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U.S. Crude Eyes $50

Daily Analysis - 10/08/2017

Inventory Decline Solidifies Bullish Sentiment

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Oil futures added to gains from the previous session to rise in early Thursday trade after official data showed U.S. crude stockpiles fell more than expected. U.S. Crude September futures were last trading just below the key psychological level of $50.00 per barrel.

Rise in Gasoline Stocks Cap Gains


U.S. crude oil inventories dropped by 6.50 million barrels to 1.15 billion barrels during the week ended August 4. This was steeper than an anticipated decline of 2.70 million barrels, data from the Energy Information Administration showed Wednesday. Crude supplies typically decline during the peak summer driving season, but the size of recent drawdown was larger than the seasonal average.

However, the positive effect from the big drop in stockpiles was partially offset by gasoline inventories rising 3.40 million barrels to 231.10 million barrels during the same week. U.S. crude September futures were last seen around the $49.60-mark. The short-term bias remains bullish, with a break above $49.70 likely to see crude attempt a return to $50.00 per barrel.

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U.S. Productivity Rises


The productivity of U.S. workers increased in the second quarter as economic growth accelerated, although it continues to remain below historical averages. Productivity, defined as the number of goods and services workers produce in an hour, grew at an annualized rate of 0.90% in the second quarter, the U.S. Labor Department said Wednesday. That was up from a 0.10% pace in the first quarter.

Unit labor costs, the price of labor per unit of output, rose at a tepid 0.60% pace in the second quarter after surging at a 5.40% rate during January through March. Economists polled by The Wall Street Journal had projected a 0.70% increase in productivity and a 1.10% gain in unit labour costs. NASDAQ September futures are trading lower early Thursday around 5900.

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New Zealand Central Bank Stands Pat


The Reserve Bank of New Zealand left interest rates unchanged early Thursday after consumer inflation flat-lined during the second quarter. After leaving rates on hold at a record low of 1.75%, Governor Graeme Wheeler said monetary policy would continue to remain accommodative. He further noted that the headline inflation figure would likely decline in the coming quarters as the effects of higher food and fuel prices dissipate.

The central bank's decision was widely expected and comes following a surprise drop in the second quarter employment rate and a relatively sluggish GDP growth pace. In the first quarter, New Zealand's economy grew at an anaemic 0.50%, after a 0.40% expansion last fourth quarter. In the forecasts accompanying the monetary policy statement, the Reserve Bank of New Zealand said it didn’t project higher interest rates until the third quarter of 2019. NZDUSD is down early Thursday to last trade around 0.73100.

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Canada Records Strong Housing Starts


Canadian housing starts rose in July, signaling the real estate sector is showing no signs of a slowdown despite government measures to rein in a frothy market. Seasonally adjusted, the annual pace of starts rose to 222,324 units in July, according to data from the Canada Mortgage and Housing Corporation, easily topping economists' expectations of 205,000.

June's figures were upwardly revised to 212,948 units. July marked the seventh consecutive month of an increase in residential construction, with starts exceeding the annualized pace of 200,000 in seven out of the previous eight months. Separately, Statistics Canada said building permits edged 2.50% higher in June on a monthly basis to CAD 8.06 billion ($6.36 billion) amid stronger demand to construct multi-family homes and office spaces. EURCAD is largely unchanged in Thursday morning trade to currently hover around 1.49200.

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