Oil eases from six-month high as traders bet on a December Fed hike
Oil prices fell early Monday after surging to near six-month highs last week, with Brent crude down about 2% at roughly $114 a barrel as Saudi, Pakistani and Turkish mediators met officials in Tehran. Gold rose 0.5% to about $4,014 an ounce after its biggest weekly drop since June. The bigger story is rates: CME FedWatch showed a 9% chance the Federal Reserve raises rates at Wednesday's meeting, but about an 80% chance of a hike by December, even if it holds steady this week.
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What happened
Oil pulled back early Monday. In Asian trading, Brent crude futures were down $1.56, or 1.34%, at $115.16 a barrel and U.S. crude was down 1.55% at $101.67, Moneycontrol reported; by European hours Brent was off about 2% at roughly $114, according to Reuters via CNBC. Prices had settled nearly $3 higher Friday after Houthi attacks in Saudi Arabia, leaving Brent up 6% for the week.
Why it matters
An 80% chance of a December hike means futures traders expect the Fed to keep raising borrowing costs. If it does, rates on credit cards, car loans and adjustable mortgages would likely rise just as gasoline prices are already squeezing household budgets. Cheaper oil is the main thing that could ease that pressure.
More context
The diplomacy: Saudi, Pakistani and Turkish officials were in Tehran on Monday for talks aimed at ending the war, CBS News reported. Traders have been selling oil on signs of negotiations and buying it back on new attacks on Gulf supply, so the headlines from Tehran are likely to drive the next move.
Gold: Spot gold rose 0.5% to $4,014.49 an ounce after hitting $3,975 on Friday, its lowest since July 20, and December gold futures were at $4,028.40, Reuters reported via CNBC. Moneycontrol said gold had just logged its biggest weekly decline since June. "This 4,000 level is seen by some as a buying opportunity," UBS analyst Giovanni Staunovo said, adding that gains are limited by concerns the Fed could keep hiking in December and again next year.
The rate math: CME's FedWatch tool showed a 9% chance of a Fed rate hike at the end of Wednesday's meeting and about an 80% chance of a hike by December, Reuters reported via CNBC. Higher energy costs feed into inflation, and the Fed's next big read on that comes Thursday, Oct. 29, with the Personal Consumption Expenditures data, the inflation gauge the Fed watches most closely. The European Central Bank and the Bank of Japan are both expected to hold rates this week while leaving room for December hikes, according to Reuters.
Timeline: Last week — Brent climbs to near six-month highs after Houthi attacks in Saudi Arabia. Friday — oil settles nearly $3 higher; gold touches $3,975. Monday — oil eases as mediators meet in Tehran. Wednesday — Fed decision. Thursday — PCE inflation data. Through the week — earnings from several of the largest U.S. tech companies, which we preview separately.
What's still unknown: Whether the Fed's statement and press conference Wednesday confirm or push back on the December pricing, and whether the Tehran talks produce anything concrete. Futures odds are a market bet, not a forecast from the Fed, and they can swing quickly on a single data release or a new strike on oil infrastructure.
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Editorial sourcing notes
Prices are early-Monday snapshots from Asian and European trading and will move before U.S. markets open. Odds are from CME's FedWatch tool as reported by CNBC.
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