Oil Retreats After Trade-Driven Rally as Market Awaits OPEC+ Output Decision

Commodity

Summary:

Oil prices slipped Thursday after a sharp rally, as optimism over U.S. trade deals tempered geopolitical risk concerns and attention turned to this weekend’s OPEC+ meeting, where a supply boost is widely expected....

Oil Pulls Back as Trade Momentum Meets Supply Uncertainty

Oil prices declined on Thursday following their biggest single-day gain in nearly two weeks. Brent crude hovered near $69 per barrel, and West Texas Intermediate (WTI) remained above $67, as market sentiment shifted from geopolitical risk to ongoing trade developments and the upcoming OPEC+ meeting.

President Donald Trump’s announcement of a new trade agreement with Vietnam—following similar deals with the UK and China—helped fuel Wednesday’s 3% oil price surge. The agreements come ahead of the July 9 deadline to finalize trade terms, easing investor fears of widespread tariff escalations that could dampen global energy demand.

However, analysts suggest the trade-driven rally may be short-lived as attention now pivots to OPEC+ negotiations, where the cartel is expected to raise production quotas in August.

OPEC+ Decision Looms Large Over Price Direction

Market participants are exercising caution ahead of Sunday’s OPEC+ meeting. The alliance, led by Saudi Arabia and Russia, is widely expected to approve a substantial increase in output, responding to seasonal demand strength and recent supply constraints.

ING’s Head of Commodities Strategy, Warren Patterson, noted that while trade optimism gave oil prices a temporary lift, "the sustainability of this move will likely be short-lived" due to the market’s reluctance to build positions ahead of the U.S. holiday weekend and the OPEC+ decision.

Any aggressive supply expansion could offset recent gains driven by Middle East tensions and U.S. trade progress, making the weekend’s outcome a key inflection point for market direction into mid-July.

U.S. Inventory Trends Signal Mixed Fundamentals

On the supply side, the latest data from the U.S. Energy Information Administration revealed that nationwide crude inventories rose by 3.8 million barrels last week—marking the first increase since May. However, stockpiles at Cushing, Oklahoma—the primary U.S. oil hub—fell for the fourth consecutive week and are now at their lowest seasonal level since 2014.

This divergence highlights a complex demand picture. While national builds suggest some softening, regional draws and ongoing heat waves across the U.S. are propping up short-term consumption. The current driving season, coupled with elevated air conditioning usage, has lent support to gasoline and fuel demand.

Market Structure Reflects Lingering Tightness

Despite Thursday’s price decline, forward curves continue to signal underlying tightness. Brent’s prompt spread—the price gap between the nearest two contracts—rose to $1.21 per barrel in backwardation, up from $0.69 a month ago. Although this remains below the levels seen during last month’s Israel-Iran conflict, the structure still suggests strong prompt demand relative to future deliveries.

Backwardation in oil markets typically reflects supply constraints or heightened immediate demand, indicating that while macroeconomic risks linger, physical market dynamics remain firm.

Oil’s recent price action reflects the market’s balancing act between easing trade tensions and looming supply increases. While new U.S. trade deals have helped stabilize demand expectations, the potential for OPEC+ to flood the market with more barrels poses a fresh challenge for bulls.

With the U.S. holiday limiting trading volumes and OPEC+ poised to announce new production targets, investors are treading carefully. The outcome of the weekend’s meeting will likely define the direction of crude markets into the second half of July, as traders weigh geopolitical developments against the fundamentals of supply and demand.

Source: Bloomberg

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Gerik

Economic

Stocks

Asian Markets Cautiously Advance Amid Critical U.S. Economic Developments

Asian equities moved modestly higher on Thursday as investors turned their attention to two key U.S. events: the June payrolls report and the congressional vote on President Donald Trump’s sweeping tax and spending bill. These developments are expected to shape near-term expectations for Federal Reserve policy and broader market sentiment.

The MSCI Asia-Pacific index (excluding Japan) edged up 0.2%, nearing a four-year high, while Japan’s Nikkei remained flat. In China, blue-chip stocks added 0.2%, but Hong Kong’s Hang Seng index slipped 0.6% following weaker-than-expected growth in China’s services sector, which expanded at its slowest pace in nine months.

Wall Street Rallies on Vietnam Trade Deal, Eyes India Next

U.S. equity markets closed at record highs after Trump announced a trade agreement with Vietnam, which includes a 20% tariff on exports to the U.S. The move was interpreted as part of a broader push to finalize trade pacts with key Asian economies, with India reportedly next in line.

This momentum lifted hopes that trade clarity might buffer recent global volatility. S&P 500 and Nasdaq futures were little changed in Asia, signaling that investors are in wait-and-see mode ahead of the critical U.S. labor data.

