Oil Holds on to Gains

Daily Analysis - 24/08/2017

Bulls Add to Futures Positions Following Drop in US Crude Stocks

Crude oil has steadied early Thursday, holding onto gains from the prior session after another decline in US crude stockpiles suggested the market is continuing to tighten. The bullish sentiment was further boosted as a tropical storm headed for key oil facilities in the Gulf of Mexico threatens the region with output disruptions.

Weather Raises Gulf Oil Output Concerns

The US Energy Information Administration reported Wednesday that domestic crude stockpiles fell by 3.327 million barrels during the week ended August 18^th, following drawdowns in each of the prior seven weeks. This was slightly smaller than the forecast 3.450 million barrel stockpile decline. Apart from crude, gasoline inventories fell by 1.223 million barrels, while distillate stocks remained unchanged for the week.

Analysts were projecting a 643,000 barrel equivalent fall in gasoline stocks and a drop of 93,000 barrels for distillates. Even though US production rose, energy traders were more focused on developments tied to Tropical Storm Harvey and its potential to hamper oil and gas production in the Gulf of Mexico. The US National Hurricane Center has issued a warning stating the storm could evolve into a hurricane by Friday. In the meantime, Brent crude futures were last seen around the $52.55-mark per barrel.

US New Home Sales Slip to 7-Month Low

Sales of new single-family homes in the United States unexpectedly fell in July to the lowest point in seven months amidst an increase in prices, igniting concerns of a slowdown in the housing recovery. Data from the Commerce Department released on Wednesday showed that new home sales tumbled -9.40% to a seasonally adjusted annual pace of 571,000 units in July.

The percentage decline was the biggest since August of 2016 and surprised economists anticipating a 0.30% rise. Even though June's sales rate was revised higher to 630,000 units from the earlier reported 610,000 units, it was not enough to offset the headline pessimism. Coming close on the heels of data that showed a slump in home building activity in July, the weak sales figures indicate that housing could prove a drag for third quarter growth. Nasdaq futures are down early in Thursday trade, with the index last seen around 5850.

Euro Area Economic Activity Rebounds

After a disappointing reading in July, Euro Area economic momentum accelerated in August as a stronger than expected performance from the manufacturing sector offset a slight dip in services activity. IHS Markit’s monthly composite PMI for the currency bloc came in at 55.8 compared to the 55.7 recorded back in July. The Markit survey is carried out across the manufacturing, services and construction sectors, and is a leading gauge of the state of the economy.

The manufacturing sector did bulk of the heavy lifting climbing from 56.6 to 57.4 in August, easily topping expectations of a decline to 56.3 for the period. The services component of the index was slightly weaker, slipping from 55.4 in July to 54.9. Investors cheered the continuation of the recent strength in the economy, sending EURUSD briefly back above key resistance standing at 1.1800.

New Zealand Records First July Trade Surplus in 5 Years

For the first time since 2012, New Zealand posted a July trade surplus buoyed in party by a recovery in global dairy prices that helped boost exports. The country reported a trade surplus of NZD 85.00 million last month compared to a deficit of NZD 351.00 million recorded a year earlier according to data released by Statistics New Zealand overnight.

On a yearly basis, exports surged 17.00% to NZD 4.63 billion through the end of July while imports edged 5.40% higher to NZD 4.55 billion. The monthly trade balance figure got a lift from a rebound in dairy export prices with shipments of milk powder, cheese and butter products soaring to NZD 1.27 billion compared to NZD 840.00 last year. The New Zealand Dollar appreciated against most its major counterparts following the data’s release, with AUDNZD currently hovering around 1.0940.