Crude Oil Ends Lower On Strong Dollar

U.S. crude oil ended lower on Thursday, as the dollar strengthened against a basket of select currencies with investors apprehensive on the supply glut after an official weekly oil report yesterday showed crude stockpiles to have jumped much more than expected last week.

Nonetheless, investor were also concerned over deteriorating oil shipments from Libya and Iraq, even as the talks with Iran seem to be progressing toward a nuclear deal.

Investors discounted the Saudi Arabian oil minister’s take on demand Wednesday as mere rhetoric, with demand remaining soft and supplies continuing to be high. With refineries shutting down for maintenance, crude stockpiles in the United States hit a record high, rising 10.3 million barrels last week.

Oil prices were also impacted after some disappointing economic data from the U.S., even as China lowered its growth target for 2015.

In a somewhat troubling sign for the labor market ahead of tomorrow’s monthly jobs data, a Labor Department report on Thursday showed an unexpected increase in first-time claims for U.S. unemployment benefits in the week ended February 28. The claims rose to their highest level since the week ending May 17, 2014.

New orders for U.S. manufactured goods unexpectedly declined in January due mainly to a drop in non-durable goods orders that offset a rebound in durable goods orders, a Commerce Department report showed Thursday.

Meanwhile, China lowered its growth target for 2015 to 7 percent amid a challenging global environment and stressed the importance of reforms to build a moderately prosperous society, at its annual session of the National People’s Congress in Beijing on Thursday.

Light Sweet Crude Oil futures for April delivery, the most actively traded contract, dropped $0.77 or 1.5 percent to settle at $50.76 a barrel on the New York Mercantile Exchange Thursday.

Crude prices for April delivery scaled a high of $52.40 a barrel intraday and a low of $50.61.

On Wednesday, crude oil rose $1.01 or 2.0 percent to settle at $51.53 a barrel, even as the official weekly oil report from the Energy Information Administration showed crude stockpiles to have jumped much more than expected last week, with inventories at its highest in about 80 years.

U.S. crude oil inventories surged 10.3 million barrels in the week ended February 27, while analysts expected an increase of 3.7 million barrels. The report showed total U.S. crude oil inventories at 444.7 million barrels.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 96.44 on Thursday, up from its previous close of 95.91 on Wednesday in late North American trade. The dollar scaled a high of 96.59 intraday and a low of 95.84. The dollar touched its highest intraday in the last one year.

The euro trended lower against the dollar at $1.1022 on Thursday, as compared to its previous close of $1.1081 on Wednesday in late North American trade. The euro scaled a high of $1.1116 intraday and a low of $1.0990, its lowest in the last one year.

On the economic front, new orders for U.S. manufactured goods unexpectedly declined in January due mainly to a drop in non-durable goods orders that offset a rebound in durable goods orders, a report from the Commerce Department showed Thursday.

The report said factory orders edged down by 0.2 percent in January after tumbling by 3.5 percent in December. The modest drop surprised economists, who had expected orders to inch up by 0.2 percent.

U.S. labor productivity in the fourth quarter fell more than initially reported with output rising less than previously estimated, a Labor Department report said Thursday. The productivity for the fourth quarter dropped by a revised 2.2 percent compared to the previously reported 1.8 percent decrease. Economists expected productivity to fall by a revised 2.3 percent.

A Labor Department report on Thursday showed an unexpected increase in first-time claims for U.S. unemployment benefits in the week ended February 28. Initial jobless claims edged up to 320,000, an increase of 7,000 from the previous week’s unrevised level of 313,000. Economists expected claims to drop to 295,000.

The European Central Bank will commence its bond purchases under an historic $1.1 trillion quantitative easing plan next week and expects the impact from it stimulus measures to return inflation to the euro area next year.

ECB President Mario Draghi said Thursday that the bank will start purchasing public sector bonds in the secondary market on March 9, under the QE scheme announced in January. Mario Draghi said the central bank will not buy bonds with yields lower than its deposit rate of negative 0.2 percent.

Earlier in the day, the ECB left interest rates unchanged for a fifth consecutive session after its meeting in Nicosia, Cyprus.

Meanwhile, the Bank of England also kept its key rate unchanged at a historic low of 0.50 percent. The central bank has persisted with the low rate at every policy meeting since March 2009, when the rate was cut to confront recession at the peak of the financial crisis.

From Asia, China lowered its growth target for 2015 amid a challenging global environment and stressed the importance of reforms to build a moderately prosperous society, at its annual session of the National People’s Congress in Beijing on Thursday. Premier Li Keqiang said the government aims to achieve about 7 percent economic growth in 2015.

In 2014, the government had targeted about 7.5 percent growth, and achieved 7.4 percent, which was the weakest expansion since 1990.

The material has been provided by InstaForex Company – www.instaforex.com

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