Brent Crude Slips Below $70
US crude tumbled nearly 4% recently, skimming the $65 per barrel mark. That slide pushed Brent crude under $70, a break lower that followed OPEC’s latest demand downgrade. Even OPEC—usually on the optimistic side—trimmed its forecast for the second time in two months, and that double-cut rattled sentiment. Adding to the unease, the API said US oil inventories fell by about 2.79 million barrels last week, a draw that, counterintuitively, didn’t lift prices and instead coincided with fresh selling pressure.
By most technical gauges, US crude looks oversold, which has traders talking about the need for a modest bounce to reset the tape. Still, the near-term tone remains broadly bearish. Demand worries are doing more work than any support coming from the supply side.
Ordinarily supportive forces—geopolitical tension, OPEC’s extended production cuts, and hurricanes in the Gulf of Mexico—aren’t getting much traction. As a result, energy stocks had a rough session yesterday.
Market Reactions to Economic Indicators
Elsewhere, the US regulatory conversation included talk that capital requirements could be eased from 19% to something closer to 9%. That potentially big shift, however, was overshadowed by a conference where top bank executives struck a cautious tone. JP Morgan’s CEO warned that the bank’s projected $90 billion in net interest income for next year may not be realistic.
BofA flagged weaker investment banking results than Wall Street expected, and Goldman Sachs guided to about a 10% drop in trading revenues for the current quarter. Ally Financial (NYSE: ALLY) underscored growing credit stress as auto loan delinquencies rise alongside higher borrowing costs. The sector took it on the chin: JP Morgan shares fell more than 5%, and Invesco’s KBW bank ETF slid 1.83%.
Across the Atlantic, European courts ordered Apple (NASDAQ: AAPL) to pay €13 billion in back taxes to Ireland, wrapping up an eight-year dispute. Google also lost its challenge to a €2.4 billion fine tied to its shopping comparison practices. Even so, market reactions were muted: Google rose 0.31% while Apple slipped 0.36%, with Apple’s move likely influenced by a lukewarm product reveal earlier.
On the brighter side, Taiwan’s exports hit a record $43.6 billion in August, lifted by strong AI chip demand. The Ministry of Finance expects that momentum to persist into the second half of the year. Nvidia (NASDAQ: NVDA) rose about 1.5% on the day, while TSM showed little change.
Broadly, the S&P 500 gained 0.45% yesterday and the Nasdaq 100 advanced 0.90%. The Dow lagged, dragged down by bank weakness. In rates, the US 2-year yield fell to 3.56%, a drop that points to rising growth concerns. The US dollar, after a recent run, eased back.
US CPI Data and Its Implications
Attention now turns to the upcoming US Consumer Price Index release. Adobe’s Digital Price Index flagged a record monthly drop in online grocery prices in August—down 3.7% month on month. Food accounts for roughly 8.6% of the headline inflation basket (though it’s excluded from the core measure). Even so, that decline dovetails with a broader picture of cooling inflation and a slowing economy.
Consensus sees core inflation holding at 3.2%, with headline inflation easing from 2.9% to 2.5%. If realized, that would be the first notable move under 3% since the previous summer and could nudge the Federal Reserve to focus less on inflation risk and more on a softening job market.
Does that open the door to a 50-basis-point cut instead of 25? Unlikely. A larger move would risk signaling the Fed has fallen behind on inflation—something policymakers would prefer to avoid.
Frequently Asked Questions
What pushed Brent crude below $70?
A sharp drop in US crude—down nearly 4% and nearing $65—coincided with OPEC cutting its demand outlook for the second time in two months. Despite an API-reported 2.79 million-barrel inventory draw last week, demand fears dominated and pulled Brent under $70.
Why does the market look bearish even if crude seems oversold?
Technical readings suggest the market could bounce, but sentiment is heavy. Concerns about weaker demand are outweighing support from supply-side factors like OPEC’s production cuts, geopolitical risks, and even hurricane-related disruptions in the Gulf of Mexico.
How are banks describing the current environment?
Leading banks struck a cautious tone. JP Morgan’s CEO questioned whether $90 billion in net interest income next year is realistic. BofA warned on investment banking, Goldman flagged a roughly 10% drop in trading revenues this quarter, and Ally Financial highlighted rising auto loan delinquencies as borrowing costs climb.
What stood out in broader market moves?
Stocks were mixed: the S&P 500 rose 0.45% and the Nasdaq 100 gained 0.90%, while the Dow fell on bank weakness. The US 2-year yield slid to 3.56%, hinting at growth worries, and the US dollar softened after recent strength.
What’s expected from the next CPI report?
Core inflation is seen steady at 3.2%, with headline inflation slipping from 2.9% to 2.5%. A drop below 3%—the first meaningful one since the previous summer—would reinforce the view that inflation is easing and could shift the Fed’s attention toward a weakening labor market, though a 50-basis-point cut still looks unlikely.