U.S. Jobs Data: A Key Test for Fed Policy Expectations

The U.S. nonfarm payrolls report, due later today, is the central risk event. Economists forecast a gain of 110,000 jobs for June and an increase in the unemployment rate to 4.3%. However, a surprise contraction in private sector payrolls earlier this week has raised fears of a more pronounced labor market slowdown.

According to IG analyst Tony Sycamore, if the jobless rate spikes to 4.4%—its highest since October 2021—it could significantly increase the likelihood of a July rate cut, with probabilities climbing toward 70%. Current market pricing implies only a 25% chance of a July cut.

The Federal Reserve has not lowered interest rates in 2025 despite pressure from President Trump, who continues to demand aggressive easing. On Wednesday, he reiterated his call for Fed Chair Jerome Powell to resign and repeated his view that rates should be slashed to 1%, down from the current 4.25%–4.50% target.

Bond Yields and the Dollar Reflect Policy Tensions

U.S. Treasury yields fell slightly ahead of the data. The 10-year yield dipped 2 basis points to 4.265%, while the 2-year yield dropped to 3.77%. These modest declines reflect market hesitancy, as a weaker-than-expected jobs print could trigger a sharper repricing in rate expectations.

The U.S. dollar remains under pressure amid mounting political criticism of the Fed’s independence. The Bloomberg Dollar Index has slipped to its lowest level in over three years. The euro inched up 0.1% to $1.1807, nearing a four-year high, while the British pound also gained 0.1% after heavy losses the previous day.

UK markets remain volatile after the government’s reversal on welfare reforms sparked concerns about fiscal stability. Gilt yields spiked nearly 23 basis points at one point—the sharpest jump since October 2022.

Oil, Gold Ease After Volatile Moves

Oil prices retreated slightly after surging 3% overnight on geopolitical tensions. U.S. crude fell 0.4% to $67.20 per barrel, while Brent dipped to $68.84. The overnight spike was triggered by Iran’s decision to halt cooperation with the U.N. nuclear agency, adding a layer of supply risk to energy markets.

Gold slipped 0.4% to $3,342 an ounce, following recent gains driven by fiscal and inflation uncertainties.

Thursday’s trading session encapsulates a moment of global market tension. The combination of a potentially soft U.S. labor report and a controversial tax bill could redefine monetary policy expectations and shape asset flows. While equities are holding up on hopes for policy stimulus and international trade progress, downside risks persist if data disappoints or fiscal dynamics further unsettle bond markets.

Investors are navigating a narrow path, balancing short-term optimism with the structural concerns of inflation, central bank credibility, and rising public debt. The U.S. payrolls report could be the catalyst that tips sentiment one way or the other.

Souce: Reuters

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Gerik

Economic

AustralianSuper Strengthens Private Equity Push With New Partnerships

AustralianSuper, the country’s largest pension fund managing over A$365 billion (US$240 billion), is intensifying its commitment to private equity. The fund is on track to onboard four new private equity managers by the end of 2025, according to Mark Delaney, the fund’s Chief Investment Officer. This strategic pivot is part of a broader push to increase exposure to unlisted assets amid subdued capital raising activity and persistent market volatility.

Delaney emphasized that these new partnerships are with managers the AustralianSuper team has worked with previously and who have consistently delivered returns through conventional private equity strategies. While specific names were not disclosed, the selection appears grounded in trust, familiarity, and proven track records—factors critical in private market investing.

New York Expansion Supports Global Private Equity Strategy

AustralianSuper’s growing presence in the U.S., particularly through its New York office, has been pivotal in facilitating access to high-quality private equity relationships. The office now has around 60 staff, several of whom are focused on strengthening partnerships with private market firms. Delaney confirmed that his recent visits to New York included direct meetings with prospective private equity managers.

The timing of these deals is strategic. Delaney noted that capital raising in the private equity space is currently low—a condition that historically produces strong returns for investors who commit during these quieter periods. This view aligns with the fund’s philosophy of investing counter-cyclically, capitalizing on opportunities when market enthusiasm is tempered.

Shift From Listed to Unlisted Assets Amid Tech-Heavy Market Bias

AustralianSuper has faced challenges in its listed equities portfolio this year, largely due to the outsized performance of the so-called “Magnificent Seven” mega-cap tech stocks, which skewed global equity returns. The fund’s diversified investment approach, which does not overweight individual high-growth sectors, underperformed in this environment. However, Delaney remains confident in the long-term benefits of broad-based diversification.

