The crude oil price pressed toward elevated levels as markets recalibrated. The Fitch downgrade dominated price action, but the impact has been disparate. If the risk-off attitude continues, will WTI face headwinds?
The crude oil price has managed to hold the high ground even though other growth-aligned assets took a hit on Wednesday.
The WTI futures contract is a touch above US$ 82 per barrel while the Brent contract has overcome US$ 85.50 per barrel.
The American Petroleum Institute (API) inventory report probably helped to underpin black gold after the latest data showed a drop of 15.4 million barrels in the week ended July 28th.
The market awaits today’s US Energy Information Agency (EIA) weekly petroleum status report for further evidence of a squeeze on supply or otherwise.
One of the dominant credit rating agencies, Fitch, downgraded its US sovereign debt credit rating to AA+ from AAA after the North American close. This is the first time that the agency has done so in almost 30 years.
US Treasury Secretary Janet Yellen referred to the decision as ‘arbitrary’ and ‘outdated.’
Somewhat strangely, Treasuries rallied in the aftermarket with yields briefly dipping before recovering. The market seems to be heading toward perceived safe havens, even though this asset is at the center of the storm.
Going against the grain, gold has struggled today, with the spot price sliding under US$ 1,950.
Equity markets have been less fortunate with a sea of red across the APAC region today. Futures prices are pointing toward a soft start to the European and Wall Street opens.
Hong Kong’s Hang Seng (HSI) and Japan’s Nikkei 225 equity indices have led the way lower, sinking over 2%.
Currency markets have reflected the risk-off tone with the growth-linked Aussie and Kiwi Dollars seeing the largest losses today.
Looking ahead, the US will see MBA mortgage applications and ADP employment change data.
