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Trends & Analysis
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Crude oil rebounds from 6-month lows

Thursday, December 14, 2023

Today’s headlines

What’s happening: Crude oil prices moved higher on Wednesday on a higher-than-expected decline in US crude supplies.

What happened: Oil prices recovered on Wednesday, after closing at their weakest level in around six months in the prior session.

Crude was also supported by the US Federal Reserve’s decision to kept rates interest rates unchanged following the latest inflation data release.

Why it matters: Oil traders assessed data from the EIA (Energy Information Administration), which showed a contraction in commercial US crude supplies for the second straight week, as well as from monthly report of major oil producers.

The EIA said that US commercial crude inventories had declined by 4.3 million barrels in the week ended December 8. This was much wide than market expectations of a decline of 2.7 million barrels and followed the contraction of 4.632 million barrels in the prior week.

Earlier this week, the API (American Petroleum Institute) had reported a decline of 2.35 million barrels in domestic crude stockpiles.

In its monthly oil report, the OPEC (Organization of the Petroleum Exporting Countries) kept its projections for global oil demand unchanged for the current and next year. It sees oil demand rising by 2.5 million barrels per day this year and by 2.2 million barrels per day in 2024.

Meanwhile, the Fed held its federal funds rate target range at 5.25%-5.5% on Wednesday. Higher interest rates increase borrowing costs for consumers and businesses, exerting pressure on overall economic growth and weighing on oil demand.

WTI crude for January delivery rose 86 cents to close at $69.47 per barrel on the NYMEX (New York Mercantile Exchange) on Wednesday. February Brent crude added $1.02 to settle at $74.26 per barrel on ICE Futures Europe. Both crude standards had declined to their lowest settlements since June 27 on Tuesday, following the release of US inflation data.

In other energy trading, January gasoline rose 4 cents to $2.02 a gallon, while January heating oil gained 4 cents to $2.55 a gallon on NYMEX and natural gas for January delivery rose by 3 cents to $2.34 per million British thermal units.

What to watch: Investors await the release of the EIA’s data on natural gas stockpiles. US utilities pulled 117 billion cubic feet of gas from storage in the week ended December 1, versus a decline of 30 billion cubic feet in the year-ago period.

Markets will also watch major economic reports, which are expected to impact oil prices in the weeks ahead.

The markets today

The British pound will be in focus today ahead of the Bank of England’s interest rate decision

Context: The GBP/USD forex pair moved higher on Wednesday, following the release of economic data.

Details: Data released on Wednesday showed the UK economy contracted in October, which raised concerns around an economic slowdown.

The Office for National Statistics said UK’s GDP shrank by 0.3% in October, reversing the growth reported in the previous two months. The data was worse than market expectations of a flat reading.

Wage growth in the UK also slowed in the three months to October, while the unemployment rate came in unchanged at 4.2%.

Traders widely expect the Bank of England to cut interest rates by almost a full percentage point next year.

Goldman Sachs also lowered its projections for UK’s economic growth to 0.5% for 2023, from its earlier forecast of 0.6%.

Weakness in the US dollar, following the Fed’s rate decision, also lent support to the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell nearly 1% to 102.87 on Wednesday.

The GBP/USD forex pair rose around 0.6% to 1.2619 on Wednesday. The British currency has gained about 4.5% against the greenback so far this year, recording its strongest yearly performance since 2019.

Meanwhile, London’s FTSE 100 gained 0.08% to close at 7,548.44 on Wednesday.

What to watch: Investors await the release of interest rate decision from the Bank of England today. The BoE is expected to keep its benchmark interest rate unchanged at a 15-year high of 5.25%.

Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.40%, 1.37% and 1.27%, respectively.

The news shaping the markets

A US intel report said that Russia had lost nearly 90% of the troops it had prior to its invasion of Ukraine. The news sent the RUB/USD forex pair lower this morning.


The Hong Kong Monetary Authority held its base rate at 5.75% at its latest meeting, which lent support to the HKD/USD forex pair.


Australia’s consumer inflation expectations eased to 4.5% in December, from 4.9% in the previous month, which sent the AUD/USD pair higher in forex trading this morning.


Japan’s core machinery orders increased 0.7% in October, topping market estimates of a 0.5% decline, which lent support to the JPY/USD forex pair.


Brazil’s central bank cut its key Selic rate by 50 bps at its December meeting. This was widely projected and sent the BRL/USD pair slightly higher in forex trading this morning.

What else to watch today

Saudi Arabia’s inflation rate and wholesale prices, India’s wholesale prices, Spain’s inflation rate, South Africa’s producer price inflation and value of recorded building plans passed, Turkey’s gross foreign exchange reserves, Brazil’s retail sales, European Central Bank’s interest rate decision, Canada’s manufacturing sales and car registrations, US retail sales, export prices, import prices, initial jobless claims and total business inventories, China’s foreign direct investment, as well as Mexico’s interest rate decision.


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