Oil Slips on Tepid US Storage Data

Daily Analysis - 07/12/2017

Rising Gasoline Stocks and Higher Crude Production Weigh on Market

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Oil futures finished lower on Wednesday after an unexpectedly large increase in US gasoline inventories more than offset the positive sentiment generated by a drop in domestic crude stockpiles. A jump in US crude output also threatened to undermine efforts by the Organization of Petroleum Exporting Countries and Russia to ease the supply glut.

Oil Investors Shift Bearish


The US Energy Information Administration said Wednesday that crude stocks dropped -5.60 million barrels during the week ending December 1st, beating expectations of a -4.10 million barrel decline forecast by an S&P Global Platts analysts’ poll. Furthermore, the figure, outpaced the American Petroleum Institute’s estimated drop of -5.50 million barrels on Tuesday. Gasoline supplies climbed 6.80 million barrels during the week to 220.90 million barrels, blowing past analysts’ forecast for an addition of 1.70 million barrels.

Meanwhile, US crude output continued to rise, with total domestic production at around 9.70 million barrels a day last week, up 25,000 barrels per day from the preceding seven-day period. US West Texas Intermediate crude futures ended Wednesday at $55.97 a barrel, down close to -3.00% for the session. From a pricing perspective, $55.80 a barrel represents the key support zone, a breach of which could see futures retreat to around the $54.00-mark.

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Bank of Canada’s More Dovish Bent Sends Loonie Tumbling


The US Dollar surged higher against its Canadian counterpart after the Bank of Canada kept interest rates on hold and signalled caution on future interest rate hikes. As was widely expected, the Central Bank left the benchmark rate unchanged at 1.00% late Wednesday, and said it expects economic growth to moderate following the blistering pace recorded during the first six months of the year. It was the second consecutive policy hold after adjustments were made in July and September.

The decision comes on the back of Governor Stephen Poloz taking a decidedly more dovish tone in recent months, stating plainly that future rate action would be solely driven by macroeconomic data. The Canadian dollar weakened against the greenback, with USDCAD jumping to a one-week high early Thursday as investors slashed the odds of a rate hike in early 2018.

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US Private Sector Adds More Jobs Than Anticipated


A solid rise in manufacturing jobs saw US private payrolls increase more than forecast in November according to data published by payroll processor ADP on Wednesday. Companies in the country added 190,000 positions last month as the economy appeared to return to normalcy after two months of hurricane-induced volatility. The November figure was just above the 185,000 consensus estimate of economists surveyed by Reuters while coming in short of the 235,000 expansion recorded in October.

The manufacturing sector alone added 40,000 positions to notch its best month of jobs growth in 2017. The ADP numbers come ahead of the Labor Department’s official nonfarm payrolls count slated for release on Friday. The current consensus is for 175,000 job additions in November, with the unemployment rate holding steady at 4.10%. In the meantime, USDCHF is advancing in Thursday Asian trade to currently hover around 0.9910.

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Aussie Dollar Slips to 1-Week Low on Narrower Surplus


Australia’s trade surplus shrank in October, prompting the Australian Dollar to hit a one week low against the Japanese Yen. Figures compiled by the Australian Bureau of Statistics showed that on a seasonally adjusted basis, the country’s surplus balance of goods and services printed at AUD$105.00 million (US$79.20 million) in October. That figure was narrower than the September tally of AUD$1.60 million and shy of economists’ projections of a surplus of AUD$1.40 billion.

Outbound shipments declined -3.00% in October from the prior month to AUD$903.00 million, short of estimates of 3.00% growth. Imports edged 2.00% higher month on month, topping the consensus expectation of an unchanged reading and shrinking the surplus to the smallest amount in six months. AUDJPY touched an earlier trough of 84.790 following the release of the trade data, marking the pair’s lowest level since November 30th.

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