TOKYO, Sept 18 2019 : Oil prices cooled today as Saudi Arabia said the kingdom had fully restored its oil supply following attacks on its crude facilities although caution ahead of an expected U.S. interest rate cut kept wider financial markets in tight ranges.
U.S. Treasury yields slipped ahead of an expected interest rate cut by the Federal Reserve at its two-day policy meeting today.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.05% while Japan’s Nikkei slid 0.03%.
Wall Street shares ticked up a tad yesterday with the S&P 500 gaining 0.26%.
Brent crude futures fell 0.64% to $64.14 a barrel while U.S. West Texas Intermediate (WTI) crude lost 0.78% to $58.88 per barrel.
Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom has recovered supplies by tapping inventories, and lost oil output of 5.7 million barrels per day (bpd) by the end of September
Saudi Arabia’s oil output will be fully restored faster than thought following weekend attacks on production facilities, two sources briefed on developments also said yesterday, taking two or three weeks, not months as initially expected.
“I would think a spike in oil prices will likely prove to be short-term given that the global economy isn’t doing too well,” said Akira Takei, bond fund manager at Asset Management One.
A U.S. official told Reuters yesterday the United States believes the attacks originated in southwestern Iran, an assessment that could further increase the rivalry between Tehran and Riyadh.
Gold was mostly flat at $1,501.70, while the 10-year U.S. Treasuries yield fell to 1.812%, compared to Friday’s high of 1 1/2-month high of 1.908% ahead of the Fed’s policy announcement today.
While a 25-basis point rate cut is seen as near-certain, investors look to the statement and economic projections from Fed policy makers, given signs of deep disagreements among them.
The ongoing U.S.-China trade war has raised policymakers’ concerns about slowing factory output although resilient domestic consumption has given hawks some reasons to worry about cutting rates too hastily.
Possibly further complicating their discussion, short-term U.S. interest rates shot up this week, with overnight repo rates rising to 7%, due largely to seasonal factors such as huge payments for taxes and bond supply.
That prompted the New York Fed to conduct its first repo operation in more than a decade to inject funds to stressed money markets.
The New York Federal Reserve said late yesterday it will conduct a repurchase agreement operation early today “in order to help maintain the federal funds rate within the target range of” 2.00% to 2.25%.
Sterling traded at $1.2504, up 0.06% so far on the day, having hit two-month high of $1.2528 as investors reversed their bets against the currency on fear of a no-deal Brexit at the end of next month.
The yen stood little changed at 108.10 yen, off 1 1/2-month low of 108.37 touched yesterday. – Reuters