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What’s happening: Crude oil prices moved higher on Wednesday, as investors assessed the release of US crude inventories data.
What happened: Oil prices recorded gains for a third day, following a bigger-than-expected decline in US gasoline and distillate stockpiles.
Oil prices were also supported by the US government lowering its projection for crude output growth on Tuesday.
Why it matters: The EIA (Energy Information Administration) said that US commercial crude inventories grew by 5.5 million barrels in the week ended February 2, following a rebound in production. The figure also came in higher than market expectations of a gain of 1.9 million barrels.
Late Tuesday, the API (American Petroleum Institute) reported that US crude inventories had risen by 674,000 barrels last week.
The EIA data also showed gasoline stockpiles contracting by 3.15 million barrels last week, versus market estimates of an addition of 140,000 barrels. Distillate inventories also declined by 3.2 million barrels, much steeper than market expectations of a decline of 1 million barrels.
US oil production increased by 300,000 barrels to a record 13.3 million barrels per day last week. However, the EIA slashed its 2024 forecast for domestic oil output growth by 0.8%, or about 170,000 barrels per day, to an average of 13.1 million barrels per day.
Some weakness in the US dollar also lent support to 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, fell 0.15% to 104.06 on Wednesday.
WTI crude for March delivery gained 55 cents to close at $73.86 per barrel on the NYMEX (New York Mercantile Exchange) on Wednesday. April Brent crude, the global benchmark, rose 62 cents to settle at $79.21 per barrel on ICE Futures Europe.
In other energy trading, March gasoline gained 4 cents to $2.26 a gallon and March heating oil added 8 cents to $2.82 a gallon. Natural gas for March delivery bucked the trend and lost 4 cents to reach $1.97 per million British thermal units.
What to watch: Investors await the release of the EIA’s data on natural gas stockpiles today. US natural gas supplies fell 197 billion cubic feet in the week ended January 26, versus market estimates of a drawdown of 194 billion cubic feet.
Context: European equity markets settled lower on Wednesday, as investors monitored the ECB’s monetary policy outlook.
Details: The European Central Bank has kept interest rates unchanged at record high levels since September.
ECB board member Isabel Schnabel said the ECB must be patient with reducing rates as inflation levels could rise again.
Investors are also watching moves by the US Federal Reserve. Fed Chairman Jerome Powell said on Sunday that more positive economic reports on inflation were needed before cutting rates.
Data released recently showed the Eurozone’s retail sales contracting 1.1% in December, after growing by merely 0.3% in the prior month. The median consumer expectations for Eurozone inflation over the next 12 months declined for a third month in a row to a reading of 3.2% in December. The HCOB Eurozone construction PMI fell to 41.3 in January, from December’s reading of 43.6.
Equinor’s stock declined around 7% on Wednesday, after the company reported its fourth-quarter results and announced plans to cut cash payouts to shareholders. Shares of TotalEnergies lost over 3% after the company posted a 31% decline in adjusted net income for the fourth quarter.
The STOXX Europe 600 Index fell 0.23% to close at 485.63 on Wednesday, after recording gains in the previous session. Most sectors closed in the negative zone, with oil and gas stocks down 1%, while autos gained 0.5% during the session.
London’s FTSE 100 fell 0.68% to close at 7,628.75. Germany’s DAX 40 fell 0.65%, while France’s CAC 40 lost 0.36%.
What to watch: With no major economic reports scheduled from the Eurozone today, investors await the release of inflation data from Germany on Friday. Analysts expect Germany’s consumer price inflation to ease to 2.9% year-over-year in January, from 3.7% in the prior month.
Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.40%, 0.82% and 1.04%, respectively.
US National Security Adviser Jake Sullivan said that the country “can and will” deliver more military assistance to Ukraine against its war with Russia. The news sent the safe-haven US dollar index slightly lower this morning.
The RICS UK Residential Market Survey house price balance improved to -18 in January, from December’s reading of -29. The latest reading being the strongest since July 2022 lent support to the GBP/USD forex pair.
China’s producer prices declined by 2.5% year-over-year in January, following a 2.7% decline in the earlier month. The figure came below market expectations of a 2.6% decline and sent the CNY/USD pair slightly lower in forex trading this morning.
Japan’s current account surplus widened to ¥744.5 billion in December, from ¥ 0.095 billion in the year-ago month. However, the latest reading came in lower than market estimates of ¥ 1018.9 billion and exerted pressure on the JPY/USD forex pair.
Brazil’s trade surplus rose by 185.6% year-over-year to $6.53 billion in January. The figure coming in short of market expectations of $7.35 billion sent the BRL/USD pair lower in forex trading this morning.
South Africa’s manufacturing output, Turkey’s gross foreign exchange reserves, Brazil’s inflation rate, new vehicle sales and car production, Mexico’s inflation rate and Bank of Mexico interest rate decision, US initial jobless claims, continuing jobless claims and wholesale inventories, Russia’s foreign exchange reserves, as well as Spain’s consumer confidence indicator.
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