US Crude Stocks Rise

Daily Analysis - 16/11/2017

Increased Petroleum Refining Rates Offset Losses in Oil Futures

Brent crude bounced off session lows, underpinned by a rise in refining rates and a drawdown in distillates after the US Department of Energy reported a second straight weekly increase in crude stockpiles. Investor expectations that OPEC will extend its production cut during a meeting later in November also contributed to more bullish sentiment.

Heightened Refining Rates Suggest Further Oil Upside

Data from the Energy Information Administration showed that domestic crude inventories increased by 1.90 million barrels during the week ended November 10^th. The figure ran contrary to an estimate for a drop of -1.00 million barrels from a survey of analysts conducted by S&P Global Platts while coming in below the 6.50 million barrel climb announced by the American Petroleum Institute on Tuesday.

The EIA report also disclosed a decline in distillate stocks in the US Gulf to a one-year low, while overall refining rates gained during the latest week, driven by a surge in East Coast refining, which is operating at a record 99.80% capacity utilization. Higher refining rates could eventually deplete crude supplies, helping prices remain elevated. Brent crude futures were last seen around $62.05 a barrel, with any rise above $62.20 a barrel possibly unlocking further upside after support was established around the $61-mark.

Greenback Pares Losses against Euro after US Data

The greenback trimmed losses against the Euro on Wednesday, after data revealed an unexpected uptick in US retail sales last month as well as a rise in underlying inflation, bolstering expectations for a Federal Reserve interest rate hike in December. Retail sales in the country increased 0.20% month-on-month through the end of October, topping market expectations of flat growth following an upwardly revised 1.90% gain in September. Other data showed US consumer prices increasing by 2.00% year-on-year in October of 2017, matching market expectations.

Core inflation, which excludes food and energy, scaled to 1.80% in October - the highest reading in six months. Investors have been closely eyeing consistently underwhelming inflation despite a tightening in the labour market. EURUSD remained weak below 1.1800 handle in Thursday Asian trade, ahead of a key vote on the US tax reform proposal due later in the session.

Australia Extends Expansion in Jobs Growth

Even though the economy added fewer than expected jobs last month, Australia’s unemployment rate fell to its lowest level in more than four-and-half years during October. On a seasonally adjusted basis, the jobless rate dropped to 5.40% from the 5.50% recorded in September, beating the consensus forecast anticipating the rate holding steady at 5.50%.

The country added a total of 3,700 jobs in October, shy of a Reuters median forecast of 17,500 new positions. Of the net October figure, 24,300 full-time jobs were created, while 20,700 part-time jobs were eliminated, adding to confidence in the outlook. According to the Australian Bureau of Statistics the seasonally adjusted workforce participation rate declined to 65.10% in October from 65.20% in the prior month. The Australian dollar dipped to as low as 0.7570 against the US dollar in the aftermath of the data release.

UK Labour Productivity Picks-Up

Labour productivity in the United Kingdom grew at its fastest pace in more than six years during the third quarter, but the Office for National Statistics cautioned that headwinds remain intact as the recent recovery trails after a particularly bad start to the year. Output per hour, the main measure of productivity in the country, improved by 0.90% in the three months to September, the fastest growth rate since the second quarter of 2011. However, overall productivity increased a mere 0.60% over the past 12 months.

The ONS further noted that unemployment remained unchanged at a 42-year trough across the third quarter, even as wages decreased -0.50% in real terms when accounting for inflation, marking the seventh straight month of negative pay growth. FTSE 100 futures are bouncing back early Thursday after reaching a one-and-half month low during the prior session.