Crude oil hits 7-week high on US inventories

Today’s headlines

What’s happening: Crude oil prices jumped to a seven-week high on Wednesday following the release of US inventories data.

What happened: A surprise decline in US weekly crude inventories raised speculations of tightening oil supply.

Oil prices also received a boost from news that Ukraine’s military forces had hit two pumping stations in Russia.

Why it matters: The Energy Information Administration (EIA) reported on Wednesday that US crude inventories declined by 607,000 barrels last week. This was significant, as the market was expecting a rise of 235,000 barrels in the week.

Meanwhile, gasoline stockpiles fell 1.08 million barrels, versus market estimates of a gain of 0.4 million barrels. Distillate stockpiles contracted by 1.685 million barrels, slightly higher than a decline of 1.5 million barrels.

Ukraine struck two oil pumping stations in the Volgograd region of Russia, while a state of emergency was declared in the city of Novorossiisk, where key oil export terminals are located. Russia is facing shortages of some grades of crude after Ukraine intensified its drone attacks on its energy infrastructure, aiming to slash its revenues from exports.

Russia, which is a member of the OPEC+ (Organization of the Petroleum Exporting Countries and its allies), was the second largest crude producer last year, behind only the US.

Meanwhile, the Dallas Fed said that oil and gas production and activity declined slightly in the major states of Louisiana, Texas and New Mexico in the US during the third quarter.

Strength in the US dollar weighed on crude oil prices, a higher greenback makes commodities more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.7% to 97.87 on Wednesday.

Brent crude rose $1.68, or 2.5%, to close at $69.31 a barrel on Wednesday, while WTI crude surged $1.58, or 2.5%, to finish at $64.99 a barrel. Brent crude recorded its highest closing level since August 1, while WTI crude delivered its strongest settlement since September 2.

What to watch: Data on the EIA’s natural gas stockpiles change (1830 UAE Time) will be released today. US natural gas inventories, which rose by 90 billion cubic feet during the week ended September 12, are expected to rise around 76 billion cubic feet in the latest week.

The markets today

US stocks in focus today ahead of a basket of major economic reports

Context: Equity markets in the US settled lower for a second consecutive session on Wednesday.

Details: Investors booked profits as the three major US indices started the week surging to record levels, after the Federal Reserve cut its benchmark interest rates by 25 basis points (bps) last week.

Some pullbacks in the stocks of top AI companies weighed on overall markets. Nvidia’s stock fell nearly 1% after the company announced a $100 billion partnership with OpenAI. Shares of Oracle fell 1.7%, while Micron Technology’s stock declined 2.8% despite the company reporting better-than-expected quarterly earnings.

Data released on Wednesday showed US new-home sales surged by 20.5% from the previous month to an annualised rate of 800,000 units in August. This was the highest mark since January 2022 and topped market estimates of 650,000. Building permits declined by 2.3% to an annualised rate of 1.330 million in August, versus a preliminary reading of 1.312 million.

The Dow Jones index shed 171.50 points, or 0.37%, to close at 46,121.28 on Wednesday, while the S&P 500 fell 0.28% to 6,637.97 and the Nasdaq 100 declined by 0.31% to settle at 24,503.57.

What to watch: Data on durable goods orders (1630 UAE Time), GDP growth rate (1630 UAE Time) and initial jobless claims (1630 UAE Time) will be released by the US today. Orders of durable goods, which dipped by 2.8% to $302.8 billion in July, are expected to contract by 0.5% in August.

Analysts expect the US economy to expand at an annualised rate of 3.3% in the second quarter, a sharp recovery from the 0.5% decline in the previous quarter. Initial jobless claims are expected to rise to 235,000 in the latest week, from 231,000 in the second week of September.

Other Markets: European indices closed mixed on Wednesday, with the FTSE 100 and DAX 40 up by 0.29% and 0.23%, respectively, and the CAC 40 down by 0.57%.

The news shaping the markets

While appealing for more military aid, President Volodymyr Zelensky said Russia is seeking to expand its war beyond Ukraine. The news sent the RUB/USD pair lower in forex trading this morning.

Thailand’s domestic car sales rose by 5.38% year-over-year to 47,622 units in August. This representing a slowdown from the 5.84% surge in the previous month exerted pressure on the THB/USD forex pair.

The People’s Bank of China injected 600 billion yuan into the banking system through its one-year Medium-Term Lending Facility, which sent the CNY/USD pair higher in forex trading this morning.

Argentina’s economic activity climbed 2.9% year-over-year in July. This being a significant slowdown from the 6.1% surge in the previous month exerted some pressure on the ARS/USD forex pair.

UK’s car production tumbled 10.2% year-over-year to 37,072 units in August, snapping a two-month growth streak. However, the GBP/USD pair rose in forex trading this morning.

What else to watch today

Eurozone’s loans to companies (1200 UAE Time), loans to households (1200 UAE Time) and M3 money supply (1200 UAE Time), South Africa’s consumer confidence (1200 UAE Time) and PPI (1330 UAE Time), UK’s Treasury Gilt 2034 auction (1300 UAE Time), CBI distributive trades (1400 UAE Time) and Treasury Stock 2038 auction (1400 UAE Time), Italy’s 6-month BOT auction (1310 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), Brazil’s IPCA mid-month CPI (1600 UAE Time), Canada’s average weekly earnings (1630 UAE Time) and 30-year Bond auction (2000 UAE Time), US GDP price index (1630 UAE Time), goods trade balance (1630 UAE Time), retail inventories (1630 UAE Time), wholesale inventories (1630 UAE Time), continuing jobless claims (1630 UAE Time), core PCE prices (1630 UAE Time), corporate profits (1630 UAE Time), GDP sales (1630 UAE Time), real consumer spending (1630 UAE Time), existing home sales (1800 UAE Time), Kansas Fed composite index (1900 UAE Time), Kansas Fed manufacturing index (1900 UAE Time), 4-week Bill auction (1930 UAE Time), 8-week Bill auction (1930 UAE Time), 15-year Mortgage Rate (2000 UAE Time), 30-year Mortgage Rate (2000 UAE Time) and 7-year Note auction (2100 UAE Time), as well as Mexico’s interest rate decision (2300 UAE Time).