Crude Oil Edges Higher

Daily Analysis - 17/08/2017

High Production Caps Gains

Oil prices gained in early Thursday trade, recovering some of the losses of the previous session. A decline in U.S. crude inventories is providing support to prices, while higher output has most likely capped short term gains.

Investors Brace for Oil Price Consolidation

Data from the Energy Information Administration showed late Wednesday that U.S. crude oil stockpiles declined by close to 13.00% from their March peak to 466.50 million barrels last week. However, total production rose by 79,000 barrels a day to 9.502 million barrels to record the highest output level since the middle of July 2015.

Oil analysts reckon the surging U.S. output is eroding efforts by the Organization of the Petroleum Exporting Countries to curb production and tighten the market. Brent crude futures for October delivery were last trading around $50.40 a barrel. Strong support exists around the $50-zone, while any move higher is likely to face resistance around $51.50 a barrel. Unless fresh catalysts emerge, the market could remain range-bound within the price band.

U.S. Dollar Declines on Fed Minutes

The greenback was on the defensive early Thursday after the minutes from the Federal Reserve's last meeting indicated that policymakers were growing wary of the recently tepid inflation data and could postpone an interest rate hike. The readout from the July rate-setting meet showed some members had called for halting the cycle of rate hikes until the inflation trend became clearer.

Money market futures are pricing in a 40.00% chance of a Fed rate rise by December, compared to a figure close to 50.00% before the Fed's minutes were released. The U.S. dollar also came under pressure after U.S. President Donald Trump disbanded two White House business advisory councils, reigniting concerns over his ability to implement economic reforms. USDCHF was last seen around 0.96450.

U.K. Unemployment Rate Falls to Fresh Record Low

The jobless rate in the U.K. fell to its lowest level in more than 40 years in June, while wage growth topped expectations in an impressive labour market report that helped lift the pound against the U.S. dollar. The Office for National Statistics said Wednesday that the U.K. unemployment rate fell to 4.40% in the three months to June, from 4.50% in the prior three months, marking its lowest level since the spring of 1975.

Excluding bonus payments, wages grew at an annualized pace of 2.10%, above the 2.00% growth rate recorded in the previous three-month period. Inflation has marginally eased since hitting a four year high of 2.90% in May, but prices continue to rise faster than wages, squeezing household spending. The sterling jumped close to half a cent against the U.S. dollar following the release of the jobs report. The pair was last trading around the 1.29050-mark.

Japanese Exports Grow

Exports from Japan rose for an eighth straight month in July, buoyed by robust shipments to the United States and underpinning a steady recovery in the economy. Meanwhile, imports grew for the seventh consecutive month amid strong demand for digital cameras and personal computers from China. Total exports surged 13.40% last month from a year earlier, data from the Ministry of Finance showed early Thursday, marginally lower than the median economists’ estimate for a 13.60% gain.

Total imports increased 16.30% in July from a year ago, versus the median forecast for a 17.00% gain. The Japanese trade balance figure stood at a surplus of 418.80 billion yen, down 17.00% from a year earlier, but higher than a 380.00 billion yen surplus projected by economists in a Nikkei survey. EURJPY is down in early Thursday trade to currently hover around 129.40000.