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Oil prices have extended losses after weak US and Chinese data spurred fresh concerns about a potential global recession that could hit energy demand.
Brent crude futures fell 90 cents, or 1 percent, to $94.20 a barrel by 00:03 GMT. WTI crude futures fell 81 cents, or 0.9 percent, to $88.60 a barrel.
Oil futures fell about 3 percent during the previous session as demand expectations are lowered in light of a string of soft economic indicators in major economies.
Signs that Iran is moving towards a nuclear deal added to the downward pressure on prices, with an agreement seen allowing the country to restart sales into the world market.
Analysts said Tehran could provide 2.5 million barrels a day, giving a much-needed shot in the arm to supplies, which have been hammered by sanctions on Russia in response to its attacks on Ukraine.
Libya has also boosted production, helping prices drop to six-month lows and wiping out the gains seen after the Ukraine conflict started.
But analysts warned that there might still be some way to go on an Iran agreement owing to upcoming US elections.
"A deal with Iran would likely not be popular with US voters and so is hard to envisage before the November mid-terms," said National Australia Bank's Ray Attrill.
"Markets are currently prone to optimism, though, and hopes for a deal... have added to downward pressure on oil prices."
Iran responded to the European Union's "final" draft text to save a 2015 nuclear deal on Monday, an EU official said, but provided no details on Iran's response to the text. The Iranian foreign minister called on the United States to show flexibility to resolve three remaining issues.
READ MORE: Libya 'confirms' its oil production is back to pre-blockade levels
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Disappointing China data
China's central bank cut lending rates to revive demand as data showed the economy slowing unexpectedly in July, with factory and retail activity squeezed by Beijing's zero-Covid policy and a property crisis.
China's fuel product exports will rebound in August to near the highest for the year so far after Beijing issued more quotas in June and July, although broader curbs are set to cap shipments at seven-year lows for 2022, analysts and traders said.
In the United States, total output in the major US shale oil basins will rise to 9.049 million bpd in September, the highest since March 2020, the U.S. Energy Information Administration (EIA) said in its productivity report on Monday.
Market participants awaited industry data on US crude stockpiles due later on Tuesday. Oil and gasoline stockpiles likely fell last week, while distillate inventories rose, a preliminary Reuters poll showed on Monday.
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Hopes of cooling inflation
With surging oil prices a key driver of inflation to multi-decade highs around the world, the drop has fanned hopes that the headline figure could begin to come down.
That has led to speculation that central bank chiefs could lift rates at a slower pace, and then think about pivoting monetary policy to cuts as early as next year.
The prospect of a less painful hiking campaign has sparked a rally in equities from their June lows.
And on Tuesday, Asia built on Wall Street's upbeat performance.
Hong Kong and Shanghai rose after Beijing cut rates on Monday as the world's number two economy struggles to recover from a plunge in activity caused by extended Covid lockdowns.
Sydney, Seoul, Taipei, Manila, Jakarta and Wellington were also up, though Tokyo was flat and Singapore dipped.
Still, analysts warned that while equities are enjoying a bounce, the economic outlook could keep them subdued or even fall back again.
"The risk of the markets going below the June lows is quite high," Shane Oliver, at AMP Services, told Bloomberg Television. The weak data presage "weaker earnings growth ahead in the US", he added.
READ MORE: UN chief blasts oil firms profiting from energy crisis
Source: Reuters
The Government of Pakistan Monday jacked up the petrol price by Rs6.72 per litre for the next fortnight.
“In the wake of fluctuations in petroleum prices in the international market and exchange rate variations, the government has decided to revise the existing prices or petroleum products to pass on the impact to the consumers,” the statement released by the Finance Division read.
While the government raised the price of petrol, it slashed the price of diesel by Rs0.51.
In line with the new changes, the price of petrol will be Rs233.91 per litre, diesel will be Rs244.44 per litre, and kerosene oil will be sold for Rs199.40 per litre, and the price of light diesel oil will be Rs191.75 per litre.
The new prices will come into effect from August 16, 2022.
