Surprise Build in Gasoline Inventories Sinks Crude Oil

U.S. West Texas Intermediate and internationally-favored Brent crude oil plunged over 3.5% on Wednesday after the U.S. government reported a smaller-than-expected drop in overall crude stocks and an alarming build in gasoline inventories. The news raised concerns about the global supply glut.

June WTI crude oil settled lower at $50.85, down $2.00 or -3.78%, the biggest one-day decline since March 8. June Brent crude oil ended the session at $52.93, down 1.96% at 3.57%. Hedge and commodity fund liquidation was primarily behind the big sell-off.

According to the U.S. Energy Information Administration, U.S. crude oil stocks fell 1 million barrels in the week-ending April 14, less than expected. The EIA data also showed that gasoline stocks posted a surprise, counter-seasonal build of 1.5 million barrels, despite reports of heavier refining activity.

Traders attributed the huge price drop to a combination of the unforeseen build in gasoline, an increase in U.S. production and higher imports from OPEC nations.

Gold

June Comex Gold futures fell nearly 1 percent on Wednesday, mostly in reaction to a firmer U.S. Dollar. However, the market was supported on the dip in prices in reaction to lingering concerns over North Korea and the upcoming French presidential elections on Sunday, April 23.

Forex

The U.S. Dollar rebounded on Wednesday, just one day after hitting a three-week low against the major currencies. The greenback has been pressured recently on lowered expectations for U.S. interest rate hikes and concerns about President Donald Trump’s ability to deliver his promised economic policies.

On Wednesday, U.S. Treasury Secretary Steven Mnuchin was quoted in the Financial Times that Trump is “absolutely not” trying to talk down the strength of the U.S. Dollar, playing down remarks by Trump in an interview last week when he said the dollar was “getting too strong.”

 

The EUR/USD reached a near-three-week high on Tuesday, however, gains were likely capped by concerns over the French presidential election which was just days away.

The GBP/USD gave back some of Tuesday’s gains fueled by British Prime Minister Theresa May’s call for a snap election for June.

The USD/CAD also posted a gain in reaction to a steep drop in crude oil prices. Falling commodity prices added to weakness in the Australian and New Zealand Dollars.

U.S. Equities

Stocks were down sharply on Wednesday, with the Dow losing about 120 points. The blue chip average has lost over 200 points the last two days. The markets were primarily influenced early in the session by a steep drop in IBM stock. It fell late Tuesday after reporting mixed quarterly results.