Oil Falls for Fifth Day as US-Iran Talks Raise Supply Hopes

Market Wrap-up: Oil Extends Losses as US-Iran Talks Raise Supply Hopes

Brent crude fell 1.09% to settle at $99.25 a barrel on Tuesday, while WTI crude declined 1.24% to $94.59. Both benchmarks recorded their fifth consecutive session of losses. Prices were down more than 4% this week but remained more than 9% higher on the month.

Oil prices came under pressure after US President Donald Trump said US officials had held a meeting with an Iranian delegation in New York that lasted about three hours. 

Trump described the meeting as “very good” and said he believed a deal with Iran could be reached after the US midterm elections. Trump also told the United Nations General Assembly that he faced a decision over whether to pursue a negotiated agreement with Iran. 

Meanwhile, reports said Iran had offered to reopen the Strait of Hormuz within seven days, although CNBC said the reports had not been independently verified.

Supply concerns also eased after Saudi Arabia restarted its East-West pipeline. People familiar with the matter told Bloomberg News that the pipeline was in the early stages of restarting, while Reuters reported that it was already pumping at a low rate and could resume exports at Yanbu on the Red Sea.

US equities were mixed. The Nasdaq Composite rose 0.45% to a record close of 27,244.28, while the S&P 500 edged lower to 7,764.64. The Dow Jones Industrial Average fell 185.14 points, or 0.36%, to 51,863.69.

The US 10-year Treasury yield edged lower to 4.959%. Treasury yields had been trending higher amid elevated oil prices, persistent inflation and rising debt, while RBC Wealth Management senior portfolio strategist Tom Garretson said markets may not have fully appreciated the implications of a higher-yield environment.

Gold recovered towards $4,360 an ounce in early Asian trading on Wednesday as hopes for diplomatic progress between the US and Iran supported the precious metal. 

However, expectations for higher US interest rates could continue to weigh on gold, while Commerzbank analysts highlighted strong Chinese demand as an important driver of the gold market this year.

The US Dollar Index (DXY) continued to recover on Tuesday, moving above the 100.00 level and reaching a two-month high amid expectations for further Federal Reserve tightening. 

Attention will remain on developments in the US-Iran situation, while the planned Trump-Xi meeting at the White House on Thursday, 24 September, will also be in focus. 

On the economic calendar, key US releases due on Wednesday include the preliminary S&P Global Manufacturing and Services PMIs for September, the weekly MBA Mortgage Applications report and the EIA’s crude oil inventories data. Fed Governor Michael Barr is also scheduled to speak.

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DXY:

Key takeaway:

• Holds above the 100.00 level and reaches a two-month high.
• Fed policy expectations remain a key focus for the dollar.

Technical Outlook:

• Daily Bias: Bullish
• Support: 100.30
• Resistance: 100.80

Gold:

Key takeaway:

• Recovers towards $4,360 an ounce in early Asian trading.
• Diplomatic developments and interest-rate expectations remain in focus.

Technical Outlook:

• Daily Bias: Bearish
• Support: 4,291
• Resistance: 4,375

Oil:

Key takeaway:

• Extends its losing streak to five sessions.
• Potential easing of Middle East supply disruptions weighs on prices.

Technical Outlook:

• Daily Bias: Bearish
• Support: 88.66
• Resistance: 94.00

Nasdaq:

Key takeaway:

• Rises 0.45% to a record close of 27,244.28.
• Reaches a fresh all-time intraday high.

Technical Outlook:

• Daily Bias: Bullish
• Support: 27,000
• Resistance: 27,500

Calendar Watch:

• S&P Global Manufacturing and Services PMI: Preliminary September readings will provide an early indication of activity across the US manufacturing and services sectors.
• MBA Mortgage Applications: The weekly report will provide an update on mortgage application activity. 
• EIA Crude Oil Inventories: The weekly report will provide fresh data on US crude stockpiles.
• Fed Governor Michael Barr: Market participants will monitor Barr’s remarks on the economic outlook and housing.

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