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What’s happening: Crude oil prices settled higher on Wednesday, as investors assessed the impact of Hurricane Francine.
What happened: Concerns around disruptions to output, with oil and gas companies in the Gulf of Mexico to pause production due to Hurricane Francine, provided a boost to oil prices on Wednesday.
However, data showing a rise in US crude oil inventories limited the overall gains in crude oil prices.
Why it matters: Brent crude prices fell sharply on Tuesday, to close at their weakest level since late 2021, due to downbeat China demand data and the OPEC (Organization of the Petroleum Exporting Countries) lowering its outlook for demand growth.
On Tuesday, the OPEC said it expects global oil demand to rise by 2.03 million barrels per day (bpd) this year, versus its previous forecast of 2.11 million bpd. The OPEC also slashed its growth outlook for China, the world’s second largest economy, to 650,000 bpd for 2024, down from its earlier forecast of 700,000 bpd.
Meanwhile, Hurricane Francine strengthened to a Category 2 storm in the Gulf of Mexico, with experts projecting a landfall in southern Louisiana, forcing oil and gas companies to temporarily close production.
The EIA (Energy Information Administration) said on Wednesday that US commercial crude inventories rose by 833,000 barrels to 419.1 million barrels in the week ended September 6, after contracting for three straight weeks. The figure was significantly higher than market expectations of crude supplies to grow by 300,000 barrels.
The API (American Petroleum Institute) had said late Tuesday that crude inventories declined by 2.79 million barrels last week, with stockpiles at the Cushing, Oklahoma delivery hub down by 1.7 million barrels.
Data also showed gasoline supplies rising by 2.3 million barrels and distillate supplies by 2.3 million barrels.
WTI crude for October delivery gained $1.56, or 2.4%, to close at $67.31 per barrel on the NYMEX (New York Mercantile Exchange) on Wednesday, after tumbling 4.3% on Tuesday. November Brent crude added $1.42, or nearly 2.1%, to close at $70.61 per barrel on ICE Futures Europe.
In other energy trading, October gasoline gained 1.5% to $1.90 a gallon, while October heating oil rose 1.6% to $2.09 a gallon on Wednesday. Natural gas for October delivery climbed 1.7% to $2.27 per million British thermal units.
What to watch: Investors will continue monitoring Hurricane Francine in the US, which is expected to significantly impact oil prices ahead.
Data on natural gas stockpiles from the EIA will also remain in focus. US natural gas supplies, which rose by 13 billion cubic feet to 3,347 billion cubic feet in the last week of August, are expected to rise by 48 billion cubic feet in the latest week.
Context: The US dollar index edged higher on Wednesday, as investors digested the latest inflation data.
Details: Data released on Wednesday showed that the US annual inflation rate had declined in August, to its lowest level since February 2021. Headline CPI inflation slowed to 2.5% in August, from 2.9% in July. The figure also came in better than market expectations of 2.6%. On a monthly basis, the region’s inflation level rose by 0.2% in August, in-line with the previous month.
However, the core CPI figure, which excludes food and energy prices, rose 0.3% in August, coming in higher than estimates of 0.2%.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose slightly to 101.68 on Wednesday.
The EUR/USD forex pair slipped to 1.1014 on Wednesday, while the GBP/USD pair fell around 0.3% to 1.3042.
Wall Street stocks closed higher on Wednesday, with the Dow Jones index adding more than 100 points and the Nasdaq 100 up by over 400 points.
What to watch: Investors await the release of economic data on producer price inflation and initial jobless claims from the US today. Factory gate prices in the US, which rose by 0.1% in July, are expected to rise by 0.1% in August. The number of people claiming jobless benefits, which fell by 5,000 to 227,000 in the week ending August 31, is projected to increase to 230,000 in the latest week.
Other Markets: European indices closed mixed on Wednesday, with the DAX 40 and STOXX Europe 600 Index up by 0.35% and 0.01%, and the FTSE 100 and CAC 40 down by 0.15% and 0.14%, respectively.
Iran denied accusations of sending ballistic missiles to Russia and said it would respond to the latest sanctions. The news sent the RUB/USD pair slightly lower in forex trading this morning.
Australia’s consumer inflation expectations eased to 4.4% in September, from 4.5% in August, lending some support to the AUD/USD forex pair.
The Philippines said its net foreign direct investment fell 29% year-over-year to $0.4 billion in June, sending the PHP/USD pair lower in forex trading this morning.
New Zealand’s annual food inflation eased to 0.4% in August, from 0.6% in the previous month. The slowdown in inflation fuelled speculations of another interest rate cut in October, which exerted pressure on the NZD/USD forex pair.
Argentina’s consumer prices rose by 4.2% in August, compared to a 4% increase in July, sending the ARS/USD pair higher in forex trading this morning.
Germany’s wholesale prices and current account, Spain’s inflation rate, Turkey’s current account, and gross foreign exchange reserves, South Africa’s inflation expectations, gold production and mining production, Brazil’s retail sales, India’s industrial production, consumer inflation rate, manufacturing production and total passenger vehicle sales, European Central Bank’s interest rate decision, Canada’s value of building permits, US continuing jobless claims and central bank balance sheet, as well as China’s new yuan loans, money supply M2, value of loans and loans to private sector.
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