Oil Prices Declined in Profit-taking as Inventory Fell and Production Gained

Posted January 19th, 2018 by NevaB529978 and filed in General News

Oil prices slipped on profit-taking, although the US inventory report showed another week of withdrawal. The front-month WTI crude contract dropped -0.03% while the Brent contract was down -0.1%. Stock markets also pulled back, amidst concerns over a US government shutdown. While the House has passed a last-minute bill to fund the government until February 16, the real challenge is in the Senate as at least 4 Senate Republicans have pledged to reject the bill while many Democrats indicated they would vote against it. The Senate needs 60 votes to get the bill passed. Wall Street fell with the DJIA and S&P 500 indices losing -0.37% and -0.16% respectively. Treasuries were mixed with 2-year yields falling +2 points to 2.048% while 10-year yields were up +1 point to about 2.61%. US dollar remained weak with the DXY index losing slipping -0.04% for the day.

On oil inventory, the US Energy Information Administration (EIA) shows that total crude oil and petroleum products stocks declined -13.8 mmb to 1205.95 mmb in the week ended January 12. Crude oil inventory plunged -6.86 mmb to 412.65 mmb as stock declined in 3 out of 5 PADDs. PADD 2 inventory fell -3.92 while that for PADD5 dropped -2.36 mmb for the week. Cushing stock dropped -4.18 mmb to 42.39 mmb. Utilization rate fell -2.3% to 93%. Meanwhile, crude production increased +0.26M bpd to 9.75M bpd for the week. For refined oil products, gasoline inventory soared +3.62 mmb to 240.94 mmb as demand fell -1.66% to 8.67M bpd. Production increased +1.94% to 9.71M bpd while imports jumped +50% to 0.4M bpd during the week. Distillate inventory fell -3.89 mmb to 139.2 mmb as demand increased 29.63% to 4.74M bpd. Production fell -4.06% to 5.08M bpd while imports fell -16% to 0.15M bpd during the week.

China’s economic activities ended last year with a strong tone. GDP growth expanded +6.8% y/y in 4Q17, beating consensus of +6.7%.From a quarter ago, GDP expanded +1.6%, down from an upwardly revised +1.8% in the third quarter. For 2017 as a whole, China’s economy expanded +6.9%, up from 6.7% in 2016 and more than meeting the government’s target of “around +6.5%”. Looking at the December data, retail sales grew +9.4% y/y, slowing from consensus of, and November’s, +10.2%. IP growth expanded +6.2% y/y in December, beating consensus of, and November’s, +6.1%. Urban fixed asset investment grew +7.2% y/y for the full year in 2017, exceeding expectations of a +7.1% increase.

Elsewhere in the US, housing starts surprisingly fell to 1.19M units in December, down from consensus of 1.27M units and +1.3M units in November, Building permits stayed unchanged at 1.3M units, compared with expectations of 1.29M units in November. Initial jobless claims fell to 220K in the week ended January 13 from 261K a week ago. The market had anticipated a milder drop to 251K. The 4-week moving average was 244.5K. Continuing claims increased +54K to 1 952K in the week ended January 6. ADP estimated that Canada’s employment fell -7.1K in December, after gaining +59.2K a month ago.

For today, Germany would release its PPI which probably eased to +2.3% y/y in December from +2.5% in the prior month. Eurozone’s current account surplus probably widened modestly to 31.3B euro in November, form 30.8B in October. UK’s retail sales might have contracted -0.9% m/m in December, after gaining +1.1% in the prior month. The preliminary data for the University of Michigan index might have risen to 97 in January, from 95.5 in the prior month.

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Oil Prices Declined in Profit-taking as Inventory Fell and Production Gained

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