What’s happening: Crude oil settled lower on Wednesday, as investors assessed the latest inventories data from the US.
What happened: The US Energy Information Administration said commercial crude inventories declined for a seventh week in a row.
However, gasoline and distillate stockpiles rose by more than 6 million barrels each, exerting pressure on oil prices.
Why it matters: Both WTI and Brent crude had settled close to their three-month highs on Tuesday, following reports of a decline in production by the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) last month.
The EIA said on Wednesday that domestic commercial crude supplies shrank by 1 million barrels during the week ended January 3. This marked the seventh consecutive week of decline in crude stockpiles. The report came against expectations of a gain of 100,000 barrels.
The EIA data also showed gasoline supplies rising by 6.3 million barrels and distillate supplies gaining 6.1 million barrels, much higher than projections of gains of 2.7 million barrels for gasoline and 2.3 million barrels for distillate.
The report showed that US natural gas supplies declined by 40 billion cubic feet, compared to market estimates of a decline of 41 billion cubic feet.
US oil production fell by 10,000 barrels to 13.56 million barrels per day (bpd) in the latest week. The demand for gasoline rose, with total motor gasoline supplied rising to 8.481 million bpd, from 8.168 million bpd in the previous week.
Strength in the US dollar also exerted pressure 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, rose around 0.4% to 109.09 on Wednesday.
WTI crude for February delivery declined by 93 cents, or around 1.3%, to close at $73.32 a barrel on the NYMEX (New York Mercantile Exchange) after moving higher earlier during the session. March Brent crude fell 89 cents, or 1.2%, to settle at $76.16 per barrel on ICE Futures Europe.
In other energy trading, February gasoline slipped 0.8% to $2.01 a gallon, while February heating oil declined 0.7% to $2.35 a gallon. Natural gas for February delivery bucked the trend and rose 5.9% to $3.65 per million British thermal units, following a 6.1% decline in the previous session.
What to watch: Trading volumes are likely to be thinner today, with the US being on holiday for former President Jimmy Carter’s funeral. Investors await the release of the US jobs report and Baker Hughes oil rigs, scheduled for Friday. The US economy, which added 227,000 jobs in November, is expected to add 154,000 jobs in December, while the unemployment rate is projected to remain at 4.2%.
Crude oil rigs in the US fell to 482 in the week of January 3, compared to 483 in the previous week.
Context: The EUR/USD forex pair edged lower this morning, as investors digested the latest economic reports.
Details: Data released on Wednesday showed producer prices in the Eurozone rose 1.6% in November, compared to a 0.4% gain in the previous month. The figure was also slightly higher than market estimates of 1.5%.
The services sentiment indicator climbed to 5.9 in December, from 5.3 in the previous month, and topped market estimates of 5.8.
However, consumer confidence in the Eurozone declined by 0.7 points to a reading of -14.5 in December.
Investors continued monitoring the European Central Bank’s monetary policy outlook, with one of the central bank’s policymakers Yannis Stournaras suggesting interest rates to be cut to 2% by autumn.
Weakness in the US dollar limited the losses for the EUR/USD forex pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.1% to 108.99.
The EUR/USD forex pair edged lower to 1.0318 this morning, while the EUR/GBP rose slightly to 0.8349. The STOXX Europe 600 Index fell 0.19% to close at 513.67 on Wednesday.
What to watch: Investors await the release of data on Eurozone’s retail sales (1400 UAE Time) today. Retail sales in the Eurozone, which contracted by 0.5% in October, are expected to grow by 0.4% in November. On a year-over-year basis, analysts expect retail sales to grow by 1.7% in November.
Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.25%, 0.16% and 0.04%, respectively.
US President-elect Donald Trump said he hopes to end the ongoing Russia-Ukraine war within six months of being in office. The news sent the RUB/USD pair slightly lower in forex trading this morning.
Philippines’ trade gap came in unchanged at $4.8 billion in November, lending support to the PHP/USD forex pair.
China’s producer prices fell by 2.3% year-over-year in December, compared to a 2.5% decline in the previous month, sending the CNY/USD pair lower in forex trading this morning.
Australia’s retail sales grew 0.8% in November, following 0.5% growth in the previous month. However, the latest reading coming in short of market estimates of 1% exerted pressure on the AUD/USD forex pair.
Japan’s nominal wages grew by 3% year-over-year in November, following a 2.6% rise in October. The figure also topped market expectations of 2.7% gain and sent the JPY/USD pair higher in forex trading this morning.
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