Crude oil prices surged about 4 percent on Thursday after U.S. inventory data showed a surprisingly large drawdown in crude stocks as imports into the U.S. Gulf Coast slid last week due to Tropical Storm Hermine.
It was not just the hurricanes that impacted supply as a reported 703,000 barrel drop in Cushing, Okla., helped reduce supply as well. We know that supply will rebound in the coming weeks and the number is supportive but the drawdown in Cushing, Oklahoma is supportive as well. The API also reported a 2.34 million barrel drop in gasoline supply as well as a 944,000 barrel increase in distillate stocks.
World stocks hit their highest in more than a year and the dollar fell sharply against the yen on Wednesday as expectations of a rise in Federal Reserve interest rates receded after weak U.S. economic data.
Despite the pronouncements by a chorus of Federal Reserve officials thatnow is the time is to raise interest rates, the data does not seem to support that position. Yesterday’s ISM non-manufacturing data was case in point as it posted at 51.4--the worst reading in 6 years. If you couple that with Friday’s disappointing employment number and the ISM manufaruring data that shows U.S. manufacturing in contraction, it seems the Fed will be either frustrated or flummoxed as the case to raise rates does not jive with the data.
WTI oil displayed an incredible rebound on Monday with prices piercing above $46 per barrel after Russia and Saudi Arabia pledged to stabilise the saturated oil markets. With Russia and Saudi Arabia being the largest oil producers in the world, the prospects of a potential deal formed by these powers has generated sharp speculative boost in prices.
North American investors are away in observance of the Labor Day. Understandably, it has been a quiet day in FX, bond and stock markets. But for one particular market, it has been an exceptionally volatile day. Crude oil took a roller coaster ride, rising nearly 5% this morning before giving up much of those gains.