US Oil Prices Dip Below $70, Mixed Day for Global Stocks

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US oil prices closed below $70 a barrel for the first time since July on Thursday amid mixed global equities performance. West Texas Intermediate oil for January delivery dropped 4.1% to $69.38 a barrel as traders considered potential interest rate cuts from the European Central Bank and the US Federal Reserve.

Concerns over weakening demand and doubts about the OPEC+ coalition’s supply restrictions fueled the decline. Analysts are contemplating the possibility of Saudi Arabia increasing production, recalling a similar move in 2014 to counter rising US production. The fear is that the Saudis, with ample spare capacity, might flood the market, adding bearish pressure.

Meanwhile, Frankfurt’s DAX stocks index achieved a record high, surpassing 16,600 for the first time, and Paris’ CAC 40 rose. Sliding German factory orders fueled expectations of an interest rate reduction by the European Central Bank (ECB).

The market sentiment is tilted towards risk-on, with a growing belief that the ECB might cut rates early in 2024. Analysts note a nearly 90% chance of an ECB rate cut in the first quarter of 2024.

US equity investors considered data indicating a softening labor market, renewing hopes for a Fed rate reduction. Recent below-forecast job openings and ADP jobs data, coupled with a significant drop in exports, contributed to expectations that the Fed could cut rates in 2024, possibly in the first quarter.

While US markets experienced another downcast session on Wednesday, Asian markets saw positive movement, with Tokyo up two percent and Sydney 1 percent higher. Several other Asian markets, including Hong Kong, Singapore, Seoul, Bangkok, Mumbai, Wellington, Taipei, and Jakarta, also posted gains.

Shanghai, however, experienced a decline, with Moody’s recent downgrade of China’s credit rating outlook contributing to the negative sentiment. The downgrade was attributed to rising debt levels and concerns about the country’s battered property sector.