A day earlier, Federal Minister for Finance and Revenue Miftah Ismail said that owing to the conditions set forth for the country by the International Monetary Fund (IMF), the Government of Pakistan is not in a position to afford any petroleum subsidies.
Oil prices dropped on Monday for a second session after the head of the world's top exporter, Saudi Aramco, said it is ready to ramp up output while production at several offshore US Gulf of Mexico platforms is resuming after a brief outage last week.
Brent crude futures fell 27 cents, or 0.3 percent, to $97.88 a barrel by 0034 GMT after settling 1.5 percent lower on Friday.
US West Texas Intermediate crude was at $91.87 a barrel, down 22 cents, or 0.2 percent, following a 2.4 percent drop in the previous session.
Saudi Aramco stands ready to raise crude oil output to its maximum capacity of 12 million barrels per day (bpd) if requested to do so by the Saudi Arabian government, Chief Executive Amin Nasser told reporters on Sunday.
"We are confident of our ability to ramp up to 12 million bpd any time there is a need or a call from the government or from the ministry of energy to increase our production," Nasser said.
He added that China's easing of Covid-19 restrictions and a pickup in the aviation industry could add to demand.
READ MORE: Oil prices drop as traders watch developments in Iran nuclear talks
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Tight supplies
Investors are looking ahead to China's economic data later on Monday for demand cues at the world's top crude oil importer.
Oil prices rebounded more than 3 percent last week after a damaged oil pipeline component disrupted output at several offshore Gulf of Mexico platforms.
Producers had moved to reactivate some of the halted production after repairs were completed late Friday, a Louisiana official said.
Energy services firm Baker Hughes Co reported on Friday that the US oil rig count rose by 3 to 601 last week.
The rig count, an early indicator of future output, has been slow to grow with oil production only seen recovering from pandemic-related cuts next year.
Global oil markets remained supported by tight supplies in the run-up to EU sanctions on Russian crude oil and refined product supplies this winter.
READ MORE: UN chief blasts oil firms profiting from energy crisis
Source: Reuters
Dow futures were flat in overnight trading on Wednesday after all the major averages posted sharp gains on the back of a better-than-expected July inflation report.
Futures tied to the Dow Jones added 0.02% or 6 points, while S&P 500 futures and Nasdaq 100 futures inched 0.07% and 0.13% lower, respectively.
Disney added 6.7% in late trading after posting stronger-than-anticipated subscriber numbers and topping earning estimates on the top and bottom lines. Shares of Sonos slumped more than 19% after missing analysts' expectations.
Wednesday's regular trading session saw all the major indexes rally, with the Dow Jones Industrial Average jumping 535.10 points, or 1.63%, to close at 33,309.51. The S&P 500 added 2.13% to 4,210.24 and hit its highest level since early May, while the Nasdaq Composite gained 2.89% to 12,854.80, its highest close since late April.
The moves came after the headline consumer price index for July came in at 8.5%, slightly cooler than the 8.7% expected by analysts surveyed by Dow Jones, and raised questions as to whether inflation has hit its peak and the Federal Reserve will need to hike rates as aggressively as anticipated when it meets next month.
Beaten-up tech shares that have borne the brunt of this year's selloff drove Wednesday's market rally as shares of Meta Platforms and Netflix jumped 5.8% and 6.2%, respectively. Battered chip names such as Nvidia and Advanced Micro Devices jumped nearly 6% and 4%, respectively.
"For today, we're rallying, and I think it's really because inflation has been such an overhang for investors and for the market," Lindsey Bell, Ally Invest's chief markets and money strategist told CNBC's "Closing Bell" on Wednesday. "And I think what investors are thinking today is maybe the peak really has been put in the past."
Earnings season continues Thursday with reports from Rivian, Warby Parker, Poshmark and more. July producer price index data is also slated for Thursday.
Investors should eschew chasing recent rallies in stocks and bonds given the current economic uncertainty, according to the chief investment officer of Swiss asset manager Prime Partners.
Francois Savary said it was hugely difficult to have clear economic visibility due to the particulars of the current investment cycle, such as the Covid-19 recovery and the Ukraine war.