In May, the fund signaled its intent to increase the private equity allocation of its balanced investment option from 5% to potentially 8%. This recalibration reflects both a tactical response to near-term equity market imbalances and a structural shift toward long-horizon, illiquid asset classes.

Tariff Volatility Doesn’t Derail Equity Exposure

Despite trade-related market turbulence triggered by President Donald Trump’s “Liberation Day” tariffs and continued global uncertainty, Delaney stated that AustralianSuper does not plan to reduce its equity exposure. While acknowledging that tariffs are expected to slow U.S. growth and compress corporate earnings, he noted that consensus forecasts stop short of predicting a recession.

“We don’t think it’s enough for us to go underweight stocks,” Delaney explained, suggesting that the current environment still supports a neutral-to-positive equity allocation over the long term.

Strategic Rebalancing to Navigate Market Complexity

AustralianSuper’s expanding focus on private equity marks a calculated pivot toward stability and long-term performance in a fragmented global market. With four new private equity manager deals in progress and a deepening footprint in the U.S., the fund is positioning itself to capitalize on low fundraising cycles and diversify away from the volatility of listed markets.

This move, set against a backdrop of trade tensions and sectoral concentration in public equities, reflects AustralianSuper’s evolving investment strategy—one that blends disciplined risk management with targeted asset class expansion to safeguard and grow member wealth over decades.

Source: Bloomberg

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Grace Montgomery

Republicans in the House of Representatives on Wednesday struggled to pass President Donald Trump's massive tax-cut and spending bill as a handful of hardliners withheld their support over concerns about its cost.

As lawmakers shuttled in and out of closed-door meetings, House Speaker Mike Johnson said he was trying to convince the holdouts to back Trump's signature bill, telling reporters, "We are planning on a vote today."

With a narrow 220-212 majority, Johnson can afford no more than three defections from his ranks, and sceptics from the party's right flank said they had more than enough votes to block the bill.

“He knows I am a ‘no’. He knows that I don't believe there are the votes to pass this rule the way it is,” Republican Representative Andy Harris of Maryland, leader of the hardline Freedom Caucus, told reporters.

Trump, who is pressing lawmakers to get him the bill to sign into law by the July 4 Independence Day holiday, met with some of the dissenters at the White House. But with the outcome uncertain, Republican leaders delayed a procedural vote for hours as they worked to shore up support.

The Senate passed the legislation, which nonpartisan analysts say will add US$3.4 trillion to the nation's US$36.2 trillion in debt over the next decade, by the narrowest possible margin on Tuesday after intense debate on the bill's hefty price tag and US$900 million in cuts to the Medicaid healthcare programme for low-income Americans.

Representative Lisa McClain, who chairs the House Republican Conference, told Reuters she expected her colleagues to work through procedural votes and bring the bill to a vote before the full House on Wednesday night.

“I think we will put it on the floor tonight. It may be 10 or 11 o'clock," McClain said.

Democrats are united in opposition to the bill, saying that its tax breaks disproportionately benefit the wealthy while cutting services that lower- and middle-income Americans rely on. The non-partisan Congressional Budget Office estimated that almost 12 million people could lose health insurance as a result of the bill.

"This bill is catastrophic. It is not policy, it is punishment," Democratic Representative Jim McGovern said in debate on the House floor.

Trump effect

Republicans in Congress have struggled to stay united in recent years, but they also have not defied Trump since he returned to the White House in January.

Representative Chip Roy of Texas was leading three holdouts who have raised concerns about increasing the deficit and high levels of spending.

Asked why he expects the bill to pass, Republican Representative Derrick Van Orden told reporters: “Because 77 million Americans voted for Donald Trump, not Chip Roy. That's why.”

Any changes made by the House would require another Senate vote, which would make it all but impossible to meet the July 4 deadline.

The legislation contains most of Trump's top domestic priorities, from tax cuts to immigration enforcement.

The bill would extend Trump's 2017 tax cuts, cut health and food safety net programmes, fund Trump's immigration crackdown, and zero out many green-energy incentives. It also includes a US$5 trillion increase in the nation's debt ceiling, which lawmakers must address in the coming months or risk a devastating default.

The Medicaid cuts have also raised concerns among some Republicans, prompting the Senate to set aside more money for rural hospitals.

Source: Theedgemarkets

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Patrick Turner

European Central Bank Governing Council member Olli Rehn is worried that inflation staying below 2% for a lengthy period could shift the price outlook of euro-zone consumers.

The ECB is projecting 18 months of inflation below its goal as US tariffs dent confidence and the 20-nation economy struggles to expand. Rehn, who heads Finland’s central bank, said risks are currently two-sided, but is more uneasy about the knock-on effects of the undershoot.

