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What’s happening: Crude oil prices moved higher on Wednesday, as investors assessed the latest inventories data.
What happened: Oil prices recovered during Wednesday’s session, after recording losses for fifth straight sessions.
Prospects of a rate cut by the US Federal Reserve in September outweighed an increase in weekly crude stockpiles to send prices higher.
Why it matters: The Energy Information Administration (EIA) said on Wednesday that US commercial crude inventories rose by 1.2 million barrels in the week ended May 31. Experts were expecting a decline of 2.3 million barrels in the week. Late Tuesday, the API (American Petroleum Institute) reported a gain of 4.05 million barrels in crude inventories.
Gasoline inventories increased by 2.1 million barrels, while distillate supplies rose 3.2 million barrels last week, the EIA said. Markets has been expecting gains of 2 million barrels for gasoline supplies and 2.5 million barrels for distillate supplies.
US oil production came in unchanged at 13.1 million barrels per day during the latest week.
Meanwhile, there are higher speculations of a rate cut by the Federal Reserve in September. Lower interest rates decrease borrowing costs to provide a boost to economic activity, which triggers an increase in the demand for oil.
Some strength in the US dollar limited the overall gains for crude oil, as this 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 104.27 on Wednesday.
WTI crude oil for July delivery gained 82 cents to close at $74.07 per barrel on the NYMEX (New York Mercantile Exchange), while August Brent crude gained 89 cents to settle at $78.41 per barrel on ICE Futures Europe. Both standards of crude oil recorded losses for five consecutive sessions, down more than 1% on Tuesday, to record their weakest closing levels since early February.
The five sessions of losses for crude came after the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) announced plans to increase oil supply starting from the fourth quarter.
In other energy trading, July gasoline was unchanged at $2.35 a gallon, while July heating oil added 1 cent to $2.30 a gallon on Wednesday. Natural gas for July delivery gained 17 cents to $2.76 per million British thermal units.
What to watch: Investors await the release of data on natural gas supplies from the EIA today. US natural-gas supplies, which increased by 84 billion cubic feet during the week ended May 24, are expected to rise by 89 billion cubic feet in the latest week.
Data on US non-farm payrolls (NFP), which will be released on Friday, will also remain in focus.
Context: Shares of Dollar Tree fell on Wednesday, despite the company reporting better-than-expected quarterly earnings.
Details: Weak discretionary demand from customers due to sticky inflation has been exerting pressure on retailers like Dollar Tree.
The company’s quarterly sales grew 4.22% to $7.63 billion, in-line with consensus estimates. Adjusted earnings came in at $1.43 per share, topping Wall Street expectations of $1.42 per share.
Same-store sales rose 1.7% for the Dollar Tree division, while growing only 0.1% for Family Dollar in the quarter.
The company’s gross profits rose 5.3% year-over-year to $2.35 billion, while gross margins widened 30 basis points to 30.8%.
Dollar Tree announced a formal review of strategic alternatives of its Family Dollar banner, including a potential sale or spinoff. “The unique needs of each banner at this time – transformation at Family Dollar and growth acceleration at Dollar Tree – lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business,” CEO Rick Dreiling said.
Management reaffirmed their net sales forecast of $31 billion to $32 billion for the full year, while slashing the adjusted earnings outlook from $6.70-$7.30 per share, to $6.50-$7.00 per share.
For the second quarter, the company said projected net sales of $7.3 billion to $7.6 billion and adjusted earnings of $1.00 to $1.10 per share, lower than market expectations of $1.19 per share.
How shares responded: Dollar Tree’s shares declined 4.9% to close at $114.38 on Wednesday, following the release of quarterly results. The stock has tumbled around 20% year to date.
What to watch: Investors will continue monitoring overall inflation levels, which is expected to weigh on discretionary spending and impact the company’s overall results ahead.
Other Markets: European indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.18%, 0.93%, 0.87% and 0.81%, respectively.
The US is expected to announce a new weapons package worth $225 million for Ukraine this week. The news sent the safe-haven US dollar index slightly lower in forex trading this morning.
Australia’s trade surplus on goods rose to A$6.55 billion in April, versus A$4.84 billion in the prior month. The latest reading topped market estimates of A$5.40 billion, lending support to the AUD/USD forex pair.
Ireland’s AIB services PMI rose to 55.0 in May, from a three-month low of 53.3 recorded in April, which sent the EUR/USD pair higher in forex trading this morning.
Argentina’s industrial production fell by 16.6% year-over-year in April, recording a contraction for the 11th straight month. However, the latest reading showed some improvement from the 21.2% plunge recorded in the prior month, which lent support to the ARS/USD forex pair.
Colombia’s producer prices fell by 0.58% year-over-year in May, signalling deflation for the 13th straight month, which sent the COP/USD pair lower in forex trading this morning.
Germany’s factory orders and construction PMI, Spain’s industrial output, Eurozone’s construction PMI, retail sales and European Central Bank’s interest rate decision, France’s construction PMI and new passenger car registrations, Italy’s construction PMI and retail sales, UK’s construction PMI, South Africa’s current account, Turkey’s gross foreign exchange reserves, US Challenger job cuts, balance of trade, initial jobless claims, continuing jobless claims, nonfarm productivity and unit labour costs, Mexico’s auto exports and car output, Canada’s balance of trade and Ivey Purchasing Managers Index, Brazil’s car production and new vehicle sales, as well as Russia’s total vehicle sales.
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