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Oil Climbs Toward Five Week Peak

Daily Analysis - 11/04/2017

Spike in Geopolitical Concerns Embolden Bulls

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Crude oil is trading below a five-week high on Tuesday as rising geopolitical tensions in the Middle East fuel supply fears. The benchmark Brent crude has risen in each of the prior six sessions.

 

Growing U.S. Shale Production Fails to Cap Rally


U.S. government data showed last week that crude inventories are at record highs at both the Cushing storage hub and in the Gulf Coast. But the market seems to have overlooked these figures, instead pushing crude prices higher as tensions build following the U.S. missile strike on Syria and a shutdown at Libya's largest oilfield. The Sharara oilfield was forcefully shut on Sunday after a group blocked a key pipeline, Libyan media reported. The field had just resumed production after suffering a week-long outage that ended in early April. Analysts reckon the current rally is also being helped by investors turning their focus to the start of the U.S. summer driving season. Brent June futures are currently sitting just below the $56-mark.

 

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IMF Upbeat About Global Economy


The International Monetary Fund is more upbeat about the global economy in 2017 than it was last year, Managing Director Christine Lagarde said in Berlin on Monday. Lagarde however added that in spite of the bullish outlook, persistent low productivity and excessive inequality had the potential to derail growth. Largarde made these comments after meeting the heads of key global economic bodies, including the World Bank, World Trade Organisation and International Labour Organization. The IMF is scheduled to release its world economic outlook later in April. Addressing a joint press conference with German Chancellor Angela Merkel, World Bank President Jim Yong Kim said most economic leaders present at the meet were optimistic that U.S. President Donald Trump would rethink his protectionist stance on international trade. S&P 500 June futures are down early Tuesday, last trading around 2350.

 

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Australian Business Conditions at 2008 High


A measure of business conditions in Australia jumped in March to its highest level since before the global financial crisis of 2008, signalling the economy could strengthen further. National Australia Bank's monthly survey of over 400 firms showed its Index of Business Conditions surged 6 points to +14 in March from +9 in February, and was well above the long-run average of +5. The index had been choppy during the first three months of the year. The report said the latest improvement in business conditions was primarily driven by the services sector and wholesale industries. Mining also showed marked improvement on the back of higher commodity prices. Business confidence however fell to +6 from +7. AUDUSD is rebounding from a one month low recorded in the previous session, and is currently hovering around 0.75050.

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Canada Housing Starts Rise


Canadian housing starts came in much better than expected in March, data from the Canada Mortgage and Housing Corporation showed late Monday, providing further clues that the real estate market is continuing to defy forecasts of a slowdown. The annual rate of housing starts soared to 253,720 units on a seasonally adjusted basis in March, easily topping economists' projections for 215,000. The February figure was also revised higher to 214,253 units. Housing has been one of the key drivers of Canada’s economy over the past several years, as interest rates remain historically low. The Bank of Canada has repeatedly downplayed the recent strength in jobs and manufacturing, instead focusing on the downside risks. Monday’s housing starts data is unlikely to change that position. The central bank’s next interest rate decision is due Wednesday, with most expecting Governor Stephen Poloz to stick to his dovish stance. USDCAD is largely unchanged around 1.33200 in early Tuesday trading.

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