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Oil prices spike on crude stockpiles data

Thursday, January 25, 2024

Today’s headlines

What’s happening: Oil prices moved higher on Wednesday, following the release of crude storage data.

What happened: US crude stockpiles contracted more than expected last week, lending support to oil prices on Wednesday.

China’s economic stimulus and continued geopolitical tensions further boosted oil prices.

Why it matters: The Energy Information Administration (EIA) reported a sharp decline in US crude oil stockpiles in the week ending January 19, 2024. US crude oil inventories contracted by 9.233 million barrels last week, recording the largest decline since August. This was also higher than market expectations of a decline of 2.15 million barrels.

The American Petroleum Institute had reported on Tuesday a decline of 6.7 million barrels in oil inventories in the country last week.

Stocks at the Cushing, Oklahoma delivery hub fell by 2.008 million barrels, compared to a decline of 2.099 million barrels in the prior week, the EIA report said. Distillate fuel inventories contracted by 1.417 million barrels, while gasoline stocks increased by 4.913 million barrels.

China’s central bank announced plans to lower the cash amount that banks are required to maintain as reserves in a bid to provide some support to the world’s second-largest economy.

In Europe, business activity in the Eurozone contracted for an eighth straight month, amid continued decline in demand. The HCOB Eurozone composite PMI edged higher to 47.9 in January, from 47.6 in the prior month, but came in short of market estimates of 48.

Germany’s Ifo institute lowered its economic growth outlook for 2024 once again, projecting Europe’s largest economy to expand by just 0.7% this year, down from its previous 0.9% estimate issued in mid-December. Germany’s economy had contracted by 0.3% last year.

Weakness in the US dollar also drove oil prices higher on Wednesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell to 103.25.

WTI crude oil for March delivery gained 72 cents to close at $75.09 per barrel, while Brent crude for March delivery added 49 cents to settle at $80.04 per barrel on Wednesday.

In other energy trading, wholesale gasoline for February delivery came in unchanged at $2.21 a gallon, while February heating oil declined 1 cent to $2.68 a gallon and February natural gas gained 19 cents to $2.64 per 1,000 cubic feet on Wednesday.

What to watch: Investors await the release of the EIA’s data on natural gas stockpiles today. US natural gas supplies had declined by 154 billion cubic feet in the week ended January 12, versus a withdrawal of 68 billion cubic feet in the year-ago period.

Markets will continue monitoring geopolitical concerns, which are expected to significantly impact oil prices ahead.

The markets today

The euro will be in focus today ahead of the European Central Bank’s interest rate decision

Context: The EUR/USD forex pair moved higher on Wednesday, following the release of PMI data.

Details: The ECB will announce its policy decision on Thursday, with the central bank widely expected to keep interest rates at the current levels.

Investors will look for some insights into the timing of rate cuts, with markets expecting the ECB to lower rated by about 130 bps in 2024.

The latest PMI data showed that the Eurozone’s private sector shrank the least since last July. The HCOB Eurozone manufacturing PMI climbed to 46.6 in January, reaching the highest level in ten months, while services PMI fell to 48.4 in January, from 48.8 a month ago.

Germany’s composite PMI fell to 47.1 in January, from 47.4 in the prior month, with business activity contracting for the seventh consecutive month.

Some weakness in the US dollar also lent support to the European common currency. The EUR/USD forex pair rose to 1.0889 on Wednesday. The STOXX Europe 600 Index surged 1.18% to settle at 477.09, amid a rise in tech stocks after SAP and ASML recorded strong quarterly earnings results.

What to watch: Investors await the European Central Bank’s interest rate decision today. The ECB is widely expected to keep interest rates unchanged at multi-year highs during today’s monetary policy meeting.

Other Markets: US trading indices closed mixed on Wednesday, with the S&P 500 and Nasdaq 100 up by 0.08% and 0.55%, respectively, and the Dow Jones index down by 0.26%.

The news shaping the markets

President Volodymyr Zelenskyy cancelled his trip after the Russian plane carrying Ukrainian prisoners crashed, killing everyone onboard. The news sent the RUB/USD pair higher in forex trading this morning.


Argentina’s retail sales surged 168.4% year-over-year at current prices in November, compared to 166.7% growth in the prior month, lending support to the ARS/USD forex pair.


Colombia’s industrial confidence indicator rose to -4.3 in December, from a reading of -7.1 in the earlier month, which sent the COP/USD pair higher in forex trading this morning.


Mexico’s economic activity increased by 2.3% year-over-year in November, the least in seven months. The figure also missed market estimates of 3.2% growth and exerted pressure on the MXN/USD forex pair.


The Bank of Canada kept the target for its overnight rate unchanged at 5% in January, which sent the CAD/USD pair slightly lower in forex trading this morning.

What else to watch today

Türkiye manufacturing confidence index, capacity utilization, foreign exchange reserves and interest rate decision, France’s manufacturing climate indicator, business climate indicator, initial jobless claims and unemployed persons, Spain’s producer prices change, Germany’s Ifo business climate index, Ifo current conditions subindex and Ifo expectations subindex, South Africa’s producer price inflation and interest rate decision, Brazil’s FGV-IBRE consumer confidence index, current account and foreign direct investment, UK’s CBI distributive trades, Canada’s CFIB’s business barometer, average weekly earnings and manufacturing sales, Mexico’s unemployment rate, US durable goods orders, GDP growth rate, Chicago Fed national activity index, goods trade balance, initial jobless claims, wholesale inventories, continuing jobless claims, core personal consumption expenditure price index, new home sales, Kansas City Fed’s manufacturing production index, Kansas City Fed’s Composite index and building permits, as well as India’s money supply M3.


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