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What’s happening: Crude oil prices settled lower on Wednesday, as investors digested the latest inventories data from the US.
What happened: The latest data release showed an increase in US crude inventories last week.
Some strength in the US dollar also weighed on oil prices on Wednesday.
Why it matters: The Energy Information Administration (EIA) reported a surprise rise in US crude oil stockpiles last week. US inventories climbed by 1.357 million barrels in the week, after declining for six consecutive weeks. The figure also came in much higher than market expectations of a contraction of 2 million barrels.
Stockpiles at the Cushing, Oklahoma delivery hub fell by 1.665 million barrels, compared to a gain of 0.579 million barrels in the prior period.
Meanwhile, gasoline inventories fell by 2.894 million barrels, versus expectations of a decline of 1.4 million barrels, while distillate fuel inventories contracted by 1.673 million barrels, higher than market estimates of a decline of 1 million barrels.
Strength in the US dollar also exerted pressure on oil prices on Wednesday, as a higher greenback makes commodities like crude oil more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained slightly to 102.57.
The annual inflation rate in the US slowed in July, fuelling speculations of the US Federal Reserve beginning to cut its benchmark interest rates in September. Lower interest rates reduce borrowing costs to boost overall economic activity, which drives the demand for oil.
Global jet fuel demand is on track to easing, with a slowdown in consumer spending weighing on travel budgets, which is expected to hit crude oil prices ahead.
September WTI crude futures declined by $1.37 to close at $76.98 per barrel on the NYMEX on Wednesday. ICE Brent crude for October delivery shed by 93 cents to $79.76 per barrel.
Both oil benchmarks declined for a second straight session after recording gains for five sessions in a row. Brent crude had jumped more than 3% on Monday to settle at $82.30 per barrel.
What to watch: Investors will continue monitoring rising geopolitical concerns, which could weight on oil demand ahead.
Data on natural gas supplies from the EIA will also remain in focus today. US natural gas supplies, which rose by 21 billion cubic feet during the week ending August 2, are expected to rise by 43 billion cubic feet in the latest week.
Context: The GBP/USD forex pair moved lower on Wednesday, as investors assessed consumer price inflation data.
Details: Data released on Wednesday showed lower-than-expected inflation in the UK, which stroked expectations of further rate cuts by the Bank of England this year.
UK’s consumer price inflation accelerated to 2.2% in July, from 2% in June, but came in lower than market expectations of 2.3%. Services price inflation eased to 5.2% in July, versus 5.7% in June. The figure also came in lower than market estimates of 5.5%, also hitting the lowest level since June 2022.
Factory gate prices of goods produced by manufacturers rose by 0.8% year-over-year in July, easing from the 1% gain recorded in the prior month.
The BoE had cut interest rates earlier during the month and traders widely expect policymakers to cut rates by more than 40 basis points this year.
The sterling had climbed to a two-week high during Tuesday’s session after data showed the jobless rate in the UK fell to 4.2% in June.
The GBP/USD forex pair fell around 0.3% to 1.2827 on Wednesday, while the EUR/GBP gained around 0.5% to 0.8587. London’s FTSE 100 rose by 0.56% to settle at 8,281.05, while the STOXX Europe 600 Index gained 0.49% to close at 504.10.
What to watch: Investors await the release of data on GDP annual growth rate, industrial production and balance of trade from the UK today. The UK’s economy, which expanded by 0.3% year-over-year in the first quarter, is expected to grow by 0.9% in the second quarter.
Analysts expect industrial production in the UK to grow by 0.1% in June, following a 0.2% gain in May. The UK’s trade deficit, which narrowed to £4.89 billion in May, is projected to shrink to £1.1 billion in June.
Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.61%, 0.38% and 0.09%, respectively.
Ukrainian President Volodymyr Zelensky said that his troops had continued to advance in Russia’s Kursk region. The news sent the RUB/USD slightly lower in forex trading this morning.
Brazil’s business confidence index rose to 51.7 in August, from a fourteen-month low of 51.4 in the prior month. This being highest reading since May lent support to the BRL/USD forex pair.
Argentina’s inflation rate eased to 263.40% in July, from 271.5% in June. This being the third month of easing inflation after 11 consecutive months of increases sent the ARS/USD pair higher in forex trading this morning.
India’s total passenger vehicle sales fell by 1.9% year-on-year to 296,785 in July, after 5.0% growth in the previous month, which exerted pressure on the INR/USD forex pair.
Japan’s GDP growth expanded by 0.8% quarter-on-quarter in the second quarter, above market expectations of 0.5%. This also marked a reversal from the 0.6% decline recorded in the first quarter, which sent the JPY/USD higher in forex trading this morning.
Saudi Arabia’s inflation rate and wholesale price inflation, UK’s business investment, goods trade balance, manufacturing production, construction orders, construction output and labour productivity, South Africa’s value of building plans passed, Turkey’s gross foreign exchange reserves and government budget value, Canada’s new motor vehicle sales and wholesale sales, US retail sales, export prices, import prices, initial jobless claims, NY Empire state manufacturing index, Philadelphia Fed manufacturing index, continuing jobless claims, industrial production, capacity utilization, manufacturing production, total business inventories, NAHB/Wells Fargo housing market index, net long-term TIC flows, net purchases of US treasury bonds and notes, net treasury international capital flows, and central bank balance sheet, as well as India’s total passenger vehicle sales.
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