Sensing that it was probably overreacting with COVID lockdowns while the rest of the world had moved on with the pandemic, top crude-oil importer China said Tuesday that it was reviewing social curbs over the virus and could fully reopen for business by spring 2023, sending crude futures higher after a two-day drop.
Continued expectations for a Federal Reserve pivot — a phrase that simply suggests the central bank may choose a rate hike of less than 75 basis points — in December boosted risk appetite throughout markets, despite the labor and other statistics that remained unconvincing.
Since the summer, investors have been nervous about the Fed’s aggressive rate hike regime, which increased from a 25-bp hike in March to a 75-bp hike in June, and which the central bank has sustained. The dollar fell initially on the rumor on Tuesday, then recovered before falling again in late-afternoon trade in New York, offering a headwind to crude-Oil and other commodities.
The benchmark for US crude, New York-traded West Texas Intermediate, finished up $1.84, or 2.1%, at $88.37 a barrel, following a net decrease of about 3% during the previous two days. After a 3% surge last week, London-traded Brent crude-oil closed up $1.84, or over 2%, at $94.65 per barrel.
The Labor Department said Tuesday that the number of available jobs for Americans in September was significantly above forecasts, with nearly two openings for every job seeker, in the latest monthly statistics that appeared to complicate the Fed’s inflation fight.
Over the last two years, one of the most redeeming features of the American economy has been its job market. However, it is something of an anathema for the Fed, given solid wage growth has contributed to the worst inflation in four decades. According to the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, there were 10.72 million open positions in September, which was more than the projected 10 million.
The JOLTS figure “reverses a recent fall and enhances the prospect of a tight jobs market for longer and the Fed needing to rise more,” economist Adam Button wrote on the ForexLive forum, noting that there were 1.9 jobs available for every job seeker.
The Fed is almost set to deliver a 75-basis-point rate hike on Wednesday, the fourth in a row, as the central bank continues its policy of jumbo-sized rate increases to bring inflation back to its objective.
Inflation, as assessed by the Consumer Price Index, was 8.2% in the year to September, not far off the 40-year high of 9.1% in June.
The Fed’s inflation target is a meager 2% per year, and it has stated that it would not stop raising interest rates until it accomplishes this goal. Since March, the Fed has hiked interest rates by 300 basis points from a starting point of just 25. The Fed plans to raise interest rates by another 125 basis points before the end of the year.
The JOLTS data was released ahead of the more critical non-farm payrolls report for October, which the Fed regards as a key benchmark for rate decisions. Economists anticipate that the United States created 191,000 nonfarm jobs last month, compared to September’s gain of 263,000.
The Fed’s primary goal isn’t to combat inflation. It is also tasked with providing “maximum employment” for Americans, which adds to the central bank’s difficulty in striking a balance between the two priorities while simultaneously attempting to cool employment in order to reduce price pressures.
Maximum employment is defined by the Fed as a monthly jobless rate of 4% or less. Since the beginning of the year, the central bank has received full credit for its mission, as unemployment reached 4% in January and has remained below that level.
Oil traders were also waiting for API, or the American Petroleum Institute, to release weekly crude-oil inventory data for the United States.
The API will issue a snapshot of closing balances on US crude-oil, gasoline, and distillates for the week ending Oct. 28 at around 4:30 PM ET (20:30 GMT). The figures are a forerunner to official inventory data from the US Energy Information Administration, which is expected on Wednesday.
According to Investing.com, analysts predict the EIA to announce a crude stockpile gain of 367,000 barrels last week, compared to the 2.588-million barrel increase reported during the week ending Oct. 21. On the gasoline inventory front, the consensus is for a draw of 1.358 million barrels, up from the previous week’s decrease of 1.478 million barrels.
The projection for distillate stockpiles is a loss of 560,000 barrels, compared to a rise of 170,000 the previous week. China’s zero-COVID policy has been a crucial role in keeping crude-oil prices under control, as periodic lockdowns in the world’s second-largest economy have slowed growth and reduced oil demand.
US Vice President Joe Biden has urged crude-oil and gas corporations to use their record profits to decrease costs for Americans and increase output or face a tax rise.
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