Dollar stands tall and oil remains steady ahead of OPEC+ meeting

As Federal Reserve officials talked about the possibility of raising interest rates further aggressively in the future, the dollar clung on in choppy trade on Wednesday after its biggest surge in weeks.

It was revealed on Tuesday that there were fewer job openings than expected across the country in June, bringing the number to its lowest level since September, an ominous sign of things to come when Friday's official employment data is released.

However, there is no consensus among Fed policymakers that this sign of a cooling US labour market will be enough to convince them that now is the right time to ease back on the central bank's aggressive monetary policies. 

It was reported on Tuesday that three Fed officials, including dovish San Francisco Fed President Mary Daly and Chicago Fed President Charles Evans, told Wall Street analysts there would not be a slowdown in the Fed's hefty rate hikes, even though the hikes could significantly curb economic activity.

In the wake of this, the yields on the United States Treasury were climbing, with the 2-Year yield in the United States rising back above 3%, lifting the dollar index to its highest point in almost three weeks. 

In addition, the dollar received some demand from safe-haven flows after US House of Representatives Speaker Nancy Pelosi visited Taiwan. She is the highest-ranked US official visiting Taiwan in 25 years. This visit escalated tensions between China and the US again.

Oil sticks to its bearish flag

On Wednesday, oil prices stabilised ahead of an important meeting of OPEC+ producers in order to discuss how the global market is likely to respond to future supply. Both benchmarks rebounded from early falls after US inventories rose unexpectedly. A major focus of Wednesday will be a meeting of the Organization of Petroleum Exporting Countries with its allies, known as OPEC+.

There had been recent cuts to oil supply that went back to the era of the pandemic. The group is now expected to keep production steady as recession fears grow, particularly since most members are struggling to meet their current production targets.

According to three delegates, OPEC+ trimmed its forecast for an oil market surplus this year by 200,000 barrels per day (bpd) to 800,000 bpd ahead of the meeting.

The outlook for demand is hampered by several factors, including rising fears of an economic slump in the United States and Europe, the distress of emerging market economies due to debt, and China's COVID-zero policy, limiting activity in the world's number one oil importer.

The American Petroleum Institute released a report on Tuesday that showed US oil stocks rose by around 2.2 million barrels in the week which ended on July 29, despite the expectations of a 600,000 drop. The increase over a week ago was due to a fall of about 4 million barrels, reported last week. 

The rise in inventories in the world's largest consumer may indicate a weakening of demand in the country. The official inventory figures to be released later Wednesday will also be closely examined. The market will be looking to see if official data from the US Energy Information Administration (EIA) at 1430 GMT confirms the inventory view.

While gasoline inventories were down by 200,000 barrels, less than expected, distillate inventories were down by about 350,000 barrels. This was opposite to expectations for a rise in stocks.