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What’s happening: Crude oil settled slightly lower on Wednesday, as investors assessed the latest US inventory data.
What happened: Oil prices remained volatile for most the session on Wednesday, with geopolitical concerns in focus.
Oil prices fell for the third straight session, although weakness in the US dollar limited the overall losses.
Why it matters: US inventory data showed a lower-than-expected weekly decline in crude inventories in the country.
The Energy Information Administration said that US commercial crude inventories declined by 1.8 million barrels during the week ended November 22. Analysts were expecting a drawdown of 5.8 million barrels.
Gasoline supplies rose 3.3 million barrels, while distillate supplies added 400,000 barrels last week. Markets were expecting declines of 1.3 million barrels for gasoline and 100,000 barrels for distillate.
The EIA also said that oil production in the US rose by 292,000 barrels to 13.493 million barrels per day (bpd) in the week.
US natural gas stockpiles declined by 2 billion cubic feet during the week, contracting for the second straight week and versus market estimates of a gain of 3 billion cubic feet.
Weakness in the US dollar limited the losses in crude, as a lower greenback makes commodities cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.9% to 106.08 on Wednesday.
WTI crude oil for January delivery fell 5 cents, or 0.1%, to close at $68.72 per barrel on the NYMEX (New York Mercantile Exchange) on Wednesday. February Brent crude slipped 2 cents to $72.30 per barrel on ICE Futures Europe.
In other energy trading, December gasoline fell by 0.9% to $1.97 a gallon, while December heating oil declined by 1.6% to $2.20 a gallon. Natural gas for January delivery shed 7.6% to $3.20 per million British thermal units, after recording sharp gains in the previous week.
What to watch: Investors await minutes of the meeting of OPEC+ (Organization of the Petroleum Exporting Countries and its allies) ministers, due on Sunday. During early November, the OPEC+ had announced plans to extend voluntary output cuts of 2.2 million bpd to the end of December.
Markets will also watch comments from US President-elect Donald Trump, as his election focused on the need to increase crude production in the country, with the slogan “Drill, baby, drill”.
Context: The CAD/USD forex pair moved higher on Wednesday, as investors assessed the monetary policy outlook.
Details: US President-elect Donald Trump reiterated his tariff threats, which included a 25% increase in tariffs on Canada.
Meanwhile, the latest inflation data dampened speculations of the Bank of Canada continuing to cut its benchmark interest rate. Canada’s trimmed-mean core inflation accelerated to 2.6% in October, from 2.4% in the previous month.
Weakness in the price of crude oil, one of Canada’s major exports, limited the overall gains for the loonie. WTI crude oil prices slipped to $68.72 per barrel on Wednesday.
Pressure on the US dollar lent support to the CAD/USD forex pair. The US dollar index declined by about 0.9% to 106.08 on Wednesday.
The CAD/USD rose around 0.2% to 1.4031 on Wednesday, with the S&P/TSX Composite Index gained 0.33% to close at 25,488.30.
What to watch: Investors await the release of economic data on current account (1730 UAE Time) and average weekly earnings (1730 UAE Time) from Canada today. Canada’s current account deficit had risen sharply to C$8.5 billion in the second quarter, from C$5.4 billion in the previous quarter. Analysts expect this to widen further to C$9.3 billion in the third quarter.
Markets expect average weekly earnings to rise 4.3% year-over-year in September, following a 4.6% gain in the previous month.
Other Markets: Asian indices traded mixed this morning, with Hong Kong’s Hang Seng Index and China’s Shanghai Composite Index down by 0.98% and 0.17%, respectively, and Japan’s Nikkei up by 0.50% this morning.
President Joe Biden’s administration is pressing Ukraine to raise the size of its military by updating its mobilisation laws to include troops as young as 18 years. The news sent the RUB/USD pair slightly lower in forex trading this morning.
The Bank of Korea cut its base rate by 25bps to 3.0% at its latest meeting. This compared to market estimates of a pause and exerted pressure on the KRW/USD forex pair.
Australia’s total new capital expenditure increased by 1.1% in the third quarter, topping market estimates of 0.9%, which sent the AUD/USD pair higher in forex trading this morning.
UK car production contracted by 15.3% year-over-year to 77,484 units in October. This being the eighth straight month of decline exerted pressure on the GBP/USD forex pair.
Mexico reported a trade surplus of $0.37 billion in October, versus a deficit in the year-ago month. This being the first trade surplus in five months sent the MXN/USD pair higher in forex trading this morning.
Spain’s inflation rate (1200 UAE Time) and business confidence (1600 UAE Time), Eurozone’s loans to companies (1300 UAE Time), loans to households (1300 UAE Time), M3 money supply (1300 UAE Time), economic sentiment (1400 UAE Time), consumer confidence (1400 UAE Time), consumer inflation expectations (1400 UAE Time), industrial sentiment (1400 UAE Time), selling price expectations (1400 UAE Time) and services sentiment (1400 UAE Time), Italy’s business confidence (1300 UAE Time) and consumer confidence (1300 UAE Time), South Africa’s producer price inflation (1330 UAE Time), Italy’s producer price inflation (1400 UAE Time), Brazil’s IGP-M inflation (1500 UAE Time), Turkey’s MPC meeting summary (1500 UAE Time) and foreign exchange reserves (1530 UAE Time), Brazil’s producer price inflation (1600 UAE Time) and bank lending (1530 UAE Time), Germany’s inflation rate (1700 UAE Time), as well as Mexico’s monetary policy meeting minutes (1900 UAE Time).
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