US Crude Inventories Drop

Daily Analysis - 25/05/2017

Onshore Oil Stockpiles Fall for Seventh Straight Week

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Data from the US Energy Information Administration released on Wednesday showed that domestic crude stockpiles fell by -4.432 million barrels during the week ended May 19th, beating analyst estimates of a smaller drawdown.  Nevertheless, production in the lower 48 states continued to climb, rising for a 16th straight week on the back of the shale resurgence.

All Eyes on OPEC Meeting Conclusion


Oil prices are gaining ahead of the conclusion of the semi-annual OPEC meeting on Thursday that is widely expected to extend an output curb aimed at tightening supply well into 2018. Brent crude prices have risen more than 16.00% from the lows reached earlier this month on a near consensus that a pledge by OPEC and Russia to slash supplies by 1.800 million barrels per day would be extended into next year, expanding on the initially agreed upon first six months of this year.

The bullish sentiment received a further boost after oil ministers of major producers Iran and Iraq both reported a willingness to back an extension of the production cut deal. Brent July futures were last trading around $54.45 a barrel. Prices could continue to rally by as much as 10.00% if Brent manages to convincingly break above the strong resistance around $54.60 per barrel.

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US Dollar Slips After Fed Minutes


The US dollar slid on Wednesday after minutes from the latest Federal Reserve meeting showed policymakers agreeing to hold off on lifting interest rates until further evidence was available to confirm that the recent economic slowdown was temporary. The dollar index, which measures the greenback’s performance against a basket of major currencies, fell after the release, trending near multi-month lows.

The minutes were the latest sign of heightened caution among Fed officials over monetary policy tightening, which began with the Central Bank hiking rates from near zero in December of last year. During the May meeting, nearly all policymakers also favoured a gradual winding down of the Fed’s massive holdings of US Treasuries and mortgage-backed securities from years of quantitative easing. With the dollar under pressure, EURUSD is gaining Thursday to trade around the 1.1230-mark.

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French Unemployment Declines


The number of French individuals seeking jobs dipped in April, reversing from a jump recorded a month prior according to data released by the country's labour ministry on Wednesday. Per the figures, the total number of Category A job seekers, defined as those registered as fully unemployed, declined -1.00% month-on-month to 3,471,800. It was the biggest fall since September of 2014.

Compared to the same period last year, the number of registered jobless dropped by -1.30%, or 46,400. Newly appointed French Minister of Labour, Muriel Penicaud, refused to comment, stating that the monthly figures were too volatile and did not give an accurate indication of the underlying trend. CAC 40 futures ended higher on Wednesday, and are largely range bound around the key level of 5300 early in the European trading session.

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Bank of Canada Leaves Rates Unchanged


In a widely-anticipated move, Canada’s Central Bank left its benchmark interest rate unchanged at 0.50%.  In keeping with recent developments, the Bank of Canada expects growth to moderate in the second quarter while highlighting that Federal measures to cool the housing market are yet to yield any substantial results. The Bank of Canada further cautioned that growth could face headwinds from the uncertainty surrounding the outlook for US trade policy. Almost three-quarters of Canadian exports are shipped to the US, translating to roughly 20.00% of the country's total economic output.

The most notable difference between yesterday's rate decision and the one delivered last month was a growing sense of optimism about a rebound in economic activity and the more hawkish leanings. The next Central Bank rate decision is scheduled for July 12th. After a two-day decline, EURCAD is tracking higher on Thursday, with the pair currently hovering around 1.5055.

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