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On May 5th, the Reserve Bank of Australia (RBA) raised its benchmark interest rate for the third consecutive time, highlighting its determination to curb stubborn high inflation and solidifying its position as the "lone wolf" among major central banks globally. The RBA voted 8-1 to raise the cash rate from 4.1% to 4.35%, completely reversing the monetary easing cycle of last year. In a statement, the bank said that after three rate hikes, monetary policy is well-prepared to respond to changing circumstances, and the committee is focused on achieving its mandate of price stability and full employment, and will take all necessary actions to achieve this goal. Currently, most economists expect the RBA to remain on hold for an extended period, but a minority believe there will be at least one more rate hike, a view shared by the money market. With three consecutive rate hikes, the RBA committee is also signaling that it prioritizes its 2% to 3% inflation target over all other considerations. This aggressive stance puts further pressure on the Australian government. With one week to go before the annual budget is released, it is expected to address war-related energy price increases and provide temporary cost-of-living relief for households.The Reserve Bank of Australia (RBA) stated that the committee will focus on data and evolving outlook and risk assessments to guide its decision-making.Reserve Bank of Australia: Higher fuel prices are exacerbating inflation, and there are signs that this could have a broader secondary impact on the prices of goods and services.The Reserve Bank of Australia (RBA) stated that the Middle East conflict has led to a sharp rise in fuel and related commodity prices, further exacerbating inflationary pressures.Reserve Bank of Australia: There are early signs that many businesses facing cost pressures are beginning to seek to raise prices for their goods and services.

A weakening dollar and low U.S. diesel inventories lifted crude oil

Skylar Williams

Oct 14, 2022 15:08

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As Saudi Arabia and the US disagreed over OPEC+'s output cuts, oil prices rose in Asian trade on Friday, supported by a weaker currency and dropping diesel supplies.


Brent crude prices rose 29 cents, or 0.3%, to $94.86 a barrel by 02:42 GMT, while WTI crude futures rose 31 cents, or 0.35 %, to $89.42.


Both contracts dropped almost 3% after two weeks of rises owing to recession fears.


"The weaker U.S. dollar and the significant rebound in risk assets helped oil prices," said CMC Markets analyst Tina Teng. Dollar-denominated commodities like oil are cheaper for non-dollar holders when the dollar weakens.


"OPEC+'s output cut will continue to underpin oil prices, paired with a possible rise in China's demand in the fourth quarter if Beijing removes COVID limitations," Teng said.


China, the world's largest crude oil importer, is fighting a COVID recovery following its week-long National Day holiday earlier this month and before a pivotal Communist Party Congress when President Xi Jinping is expected to extend his reign. The country has a zero-COVID policy despite a low infection rate.


Saudi Arabia and the US opposed last week's OPEC+ plan to cut oil supply. Saudi Arabia, OPEC's de facto leader, called Washington's concerns "not based on facts" and said that delaying the cut by one month would have hurt the economy.


The White House claims that the Saudis pressured other OPEC members to vote in their favor after receiving research showing that the reductions could hurt the global economy. Both nations' officials will meet soon.


Oil prices were also buoyed by a strong fall in distillate inventories as heating oil demand is predicted to surge as winter approaches.


Thursday, the U.S. Energy Information Administration announced that distillate stockpiles, which include diesel and heating oil, fell by 4.9 million barrels to 106.1 million barrels, their lowest level since May, compared to estimates of a 2 million-barrel decline.


US crude oil and gasoline inventories rose more than expected. In the week ending October 7, the EIA reported a 9.9 million-barrel increase in oil stockpiles to 439.1 million, significantly exceeding the 1.8 million projected by analysts in a Reuters poll. [EIA/S]


"The market ignored a 10-million-barrel increase in U.S. crude inventories last week and instead focused on a 4.9-million-barrel decline in distillate inventories ahead of heating demand," said ANZ Research in a Friday note, adding that OPEC+'s oil output cut and Russian oil sanctions "create a perfect backdrop for volatile prices."

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