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Crude oil rises on US supplies, inflation data

Thursday, May 16, 2024

Today’s headlines

What’s happening: Crude oil prices settled higher on Wednesday as investors assessed crude supplies data.

What happened: Crude supplies in the US contracted for the second straight week, providing a boost to oil prices.

A slowdown in the US inflation rate also raised prospects of rate cuts by the Fed, which could trigger energy demand.

Why it matters: Both WTI and Brent prices climbed on Wednesday after settling at their weakest levels since March 12 in the previous trading session.

The EIA (Energy Information Administration) said US commercial crude inventories shrank for the second straight week, declining by 2.5 million barrels in the week ended May 10. This was significantly higher than market estimates of a decline of 500,000 barrels.

Late Tuesday, the API (American Petroleum Institute) had also announced a decline in crude inventories of 3.1 million barrels. Meanwhile, US oil production came unchanged at 13.1 million barrels per day for the recent week.

US consumer prices increased 0.3% in April, below market expectations of a 0.4% rise. The annual inflation rate also eased to 3.4% in April, from 3.5% in the earlier month. Treasury yields moved lower following the release of CPI data, fuelling speculations of interest rate cut by the Federal Reserve.

Oil prices recorded losses in earlier on Wednesday after the IEA slashed its 2024 growth outlook for oil demand. The IEA (International Energy Agency) cut its outlook for global oil demand growth to 1.1 million barrels per day, from its earlier projection of 1.2 million barrels per day.

Weakness in the US dollar lent support to oil prices, as a lower greenback makes commodities cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.6% to 104.35 on Wednesday.

WTI crude for June delivery gained 61 cents to close at $78.63 per barrel on the NYMEX (New York Mercantile Exchange) on Wednesday, after falling to its weakest level since late February. July Brent crude, the global benchmark, added 37 cents to settle at $82.75 per barrel on ICE Futures Europe, after declining to its weakest level since mid-March.

In other energy trading, June gasoline added 4 cents to $2.50 a gallon, while June heating oil came in unchanged at $2.42 a gallon. Natural gas for June delivery rose 8 cents to $2.42 per million British thermal units.

What to watch: Investors will continue monitoring geopolitical concerns, which could significantly impact oil prices ahead.

Data on natural gas supplies from the EIA will be released today. US natural gas inventories are expected to rise by 76 billion cubic feet in the recent week, compared to a gain of 79 billion cubic feet gain in the week ended May 3.

The markets today

European stocks will be in focus today after closing higher on Wednesday

Context: European equities recorded gains on Wednesday as investors monitored the latest economic reports.

Details: Data released on Wednesday showed the Eurozone economy growing by 0.3% during the first quarter, compared to a 0.1% contraction in each of the prior two quarters. Industrial production in the Eurozone climbed by 0.6% in March, versus a revised 1% gain a month ago.

The European Union’s GDP is expected to expand by 1% in 2024, according to the European Commission’s Spring 2024 forecast, compared to the 0.9% estimate in the Winter 2023 report.

Markets widely expect the European Central Bank to announce its first rate cut in June.

The STOXX Europe 600 Index gained 0.59% to close at 524.71 on Wednesday, with most sectors settling in the positive zone. Utilities stocks were among the top performers, while oil and gas stocks bucked the overall market trend to close lower.

In the US markets, the S&P 500 surged to fresh record highs following the release of inflation data.

London’s FTSE 100 gained 0.21% to settle at 8,445.80 on Wednesday, surging to an all-time high. Germany’s DAX 40 jumped 0.82% to 18,869.36, while France’s CAC 40 added 0.17% to close at 8,239.99.

What to watch: With no major economic reports due to be released today, investors await Friday’s inflation data. The annual inflation rate in the Eurozone is expected to remain at 2.4% in April, while the harmonized index of consumer prices is projected to increase by 0.6% in April, compared to a 0.8% rise in March.

Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.88%, 1.17% and 1.49%, respectively.

The news shaping the markets

Russia’s President Vladimir Putin arrived for a two-day visit in China to hold talks with President Xi Jinping. The news sent the RUB/USD pair higher in forex trading this morning.


Australia’s unemployment rate rose to 4.1% in April, from a revised 3.9% in the prior month, exerting pressure on the AUD/USD forex pair.


Japan’s economy shrank 0.5% in the first quarter, higher than market expectations of a 0.4% decline. However, the JPY/USD pair rose in forex trading this morning.


Colombia’s leading economic indicator declined by 1.48% year-over-year in March. This being the biggest contraction since February 2021 exerted pressure on the COP/USD forex pair.


Canada’s housing starts declined by 0.87% to 240,229 units in April, sending the CAD/USD pair slightly lower in forex trading this morning.

What else to watch today

Italy’s inflation rate and balance of trade, South Africa’s value for building plans passed, Turkey’s gross foreign exchange reserves, total vehicles production and total vehicle sales, US building permits, export prices, housing starts, initial jobless claims, Philadelphia Fed manufacturing index, continuing jobless claims, industrial production and capacity utilization, manufacturing production, as well as Russia’s GDP growth rate.


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