The price of oil soared by nearly 3 percent to a new 10-month high, reaching $100 per barrel on Wednesday. Lower than expected US stocks added to the concerns over tighter global crude supplies.
Brent crude, the international benchmark, rose to $97.06 per barrel intraday, its highest level since November 20,22. It then pared this gain slightly, settling at $96.55. West Texas Intermediate in the US rose by 3.6 percent to $93.68 per barrel as stocks at a key delivery hub continued to fall, according to government data.
Energy Information Administration’s latest report showed that US commercial crude inventories dropped by 2.2mn barges from the previous weeks, further tightening the supply. The delivery point for WTI also saw its inventories drop to their lowest point in over a year.
Ole Hansen is the head of commodity strategy for Saxo Bank. He said that “the price correction last week has faded and market momentum points to higher prices.”
Oil prices are up 30 percent since June, after some of the biggest producers in the world announced that they would cut their supply until the end this year. This has added to investor’s concerns about persistent inflation in Europe and the US.
After hitting a low of three months in the previous session, the benchmark US S&P 500 index closed marginally higher. The Nasdaq Composite increased by 0.2 percent.
The energy stocks rose due to higher oil prices. Supermajors ConocoPhillips & ExxonMobil were up 3% and 3.3%, respectively.
In Europe, Stoxx Europe 600, the regional Stoxx Europe 600 Index, ended the day 0.2% lower, marking its fifth consecutive day of losses.
The Fed’s hawkish comments that interest rates would likely remain high for a longer period of time due to persistent inflation triggered the sharp selling off of US government bonds.
The yield on the 10-year Treasury note, which is considered the benchmark, rose by 0.05 percentage points on Wednesday to reach a new high since 2007. The yield on the 30-year bond increased by 0.03 percentage points, to 4.72 percent.
The dollar, which usually strengthens when investors anticipate higher interest rates, climbed 0.4 percent against a basket six currencies. It reached a new 10-month high.
Emmanuel Cau is the head of European equity strategies at Barclays.
He said that investors had accepted the fact that interest rates would remain higher for longer and threaten economic growth. Bonds are becoming more attractive than equities amid the hawkishness of central banks and risks to the economy. Meanwhile, US durable goods orders — a closely watched gauge of manufacturing activity — rose 0.2 per cent month on month in August, a sharp improvement from the 5.6 per cent contraction in the previous month, and above economists’ estimates for a 0.5 per cent decline.
In August, new orders of non-defence goods (excluding aircraft), which are considered to be a proxy for investment by businesses, rose by 0.9%. This was also higher than expected.
Investors waited for the US and Eurozone inflation data that was due to be released later this week to get a better understanding of central banks’ plans.
Separate data released on Wednesday revealed that the profits of China’s industrial sector dropped 11.7 percent year-on-year in the first eight of 2023. This is compared to a greater 15.5 percent contraction in the seven month period of the same year.
After a two day losing streak, the Hang Seng Index in Hong Kong rose by 0.8 percent and China’s CSI index advanced by 0.2 percent.