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Crude Oil Futures Rebound Slightly after Favorable Inventories Report

By:
James Hyerczyk
Updated: Aug 13, 2015, 08:11 UTC

Crude Oil futures posted a slight gain on Wednesday following the release of this week’s U.S. Energy Information Administration inventories report. The

Crude Oil Futures Rebound Slightly after Favorable Inventories Report

CRUDE OIL PUMPJACK SILHOUETTES
Crude Oil futures posted a slight gain on Wednesday following the release of this week’s U.S. Energy Information Administration inventories report. The report came out slightly better than estimates, showing a drawdown of 1.7 million barrels. Traders were looking for a decline of 1.6 million barrels.

The market rebounded after early session weakness. The selling pressure was fueled by another devaluation of the Yuan by the People’s Bank of China. Also supporting crude oil prices today was a weaker U.S. Dollar, yesterday’s American Petroleum Institute’s (API) weekly report which showed inventory depletion by 874,000 barrels, the third consecutive weekly drop, and a decline in Saudi Arabian production by 200,000 barrels per day in July.

The weaker U.S. Dollar and the turmoil created by China’s devaluation of the Yuan also helped support December Comex Gold prices. Technical factors also contributed to the rally. The chart pattern suggests that the rally could extend into at least $1140.50 before sellers are likely to reappear. Upside momentum is also expected to continue as long as the Greenback remains under pressure.

The GBP/USD rebounded after early selling pressure subsided. The Forex pair was under pressure after the Office for National Statistics said the second successive rise in U.K. unemployment suggested the economy’s job growth could be “levelling off”.

Rising unemployment and a slowdown in U.K. pay growth weighed on prices early as concerns about the U.K. labor market as well as slower growth in China raised doubts of a 2016 rate hike by the Bank of England.

The Average Earnings Index for three months rose 2.4%. Traders were pricing in a 2.8% increase. Preliminary Unit Labor Costs rose 0.5% versus a 0.0% estimate. Last quarter, this report showed a robust 6.7% gain. The Unemployment Rate remained steady at 5.6%.

There were no major reports out of Europe today, but buyers continued to drive the Forex pair higher on the heels of yesterday’s bailout agreement between Greece and its international creditors. Additionally, the turmoil fueled by China’s devaluation of its currency created opportunities in the interest rate markets. With the Euro currently being treated as a funding currency, traders flocked into the EUR/USD driven primarily by the favorable U.S.-German 10-Year Bond yield spread.

The U.S. Dollar has also been under pressure since Friday’s U.S. Non-Farm Payrolls report drove investors to question whether the Fed will go ahead with a rate hike in September or December.

In other news, the U.S. JOLTS Job Openings report showed a gain of 5.25 million versus an estimate of 5.33 million.

Tomorrow could be a volatile session because of the ECB meeting and the release of the U.S. Retail Sales report. 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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