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What’s happening: Crude oil prices settled lower on Wednesday, as investors digested the release of supply data.
What happened: The Energy Information Administration (EIA) reported the first decline in US commercial crude supplies in five weeks.
Some strength in the US dollar and slowdown in the country’s business activity exerted further pressure on oil prices.
Why it matters: Both WTI and Brent had closed at their strongest levels in a week on Tuesday, amid heightened geopolitical concerns. WTI crude prices started Wednesday’s session on a positive note, moving towards the $84 mark, but pared gains following the release of supply data.
Data released by the EIA on Wednesday showed US commercial crude inventories falling by 6.4 million barrels to 453.6 million barrels last week. This was much higher than estimates of a decline of 2.1 million barrels. Late Tuesday, the API (American Petroleum Institute) said crude inventories contracted by 3.2 million barrels last week. US oil production came in unchanged at 13.1 million barrels per day last week.
The US dollar moved higher on Wednesday, weighing on oil prices, as 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 0.2% to 105.86 on Wednesday.
US business activity slowed to a four-month low in April, with the S&P Global Flash Composite PMI Output Index dipping to 50.9 in April, from 52.1 in March.
WTI crude for June delivery fell by 55 cents, or 0.7%, to close at $82.81 per barrel on the NYMEX (New York Mercantile Exchange) on Wednesday. June Brent crude, the global benchmark, also declined by 40 cents, or around 0.5%, to settle at $88.02 per barrel.
In other energy trading, May gasoline gained 0.3% to $2.73 a gallon, while May heating oil dipped 1.1%, to $2.55 a gallon and natural gas for May tumbled 8.8% to settle at $1.65 per million British thermal units.
What to watch: Investors await the release of natural gas supply data from the EIA today. Analysts expect an increase of 79 billion cubic feet in natural gas supplies last week, versus a five-year average gain of 59 billion cubic feet in the previous week.
The US Federal Reserve will also remain in focus, as the central bank is projected to begin cutting rates this year, which could provide a boost to economic growth and drive oil demand.
Context: Ford’s shares gained in after-hours trading on Wednesday on better-than-expected quarterly results.
Details: Ford reported a 24% year-over-year decline in first-quarter net income amid lower sales from its combustion engine vehicle unit. Revenues from Ford Blue, the company’s combustion engine unit, declined by 13% year-over-year to $21.8 billion.
The company saw strong growth in its Ford Pro unit, driven by higher demand for Super Duty work trucks, Transit vans and software. Revenues from the Ford Pro segment jumped 36% year-over-year to $18.0 billion.
Ford said its overall revenues grew by 1.3% year-over-year to $42.8 billion in the first quarter, surpassing the consensus estimates of $40.1 billion. The company posted earnings of 49 cents per share in the first quarter, topping Wall Street expectations of 42 cents per share.
Management reiterated their earnings outlook for the full year in the range of $10 billion to $12 billion.
How shares responded: Ford’s shares rose 2.4% to $13.26 in extended trading on Wednesday, following the release of quarterly results. The stock has gained around 12% over the past six months.
What to watch: Investors will continue monitoring overall auto prices in the US. The Fed’s interest rate decision will also remain in focus, as lower rates boosts economic growth and drives the demand for vehicles.
Other Markets: European indices closed lower on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.06%, 0.27%, 0.17% and 0.43%, respectively.
The US President Joe Biden signed a long-delayed $61 billion aid bill into law to help Ukraine in its ongoing war with Russia. The news sent the safe-haven US dollar index slightly lower in forex trading this morning.
UK’s car production tumbled 27.1% to 59,467 units in March, after recording growth for six straight months, which lent support to the GBP/USD forex pair.
South Korea’s economy grew by 1.3% in the March quarter, versus a 0.6% increase in the prior quarter. However, the KRW/USD pair fell in forex trading this morning.
Argentina’s retail sales jumped 181.2% year-over-year at current prices in February, accelerating from a 165.3% gain a month ago, which lent some support to the ARS/USD forex pair.
Canada’s retail sales remained flat in March, compared to a 0.1% decline in February, which sent the CAD/USD pair higher in forex trading this morning.
Germany’s GfK consumer climate indicator, France’s manufacturing climate indicator, business climate indicator, unemployed persons and initial jobless claims, Spain’s producer price inflation, South Africa’s producer price inflation, UK’s CBI distributive trades, Central Bank of Turkey’s interest rate decision, Canada’s average weekly earnings, US GDP Growth rate, goods trade balance, initial jobless claims, wholesale inventories, continuing jobless claims, pending home sales, Kansas Fed composite index and Kansas City Fed’s manufacturing production index, Argentina’s consumer confidence indicator, as well as Brazil’s federal tax revenue.
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