HONG KONG:
Oil prices were lower in Asia Thursday following a mixed US energy report and after the US Federal Reserve signalled it will keep its near-zero benchmark interest rates unchanged for now, analysts said.
US benchmark West Texas Intermediate for July delivery fell 39 cents to $59.53 while Brent crude for August was down 26 cents at $63.61 in mid-morning trade.
The US Department of Energy’s (DoE) inventory report for the week to June 12 showed Wednesday that crude reserves fell 2.7 million barrels, the seventh straight weekly decline.
However, crude supplies at the closely watched trading hub in Cushing, Oklahoma, rose by 100,000 barrels.
The data also showed US oil production at 9.59 million barrels per day, down a scant 21,000 from last week’s record high.
Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at business consultancy firm EY, said investors are switching focus “between price-supporting news from the US where inventories and rig counts are falling” and concerns about the global supply glut.
Dealers have been hoping that a drawdown of the United States’ burgeoning reserves during the summer months, coupled with a slowdown in its shale output, could whittle down excess global supplies.
A surplus of US stocks was one of the reasons oil prices collapsed by more than 50 percent between June and January.
Crude investors are also digesting the Fed’s indication on Wednesday after a two-day policy meeting that it will maintain near-zero interest rates for now and adopt a cautious and methodical approach to raising them from later in the year.
Interest rate adjustments are closely watched by crude investors as an increase usually leads to a pick-up in the dollar. A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies, denting demand.
Asia markets mostly lower, dollar hit by dovish Fed
Asian markets mostly headed lower Thursday and the dollar retreated after the Federal Reserve said any rises in US interest rates would be slow.
The losses come despite another advance on Wall Street, while investors are keeping track of Greece’s troubled bailout talks as Europe’s leaders are warned of the dire consequences of failing to reach a deal.
Tokyo slipped 0.75 percent, Shanghai shed 0.39 percent, Sydney tumbled 1.29 percent and Hong Kong was flat, while Seoul gained 0.20 percent.
After a two-day meeting the Fed on Wednesday held off hiking rates but altered its outlook for future rises, expecting a lower upward curve than previously forecast.
While policymakers kept unchanged their outlook for a 0.625 percent rate for the end of this year, the end-2016 rate was 1.625 percent, down 20 basis points from the March estimate, and 2.875 percent by the end of 2017, which was 25 basis points lower.
In a news conference afterwards, the bank’s head Janet Yellen said its first interest rate hike in nine years would likely come “later this year”.
However, she added: “My colleagues and I would like to see more decisive evidence that a moderate pace of economic growth will be sustained, so the conditions in the labour market will continue to improve and inflation will move back to two percent.”
The prospect of lower borrowing costs boosted US shares. The Dow rose 0.17 percent, the S&P 500 gained 0.19 percent and the Nasdaq put on 0.18 percent.
“Yellen was dovish in the press conference,” said David Buckle, London-based head of quantitative research at Fidelity Worldwide Investment, told Bloomberg News.
“She was at pains to point out that monetary policy will likely to remain highly accommodative for a long time after the first rate rise.”
— ‘Difficult situation’ —
The news put pressure on the dollar, which was at 123.33 yen in Tokyo Thursday, against 123.43 yen in New York and well down from 123.67 yen in Asia earlier Wednesday.
Yellen also voiced concern about Greece’s debt crisis, warning the world economy could see significant turmoil if Athens did not reach an agreement with its creditors on overhauling its bailout.
“This is a very difficult situation. In the event that there is not agreement I do see the potential for disruptions that could affect the European economic outlook and global financial markets,” Yellen said.
Failure to hammer out a deal before a debt repayment deadline at the end of the month would see it default and possibly crash out of the eurozone.
Despite talks being at a stalemate the euro ticked higher. It bought $1.1357 and 140.09 yen in Asia, compared with $1.1335 and 139.91 yen in New York. It is also well up from $1.1264 and 139.30 yen earlier Wednesday in Tokyo.
The Greek central bank also warned that failure would start “a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and -– most likely -– from the European Union”.
The comments come as finance ministers from the 19 eurozone countries prepare to meet Thursday in Luxembourg, although several officials said they were not expecting a breakthrough.
Oil prices slipped after a mixed energy report. US benchmark West Texas Intermediate for July delivery fell 18 cents to $59.74 while Brent crude for August was down 11 cents to $63.76
Gold fetched $1,186.56 compared with $1,178.47 late Wednesday.