West Texas Intermediate futures dropped more than 4 percent as stockpiles of Oil in the United States rose by 3.3 million barrels last week, versus expectations for a 3.5 million-barrel drop.Gasoline stockpiles also surged and demand for the fuel fell.
U.S. crude prices plunged toward $46 a barrel today. The next potential level to watch is the March low just below $44 a barrel. This price level was struck after oil prices fell through a number of key technical levels.
The U.S. dollar fell 1.02 percent to 109.32 yen its lowest since April 21, as more economic data drove U.S. government bond yields towards critical lows. The euro lost 0.9 percent 123.25 yen.
With the Bank of Japan keeping 10-year Japanese bond yields pinned to zero, the dollar-yen exchange rate has been closely correlated for the past year with any shifts in U.S. 10-year Treasuries.
According to the Rabobank analysts, "it is worth pointing out that the US 10-year is hovering above the key technical level at 2.13 percent".
Oil prices fell on Thursday as disappointment over OPEC's production policy set in among investors. Delegates signaled the oil producer group had agreed to extend production cuts by nine months to March 2018. They also said non-OPEC producers would also carry over the deal.
Brent oil fell $2.09, or 3.9 percent, to $51.87 a barrel just before 1 p.m. ET (1700 GMT). U.S. West Texas Intermediate (WTI) crude futures were down $2.12, or 4.1 percent, at $49.24. The reserve, which now totals 687.7 million barrels, was established after the 1970s oil crisis to ensure the U.S. economy would not suffer shocks in times of tight supply.
The dollar fell to its lowest level against the yen since May 1. The currency sank 0.5 percent against the Swiss franc, falling to its lowest since Nov. 9, as talk that U.S. President Donald Trump could face the threat of impeachment boosted safe-haven assets. The greenback fell by as much as 1.35 percent against the yen, blowing through the 112 yen level to 111.57 yen.
Today's price action showed traders were losing faith in Trump's ability to push through his campaign trail promises of tax reform and fiscal stimulus. However, there was limited expectation that he would realistically face impeachment. Many financial analysts said the market was losing some faith in the likelihood of the FED raising U.S. overnight interest rates at its meeting next month. Higher rates make a country's currency more attractive to investors.
The New Zealand Dollar depreciated against its major counterparts after the Reserve Bank of New Zealand (RBNZ) held rates unchanged in May as expected. The RBNZ defied market expectations at its policy meeting on Thursday, sending the country's currency to an 11-month low.
Inflation accelerated to 2.2 percent in the quarter, well above the RBNZ's projection of 1.5 percent. The first time since 2011 inflation had reached the midpoint of the central bank's target range. The bank's consumer price index forecasts show inflation falling back to the bottom of the 1-3 percent target band next year.
The RBNZ said that monetary policy will remain accommodative for a considerable period. The RBNZ forecasts that the average official cash rate will rise in the third quarter of 2019, but the markets were seeing this happening earlier.
Crude oil inventories fell by 5.2 million barrels
Oil prices extended gains after a larger-than-expected fall in U.S. crude inventories as refineries cut output.
According to Energy Information Administration, U.S. commercial crude inventories fell by 5.2 million barrels to a total of 522.5 in the week through May 5.
Stockpiles fell by 5.8 million barrels
The American Petroleum Institute had reported on Tuesday stockpiles fell by 5.8 million barrels last week, more than the 1.8 million-barrel slide analysts predicted.Global benchmark Brent crude was up $1.57, or 3.2 percent, at $50.30 a barrel by 12:36 p.m. ET (1636 GMT). U.S. light crude oil was $1.60, or 3.5 percent, higher at $47.48 a barrel.
U.S. gasoline futures were up 3.3 percent
Gasoline demand, which has been soft in recent weeks, also rebounded strongly. U.S. gasoline futures were up 3.3 percent after the report. EIA reported gasoline stocks fell by 150,000 barrels, compared with analysts' expectations in a Reuters poll for a 538,000 barrel-drop. API had reported a build in U.S. gasoline stockpiles on Tuesday.Distillate stockpiles, which include diesel and heating oil, fell by 1.6 million barrels, versus expectations for a 1 million-barrel decline, the EIA data showed.
Saudi Arabia also limited oil production
Saudi Arabia's energy minister, Khalid al-Falih, said on Monday he expected OPEC to agree to extend an agreement to limit oil production to the end of the year or possibly longer.State-owned Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels next month, a source told Reuters, as part of the OPEC ' agreement to reduce production. Some data from tanker tracking firm ClipperData last week showed Saudi crude oil loadings for export fell by about 670,000 barrels a day in April from October.
The U.S. dollar rose to nearly two-month highs against the yen on Tuesday. The risk appetite is improved following the French election and investors focused on monetary policy and potential Federal Reserve interest rate hikes.
The dollar was up 0.88 percent against the yen at 114.25 yen , after earlier hitting its highest level since mid-March. The euro also rose against the yen, up 0.39 percent at 124.16 yen.
“The overall outlook remains solid”
Chief market analyst at Commonwealth Foreign Exchange in Washington, Omer Esiner, said for Bloomberg that “the U.S. economy saw a marked deceleration in the first quarter, the overall outlook remains solid and the Fed is still widely expected to raise U.S. lending rates in June and likely again in September".
Chinese shares rose after a five-day selloff brought the Shanghai Composite Index to the lowest level since October. Asian stocks slipped after rallying to a two-year high on Monday. Japan’s Topix retreated from the highest level since December 2015.
Gold prices fell to six-week lows, under pressure from a strengthening dollar on expectations of further U.S. rate rises. The political uncertainty in Europe is also a reason for this drop. Spot gold was down 0.74 percent to $1,228.81. U.S. gold futures fell 1.52 percent to $1,229.50 an ounce.
A rising U.S. currency makes dollar-denominated commodities more expensive for holders of other currencies, potentially subduing demand for Gold. According to Goldman Sachs, the precious metal may be traded moderately lower. The 3-month target of the bank is is $1,200/oz.
Oil prices extended losses on Thursday after news that two key oilfields in Libya had restarted, pumping crude for export into an already bloated market.
Libya's Sharara oilfield, with a production capacity of almost 300,000 barrels per day (bpd), has restarted after the end of protests that had blocked pipelines there, according to a Libyan oil source and local official. The same source said El Feel oilfield, with a capacity of about 90,000 bpd, had also restarted.
According to the OPEC Secretary, General Mohammad Barkindo, a global oil overhang was declining. He added that stocks remained high and needed to fall further.
OPEC is discussing extending its cuts into the second half of the year, but the group has a hard task. Oil inventories are near record levels in many parts of the world.
U.S. equities got off to a strong start today. The Dow Jones industrial average rose more than 200 points, with Caterpillar contributing the most gains .
The S&P 500 advanced 0.5 percent, with financials and materials rising more than 1 percent to lead advancers and Nasdaq Composite Index topped 6,000 for the first time. Stocks in Europe and emerging markets climbed, as risk appetite fueled by the outcome of France’s election continued.
Some of the firms that posted quarterly results before the bell:
Caterpillar: posted EPS of $1.28 and sales of $9.822 billion, versus expected EPS of 62 cents and $9.271 billion revenue forecast.
McDonald's: posted EPS of $1.47 and revenue of $5.68 billion, versus expected EPS of $1.33 and sales of $5.53 billion.
3M: posted EPS of $2.16 and revenue of $7.685 billion, versus expected EPS of $2.06 and sales of $7.472 billion.
DuPont: posted EPS of $1.64 and sales of $7.743 billion, versus expected EPS of $1.39 and revenue of $7.504 billion.