Crude falls for 4^th straight day on demand woes

Today’s headlines

What’s happening: Crude oil moved lower on Thursday, recording losses for the fourth consecutive session.

What happened: Prospects of another interest rate hike by the Fed fuelled concerns around energy demand.

An increase in US crude stockpiles in the latest week also weighed on oil prices, sending WTI to its the weakest level in three months.

Why it matters: Minutes released from the US Federal Reserve’s latest policy meeting on Wednesday showed various central bank policymakers expressing the need to hike increase rates, if needed, in order to control inflation.

Higher rates raise the cost of borrowing, which weighs on economic growth and impacts oil demand.

Data released by the EIA (Energy Information Administration) on Wednesday also exerted pressure on oil prices. US crude stockpiles rose by 1.8 million barrels last week, versus market expectations of a decline of 2.5 million barrels. Heating oil stockpiles climbed by 477,000 barrels in the week, while distillate fuel inventories rose 379,000 barrels.

However, data from the EIA also showed US gasoline demand at its strongest level since November, which lent some support to the energy market.

The EIA said on Thursday that US natural gas supplies has risen by 78 billion cubic feet in the week ended May 17. This was lower than market expectations of a gain of 82 billion cubic feet.

According to S&P Global data, US business activity showed growth in May, but manufacturers also revealed an increase in prices for several inputs, which signalled further goods inflation in the upcoming months.

Brent crude for July delivery lost 54 cents to close at $81.36 per barrel on Thursday. WTI crude oil for July delivery declined 70 cents to settle at $76.87 per barrel.

In other energy trading, June gasoline came in almost flat at $2.47 a gallon, while June heating oil lost 2 cents to $2.41 a gallon. Natural gas for June delivery fell 19 cents to $2.66 per million British thermal units, after adding 6% on Wednesday.

What to watch: Investors await the release of data on Baker Hughes crude oil rigs today. Crude oil rigs in the US rose to 497 in the May 17 week, compared to 496 in the prior week.

The OPEC+ (Organization of Petroleum Exporting Countries and its allies) will hold a meeting on June 1 to decide its future output policy, which could provide direction to oil prices. Meanwhile, Russia said it had surpassed its OPEC+ output quota in April for “technical reasons” and will present a plan to compensate for the error.

The markets today

Medtronic will be in focus today after releasing results for its fiscal fourth quarter

Context: Shares of Medtronic fell on Thursday despite the company reporting better-than-expected quarterly results.

Details: Markets have been expecting an increase in the sales of medical devices, with people returning to hospitals for medical procedures after postponing them during the pandemic.

Medtronic said overall sales rose 0.5% to $8.59 billion in the fiscal fourth quarter, beating consensus estimates of $8.44 billion. Adjusted earnings came in at $1.46 per share, topping Wall Street expectations of $1.45 per share.

Revenues from the cardiovascular segment, the company’s biggest sales driver, fell 5.2% year-over-year to $3.13 billion, while neuroscience revenues rose 5.6% to $2.545 billion in the quarter. Medical Surgical revenues climbed 3.5% to $2.19 billion, while Diabetes revenues gained 10.9% to $660 million.

The company raised its quarterly dividend from 69 cents per share to 70 cents per share.

“We’re beginning new product cycles in some of MedTech’s most attractive markets, which is further enhanced as we apply AI across our portfolio,” CEO Geoff Martha said.

For fiscal 2025, management guided to organic revenue growth of 4% to 5% and adjusted earnings of $5.40 to $5.50 per share. The company also projected earnings of $1.19 to $1.21 per share for the first quarter, missing market estimates of $1.25 per share.

How shares responded: Medtronic’s shares fell 5.1% to close at $81.38 on Thursday, following the release of quarterly results. The stock has gained around 3% over the past six months.

What to watch: Investors will continue monitoring the sales of medical devices. Markets will also watch the effects of AI being implemented across Medtronic’s portfolio.

Other Markets: European indices closed mostly higher on Thursday, with the DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.06%, 0.13% and 0.07%, respectively, and the FTSE 100 down by 0.37%.

The news shaping the markets

The US is preparing a fresh military aid package of $275 million to help Ukraine in its ongoing war against Russia. The news sent the safe-haven US dollar index slightly lower in forex trading this morning.

New Zealand’s trade surplus shrank to $0.09 billion in April, from $0.22 billion in the year-ago period, exerting pressure on the NZD/USD forex pair.

Japan’s annual inflation rate eased to 2.5% in April, from 2.7% in the prior month. Inflation easing for the second consecutive month sent the JPY/USD pair lower in forex trading this morning.

Argentina’s retail sales jumped 208.8% year-over-year at current prices in March, versus a 181.2% gain in February, which lent support to the ARS/USD forex pair.

Eurozone’s consumer confidence increased by 0.4 points to a reading of -14.3 in May. The reading came slightly weaker than expectations of -14.2 and sent the EUR/USD pair lower in forex trading this morning.

What else to watch today

Germany’s GDP growth rate, UK’s retail sales volumes, France’s manufacturing climate indicator and business climate indicator, Spain producer prices change, Turkey’s tourist arrivals, Brazil’s FGV-IBRE consumer confidence index, current account and foreign direct investment, Canada’s CFIB business barometer, retail sales and manufacturing sales, India’s foreign exchange reserves, Mexico’s balance of trade and current account, US durable goods orders and University of Michigan consumer sentiment, as well as China’s foreign direct investment.