Oil Gains For 6th Straight Session

Daily Analysis - 29/06/2017

US Crude Output Falls As Storm Takes Production Offline

Crude oil prices rose for a sixth consecutive session on Thursday to touch its highest point since June 19^th. Bulls were encouraged by a weekly drop in US output after a tropical storm disrupted extraction and shrugged off a build-up in crude stockpiles in the world's largest energy consumer.

Energy Glut Worries Ease

The US Energy Information Administration report delivered on Wednesday showed that crude oil inventories increased by 118,000 barrels during the week ended June 23^rd, the second weekly increase in the last 12 periods. Helping oil prices recover was the dip in weekly production which fell by 100,000 barrels to 9.3 million bpd - the biggest weekly decline in output since 2016 after Tropical Storm Cindy saw production shuttered.

Additional support for prices came following a drop in US gasoline stocks, which slid by 894,000 barrels last week. Traders interpreted the decline as indicative of a pick-up in demand following a tepid start to the peak US summer driving season. Oil slipped into bear market last week amid concerns that rising global supply will undermine OPEC efforts. In the meantime, if Brent futures stay below the $48-mark, the current downward trend will remain in place.

US Pending Home Sales Record Unexpected Drop

Contracts to buy existing homes in the United States unexpectedly fell in May to post the third straight monthly drop, as fewer homes on the market narrowed supply. The Pending Home Sales Index announced by the National Association of Realtors, which is determined based on the number of contracts signed in the previous month, slid -0.80% to 108.5. Sales dropped in the Northeast, West and South, and remained flat in the Midwest.

The figure itself missed the consensus forecast of pending home sales growing by 0.80% in May, extending the prior month’s losses. Compared to a year ago, pending home sales were down -1.70% in May. A lack of inventory has driven prices higher, which has most likely resulted in buyers postponing their purchases. Equities shrugged off the data, with S&P 500 futures perched just below the key resistance at 2450.

French Consumer Confidence Reaches 10-Year High

According to data from the official French statistics agency INSEE, consumer confidence soared to the highest peak since 2007 during the month of June amid an upswing in morale following the presidential election. The monthly consumer confidence index jumped to 108 in June from 103 in May, when the country elected Emmanuel Macron as the youngest leader to head France since Napoleon.

The statistics agency indicated that spikes in consumer optimism have been noted around presidential elections. Nevertheless, last month’s increase was the biggest monthly gain since Nicolas Sarkozy won the presidential vote in 2007. The index reading also easily topped forecasts for a result of 103 estimated by a Reuters survey of economists. Shares of French retailing giant Carrefour rallied following the release of the upbeat consumer figures after significant weakness earlier in the week.

Japan Retail Sales Growth Slows

Retail activity in Japan increased at a weaker-than-anticipated pace in May as purchases at department stores and supermarkets shrank. Sales grew 2.00% year-on-year last month, well below the median projection of 2.60% and down from the April rate of 3.20% expansion. Sales at department stores and supermarkets decreased -0.60% after expanding in April for the first time in nine months at an annualized rate of 1.10%.

On a monthly basis, retail sales contracted by -1.60% last month contrasting sharply with the 1.40% increase back in April. Wages have been stagnant for years, and without a significant rebound in pay, consumers are unlikely to increase spending any time soon, further denting the inflationary outlook. AUDJPY is rallying in early Thursday trade, edging just above 86.000 ahead of the European open.