibility of gold testing previous support zones, Gule adds. Front-month gold settles down 0.9% in New York at $4,345.80 a troy ounce. Silver falls 1.1% to $65.825 a troy ounce.(anthony.harrup@wsj.com)
1240 ET - Bank of Canada Gov. Tiff Macklem stands ready to raise rates to contain inflation but that's not necessarily a foregone conclusion, says Royce Mendes, head of macro strategy at Desjardins Capital Markets. Mendes' reasoning comes after parsing through remarks from Macklem in Atlantic Canada, where he described the competing forces policymakers are grappling with -- namely, elevated trade uncertainty and upward inflation risks. Mendes says that the BOC could raise rates as early as late October, so long as crude-oil prices remain over $100 a barrel and the CPI report for September shows a broadening of inflationary pressure. (paul.vieira@wsj.com; @paulvieira)
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.
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