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Crude oil spikes after US inventories data

Thursday, July 11, 2024

Today’s headlines

What’s happening: Crude oil prices moved higher on Wednesday, after data from the US showed inventories contracting for the second straight week.

What happened: The OPEC released its monthly report of crude demand projections.

A cooler-than-expected inflation report from China also fuelled concerns over the demand for crude.

Why it matters: The Energy Information Administration (EIA) said that US crude inventories had declined for the second week in a row, falling by 3.4 million barrels in the week ended July 5. The drawdown was much more than market expectations of 1.2 million barrels.

The American Petroleum Institute’s (API) report, released late Tuesday, showed a decline of 1.92 million barrels last week.

The EIA also said gasoline inventories had contracted by 2 million barrels, higher than estimates of a decline of 1.8 million barrels.

Meanwhile, weak economic data from China limited the overall gains for crude oil. China’s consumer price index rose 0.2% year-over-year in June, compared to market expectations of a 0.4% rise and versus May’s increase of 0.3%.

China’s producer price index declined 0.8% year-over-year in June, signalling contraction for the 21st consecutive month. The latest data reinforced demand concerns for oil.

In its monthly report, the OPEC said it sees demand rising by 2.2 million barrels per day, with total demand likely to reach 104.5 million barrels per day this year. The report also projected growth of 1.8 million barrels per day in 2025.

Some weakness in the US dollar also lent support to oil prices on Wednesday, as a weaker 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 around 0.1% to 105.05.

WTI crude for August delivery gained 69 cents to close at $82.10 a barrel on the NYMEX (New York Mercantile Exchange). September Brent crude, the global benchmark, added 42 cents to settle at $85.08 a barrel on ICE Futures Europe.

In other energy trading, August gasoline fell 3 cents to $2.50 a gallon, while August heating oil came in flat at $2.52 a gallon. Natural gas for August delivery fell 1 cent to $2.33 per million British thermal units.

What to watch: Investors await the release of the EIA’s report on natural gas stockpiles today. Working gas held in storage facilities had risen by 32 billion cubic feet during the week ending June 28. Analysts project nat-gas stockpiles growing by 56 billion cubic feet in the latest week.

The Baker Hughes rig count report for the week, due to be released on Friday, will also remain in focus.

The markets today

The British pound will be in focus today ahead of a basket of major economic reports

Context: The GBP/USD forex pair hit its strongest level in around a month as investors assessed the monetary policy outlook.

Details: Investors have shifted their focus from the Labour Party’s landslide victory in the UK general elections last week to the central bank’s monetary policy.

Investors widely expect the Bank of England to cut interest rates during its upcoming meeting on August 1. Markets have fully priced in a rate cut by the BoE in September.

Some weakness in the greenback following comments from Federal Reserve Chairman Jerome Powell also provided a boost to the GBP/USD pair on Wednesday.

The GBP/USD forex pair gained around 0.5% to 1.2849 on Wednesday, while the EUR/GBP fell more than 0.3% to 0.8429.

London’s FTSE 100 climbed 0.66% to close at 8,193.51 on Wednesday, snapping a three-session losing streak.

What to watch: Investors await the release of economic data on industrial production, balance of trade and GDP growth rate from the UK today. Industrial production in the UK, which fell by 0.9% in April, is expected to increase by 0.2% in May. Analysts expect the British economy to grow by 1.2% year-over-year in May, following a 0.6% expansion in April.

The UK’s trade deficit, which widened to around a two-year high of £6.75 billion in April, is projected to narrow to £4.3 billion in May.

Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.09%, 1.02% and 1.09%, respectively.

The news shaping the markets

During his visit to Moscow, India’s Prime Minister Narendra Modi urged Russian President Vladimir Putin to end the war with Ukraine. The news sent the safe-haven US dollar index slightly lower in forex trading this morning.


Australia’s consumer inflation expectations eased to 4.3% in July, from 4.4% in the prior month, lending support to the AUD/USD forex pair.


The Bank of Korea kept its base rate unchanged at 3.5% for the 12th consecutive time during its July meeting, sending the KRW/USD pair higher in forex trading this morning.


New Zealand’s annual food inflation declined by 0.3% in June, versus a 0.2% increase in the prior month. The region recording the first annual decline in food inflation since August 2018 lent support to the NZD/USD forex pair.


US wholesale inventories grew by 0.6% to $901.7 billion in May, accelerating from the 0.2% gain recorded a month ago, which sent the Dow Jones index higher by over 400 points on Wednesday.

What else to watch today

South Africa’s gold production, industrial output and mining production, UK’s goods trade balance, manufacturing production and construction output, Turkey’s retail sales and foreign exchange reserves, Brazil’s retail sales, US consumer prices, initial jobless claims, continuing jobless claims and government budget, Russia’s current account, Bank of Mexico’s monetary policy meeting minutes, France’s current account, as well as China’s new yuan loans, broad M2 money supply, outstanding yuan loans and total social financing.


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