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What’s happening: Oil prices rose on Wednesday, following the release of data on crude inventories.
What happened: Crude oil recorded gains after the Energy Information Administration reported a large surprise decline in US stockpiles.
A warning from the Saudi energy minister related to OPEC+ production cuts also provided support to oil prices on Wednesday.
Why it matters: The EIA said US crude oil inventories fell by 12.456 million barrels in the week ending May 19, representing the biggest draw since November 2022. This came against market expectations of an increase of 0.775 million barrels.
Gasoline inventories contracted by 2.053 million barrels, higher than estimates of a 1.051 million decline. Distillate stockpiles contracted by 0.562 million barrels, compared to expectations of a rise of 0.385 million.
Saudi Arabia’s energy minister warned short sellers to “watch out” for potential outcomes, which raised speculations of the OPEC+ (Organization of Petroleum Exporting Countries and allies) announcing additional output cuts at its upcoming meeting in June.
Meanwhile, traders continued to monitor the US debt ceiling talks. No signs of an agreement being reached soon impacted overall sentiment.
The overall gains for oil were constrained by news of UK’s inflation rate declining lower than expected, which increases the increased prospects of further rate hikes by the Bank of England.
UK’s consumer price inflation eased to 8.7% year-over-year in April, but still came in above market expectations of 8.2% and remained well above the UK central bank’s 2% target.
Brent crude for July delivery climbed $1.52 to $78.36 per barrel, while WTI crude oil for July delivery gained $1.43 to settle at $74.34 per barrel on Wednesday.
In other energy trading, wholesale gasoline for June delivery added 6 cents to $2.72 a gallon, while June heating oil rose 5 cents to $2.41 a gallon and June natural gas gained 8 cents to $2.40 per 1,000 cubic feet.
What to watch: The US Memorial Day holiday on May 29 marks the start of the peak summer travel and is typically a season of higher oil demand.
Traders will also monitor the ongoing debt talks between President Joe Biden and Republican Speaker Kevin McCarthy. The release of the EIA’s data on natural gas stockpiles will remain in focus.
Context: Shares of Nvidia jumped sharply in after-hours trading on Wednesday on the company’s upbeat quarterly results and its plans to increase production.
Details: Nvidia delivered a strong beat for the first quarter results and issued an upbeat outlook for second quarter, projecting revenues more than 50% higher than market expectations.
Adjusted revenues for the quarter came in at $7.19 billion, higher than the Wall Street expectations of $6.52 billion. Nvidia reported first-quarter earnings of $1.09 per share, ahead of the consensus estimates of 92 cents per share.
The company’s data centre unit, which includes AI chips, delivered record revenues of $4.28 billion in the quarter, surpassing expectations of $3.89 billion. Nvidia announced plans to increase the production of its AI chips to meet rising demand.
CEO Jensen Huang said during the earnings call, “A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service, and business process.” He added that the entire suite of Nvidia’s data center products was in production and the company was working on “significantly increasing” production to meet “surging demand.”
How shares responded: Nvidia’s shares climbed 24.6% to $380.60 in the after-hours trading session. The surge in the stock took the company’s market valuation higher by around $200 billion to over $960 billion. Shares of other AI-based companies also rallied after Nvidia’s earnings release.
What are expectations: Rising competition for AI chips from Advanced Micro Devices and Intel will remain in focus.
Other Markets: US trading indices closed lower on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.77%, 0.73% and 0.50%, respectively.
Ukraine’s Foreign Minister Dmytro Kuleba urged African nations to abandon their neutral stance on the war with Russia. The news sent the safe-haven US dollar index higher this morning.
Singapore’s current account surplus narrowed to S$29.45 billion in the first quarter, from S$34.43 billion in the year-ago period, exerting pressure on the SGD/USD forex pair.
The Bank of Korea held its base rate at 3.5% at its May meeting, sending the KRW/USD pair lower in forex trading this morning.
Argentina’s retail sales surged by 126.1% year-over-year in March. However, the figure came in lower than the previous month’s 132.8% growth and exerted pressure on the ARS/USD forex pair.
Russia’s producer prices fell by 12.7% year-over-year in April. This being the sixth straight month of easing prices sent the RUB/USD pair higher in forex trading this morning.
Germany’s GfK consumer climate indicator and gross domestic product, Saudi Arabia’s balance of trade, France’s business confidence and business climate indicator, Spain’s producer prices change, Indonesia’s loan growth and Bank of Indonesia’s interest rate decision, South Africa’s producer price inflation and South African Reserve Bank interest rate decision, UK’s CBI distributive trades survey’s retail sales balance, Brazil’s FGV consumer confidence and consumer prices, Canada’s CFIB Business barometer long-term optimism index, manufacturing sales and average weekly earnings, Central Bank of Turkey’s interest rate decision, Mexico’s balance of trade and current account, as well as US corporate profits, GDP growth rate, Chicago Fed national activity index, initial jobless claims, continuing claims, price index for personal consumption expenditures, pending home sales, and Kansas City Fed’s manufacturing production index.
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