Inventories trump Iran sending WTI lower
Speculation on Iran potentially working with other producers to stabilize the oil market sometime in the future was trumped today by the immediate reality of oversupply in the US market where DOE inventories rose by 2.5 mmbbls, essentially confirming the 4.4 mmbbl increase in API inventories. WTI crude fell by 2.6% with Brent crude falling 1.7%.
A rebound in USD didn’t help oil either and also weighed on other commodities like grains, and currencies like gold. Traders remain focused on Friday’s big Jackson Hole speech from FOMC Chair Yellen where she is expected to take a neutral approach on interest rates and leave the door open to a hike this year. Fed commentary of late has been focused on two themes: the neutral interest rate is likely to be a lot lower this cycle, likely in the 1.00% to 1.25% range and that with the US economy strong, full employment nearing and inflation/wage pressure starting to rise, the Fed is still likely to raise rates this year. I still think the central bank will use its forecasts and dot plot in September to signal toward a rate increase in December after the November Presidential Election.
In Canada today, Royal Bank beat the street on earnings, raised its dividend and reduced its provision for credit losses, showing more confidence in the oil patch. It’s shares didn’t move much indicating Tuesday’s rally on Bank of Montreal results had already priced in a positive surprise. Thursday CIBC and TD could be active on their results.
It’s a quiet day for Asia Pacific news overall, but we could see some action in JPY and Japanese stocks as USDJPY continues to test the 100 level. Miners could be impacted by falling metal prices.
There have been no major announcements after the US close today
Significant announcements released overnight include:
US FHFA house prices 0.2% vs street 0.3%
US existing home sales 5.39M vs street 5.51M
US DOE crude oil inventories 2.5 mmbbls vs street (0.85 mmbbls)
US DOE gasoline inventories unchanged vs street (1.7 mmbbls)
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
8:00 am BST Spain GDP street 3.2%
8:00 am BST Sweden unemployment rate street 5.9%
9:00 am BST Germany IFO business climate street 108.5
9:00 am BST Germany IFO current assessment street 114.9
9:00 am BST Germany IFO expectations street 102.4
11:00 am BST UK CBI reported sales street 0 vs previous (14)
11:00 am BST UK CBI distributor sales previous (11)
8:30 am EDT US jobless claims street 265K
8:30 am EDT US durable goods orders street 3.4% vs previous (3.9%)
8:30 am EDT US durables ex transport street 0.4% vs previous (0.4%)
9:45 am EDT US flash services PMI street 51.8
10:30 am EDT US natural gas street 18 BCF
11:00 am EDT US Kansas City Fed street (2)
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