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Crude prices down about 1% or more in Asia markets. That comes with the time Israel is currently engaged in a continuous and multi-faceted military operation within the Gaza Strip. Which aim at addressing the presence of Hamas. Nonetheless, it is noteworthy that oil traders currently exhibit a greater preoccupation with the potential actions or statements of the Federal Reserve in its forthcoming rate decision. This decision scheduled for Wednesday and the forthcoming release of US job data for the month of October on Friday. This focus on financial matters persists despite the ongoing conflict in the Middle East. Which had a significant impact on global markets in the preceding week.
Additionally, it is notable that gold has surged to new highs in 2023. As it surpassing the $2,000 per ounce mark. That comes due to increased interest from investors seeking refuge in this precious metal.
As the new week commenced in the Asian markets, oil and crude prices down in a decline. Retracing a substantial portion of the gains achieved in the prior trading session. This drop attributed to the anticipation surrounding the Federal Reserve meeting and the crucial economic data. This data expected to be unveiled later in the week, leading to profit-taking among traders.
Crude prices Down: WTI and Brent Decline Amidst Volatility
Specifically, the West Texas Intermediate (WTI) crude, priced at $84.37 per barrel by 14:45 in Singapore (02:45 New York time). It is traded in New York for delivery in December. Representing a decrease of $1.17 or 1.4%. The lowest point reached during this session was $83.77. Over the course of the previous week, the US crude benchmark observed a 3% decline in value. Which contributing to one of the most volatile weeks in this year. Traders grappled with the challenge of determining an appropriate risk premium for oil. That comes in the context of the ongoing geopolitical turmoil.
Simultaneously, the London-traded Brent crude, for the most active December contract, was valued at $88.22. Which reflecting a decrease of 98 cents or 1.1%. The lowest point reached during the session for December crude was $88.02. Over the course of the previous week, the global crude benchmark experienced a nearly 2% decline.
Also Read: Crude Oil Stabilizes Amid Middle East Risks Before Fed
Middle East Geopolitics Affect Oil Market Ahead of Fed Meeting
It is essential to acknowledge that while financial markets are indeed keeping a watchful eye on developments in the Middle East. Which in particularly in the wake of Israel’s much-anticipated ground offensive in Gaza over the weekend. Also the absence of further escalation in the conflict on Monday. And, more critically, the continued uninterrupted flow of oil shipments in the vicinity of the conflict zone have led to a reduced perception of the risk premium associated with crude oil.
In the coming week, the oil market is poised for a data-heavy focus. This is primarily attributed to the impending Federal Reserve meeting. Where any signs of a hawkish stance from the central bank could exert additional downward pressure on crude oil demand. The consensus expectation is for the Federal Reserve to maintain current interest rates. Though there is a possibility of one more rate hike later in the year. Particularly in light of several instances of inflation exceeding expectations.
Stable US Dollar as Crude prices down Job Data and Inflation Insights Awaited
With the Crude prices down, The US dollar remained relatively stable on Monday. As it retains recent gains and diminishing international demand for crude oil. Worth noting is priced in US currency. The most pivotal economic data release of the week is the non-farm payrolls report for October. Which scheduled for release on Friday. After a remarkable addition of 336,000 jobs in September, economists anticipate a more modest job growth figure of 182,000. Which is still indicative of a robust labor market. The unemployment rate expected to remain at 3.8%. While wage growth projected to decrease to 4% year-on-year, marking a post-pandemic low.
This potential moderation in wage growth could support the Federal Reserve’s perspective that inflationary pressures are easing. Thereby reducing the need for further interest rate hikes. Leading up to Friday’s data release, market participants will also scrutinize third-quarter employment cost data on Tuesday for indications of moderating wage growth.
Market Focus on China’s PMI Data and Bank of Japan Meeting
Before the Federal Reserve meeting, there is a noteworthy focus on key purchasing managers index data from China, Expected to provide insight into business activity in the world’s largest oil importer. China’s economy has shown signs of stabilization in recent months following a significant decline in growth earlier in the year. Additionally, the Chinese aviation regulator has expressed its intention to increase domestic flights to 34% above pre-pandemic levels, which serves as a positive indicator for oil demand. However, it’s worth noting that air travel still constitutes a relatively small portion of China’s overall fuel consumption.
Furthermore, the Bank of Japan set to convene on Tuesday, with market participants factoring in the possibility of a policy shift in response to rising inflation.
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Disclaimer:
Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