“I’m quite concerned about inflation being below target for an extended period of time,” he told Blomberg TV on Wednesday in Sintra, Portugal, where he’s attending the ECB’s annual retreat. “We have to make sure that will not become persistent and become embedded in inflation expectations.”

With price growth at the ECB’s 2% goal and the economy battling headwinds ranging from trade to wars, officials are pondering whether to lower borrowing costs further. While investors expect the deposit rate to remain at 2% this month, they see one more cut by year-end.

“We are in a good place but there is no reason for complacency,” Rehn said.

Some officials are wondering whether a rapid strengthening of the euro could derail efforts to anchor inflation at target. Vice President Luis de Guindos told Bloomberg TV on Tuesday that any rise above $1.20 could make things “much more complicated.”

Rehn repeated standard ECB language on how he and his colleagues don’t aim for a specific level for the common currency, but acknowledged the assistance they’ve had from its rally against the dollar this year.

“The appreciation of the euro has indeed helped us reaching the 2% target for now,” he said. “We are following closely the developments in the exchange rate.”

Source: Bloomberg Europe

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Michael Ross

Employment at US companies fell in June for the first time in more than two years, reflecting a drop in services payrolls that may raise concerns about a more pronounced labor market slowdown.

Private-sector payrolls decreased 33,000 last month after a downwardly revised 29,000 gain in May, according to ADP Research data released Wednesday. None of the economists in a Bloomberg survey of economists expected a decline.

“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” Nela Richardson, chief economist at ADP, said in a statement.

Treasury yields slumped after the figures, while stock-index futures fell and the dollar trimmed gains.

Employers have grown increasingly cautious about the impact from the Trump administration’s trade policy, and are doubling up efforts to reduce costs. Companies are focused on bringing headcounts more in line with economic activity that has slowed this year.

Service providers reduced payrolls by 66,000 in June, largely due to declines in professional and business services as well as health care and education. Payrolls climbed in manufacturing, construction and mining. Employment fell among small- and medium-size businesses.

Based on the ADP report, average payrolls growth over the past three months slowed to 18,700 in May, the weakest since early in the pandemic. Other data indicate it is taking longer for unemployed people to find a new job, while figures from placement firm Challenger, Gray & Christmas show hiring plans in June were the second-weakest in data back to 2004.

Data from The Conference Board show the share of consumers who said jobs were plentiful in June declined to a more than four-year low.

Despite signs of a downshift, Federal Reserve Chair Jerome Powell has repeated that the labor market remains solid. Fed officials have refrained from lowering interest rates this year as they wait to see the impact of tariffs on inflation.

The ADP report, published in collaboration with the Stanford Digital Economy Lab, showed wage growth cooled. Workers who changed jobs saw a 6.8% increase in pay, while those who stayed put saw a 4.4% gain. ADP bases its findings on payrolls covering more than 25 million US private-sector employees.

The government’s June employment report due Thursday is expected to show the slowest payrolls growth in four months and a slight increase in the unemployment rate to 4.3%.

Source: Bloomberg Europe

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Henry Thompson

Japan's service sector activity expanded at a slightly faster pace in June, with business confidence improving to a four-month high, a private sector survey showed on Thursday.

The final au Jibun Bank Japan Services purchasing managers' index (PMI) rose to 51.7 in June from 51.0 in May, topping the flash figure of 51.5 and marking a third consecutive month of growth.

Readings above 50.0 indicate expansion in activity, while those below that level point to a contraction on a monthly basis.

Overall new order growth accelerated slightly from May. But the increase in new export business, generally attributed to tourist activities, decelerated to the slowest since December.

Service firms' business confidence on a 12-month outlook improved to a four-month high in June, with companies citing expansion plans, staff hiring and new product rollouts, according to the survey. As a result, employment in the sector grew at the fastest pace since January.

Input price inflation eased to a six-month low, but output inflation rose to the fastest rate in 14 months, as service firms continued to pass higher labour, fuel and other costs onto their customers.

The upturn in services, coupled with factory activities' return to growth for the first time in about a year, helped lift the composite PMI to 51.5 in June from 50.2 in May, marking the strongest overall business activity growth since February.

"However, market confidence and trading conditions remain subdued, in part due to lingering uncertainty over U.S. tariffs," said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiled the survey.

"The PMI data signalled that overall growth momentum slowed in the second quarter compared to the first quarter of 2025, to suggest an easing of GDP growth," Fiddes added.

Japan's GDP shrank by an annualised 0.2% in the January-March quarter due to falling exports and lacklustre domestic consumption even before the full blow of U.S. President Donald Trump's tariffs hit the economy.