"One of the key factors that supported the rally, which was a strong bond market during the month of July, has disappeared to a certain extent," he told CNBC's "Street Signs Europe" on Monday.
Additionally, while the second-quarter earnings season has been robust so far, a key issue looming is how much analysts will revise their third-quarter earnings forecasts. "So we consider that the two elements that can support a further rally in the equity market are not clearly there," Savary said.
As such, he said investors should "absolutely not" be chasing the rally in equities that has been underway since mid-July. The S&P 500 is up almost 13% from its July lows, closing at 4,140 on Monday, but remains down since the start of the year.
On bonds, Savary said, "we all know it's very difficult to make money on the bonds side. I would not chase the bond rally that we experienced over the last two months."
Corporate, government and high-yield bond funds saw sizeable inflows last month. The U.S. 10 Year Treasury yield — which moves inversely prices — has slipped to trade around 2.76% on Tuesday after topping 3.48% in mid-June.
Investors in global markets are navigating a whirlwind of inflationary pressures, recession risks and central bank tightening cycles, with even juggernauts such as Berkshire Hathaway and SoftBank posting investment losses in the June quarter.
"It's a very difficult market environment," Savary told CNBC. "You need to have some hedge funds [and] some kind of decorrelating strategy that are in your portfolio."
Keeping some investment in stocks will provide partial protection from inflation, he said, however investors will need to be tactical and observe the latest economic figures.
Meanwhile cash, Savary said, is useful for providing flexibility.
"It's interesting to have some cash to check because everything is possible in this kind of environment. We could have a recession, but you could also get a slow but satisfactory rate of growth in the coming 12 months," he said.
For now, Savary said the market has priced in a recession. "But the numbers are not telling you that there is a recession, so we need to be nimble and to check what is happening week-by-week and month-by-month, and we should have more visibility by the early fall, in the U.S. in particular."
U.S. gross domestic product fell for the first two quarters of the year, meeting a common definition of a recession, although the NBER defines it differently and the White House insists the U.S. is not currently in recession.
Investors will be looking to U.S. inflation data out Wednesday for further clues on the state of the world's largest economy. It comes after the jobs report for last month showed unexpected strength and increased expectations of a 75 basis points rate hike in September.
The logo of the Government of Singapore Investment Corp. (GIC)
Munshi Ahmed | Bloomberg | Getty Images
Singapore's sovereign wealth fund GIC reported stable returns for the year but warned of "profound uncertainties" as investors face worries about inflation, pandemic risks and geopolitical challenges.
The fund's portfolio recorded an annualized dollar nominal rate of return of 7% over a 20-year period ending March 31, 2022, GIC said in its annual report published on Wednesday.
It also achieved an annualized rolling 20-year real rate of return of 4.2 % for the period ending March 31, after stripping away inflation. GIC doesn't publish annual results.
Still GIC, which is among the world's largest investors, painted a rather bleak picture of the global environment.
"Years of concerns over deflation have turned into worries of elevated inflation, forcing economic policymakers to reverse stimulus policies," said Chief Executive Lim Chow Kiat in the report.
"At the same time, the clock for the climate crisis is ticking, pandemic risk lingers on, and geopolitical conflicts and domestic political schisms are growing. There are no easy choices for policymakers and business leaders, and in turn, for investors."
Given these uncertainties, we have doubled down on our core investment principles — diversify our portfolio, take the long view, and emphasize preparing rather than predicting.
As a result, the CEO said he expects portfolio diversification to be "more challenging as few assets are spared from the effects of worsening inflation and slower economic growth."
GIC said its diversified portfolio and cautious investment stance helped cushion its performance from the market correction that occurred in early 2022.
"Given these uncertainties, we have doubled down on our core investment principles — diversify our portfolio, take the long view, and emphasize preparing rather than predicting," Lim said in the report.
Amid the global shift to a low-carbon economy, the fund announced it has set up a dedicated office focusing on sustainability, to ramp up focus on that front.
The new office will deepen research into critical issues and integrate sustainability further into all its investment and corporate processes, GIC said as part of the release of its annual report.
