US weekly EIA oil inventories -7897K vs -4359K expected

Weekly US oil inventories

  • Prior was +6866K
  • Gasoline +1039 vs -1786K exp
  • Distillates +3657K vs +0.877K exp
  • Refinery utilization -0.4% vs +0.5% exp
  • Cushing -1589K
API data released late yesterday:
  • Crude -4100K
  • Gasoline -1500K
  • Distillates +3700K
  • Cushing -1.6K exp
WTI crude oil was trading at $74.65 ahead of the report after hitting as high as $75.40 today and as low as $74.08 on OPEC news.
This report was delayed twice (for 30 mins each) due to technical issues. This report is modestly bearish due to the product builds. Note that this week is a tough read because it’s coming off the July 4 holiday week.
Implied demand fell by 2.244 mbpd to 19.303mbpd. Overall stocks are at the lowest since January 2020 as excess inventory built up in the pandemic disappears.

Saudi Arabia, UAE reportedly reach compromise over oil output deal

Reuters with the headline, citing an OPEC+ source

Oil slips on the news as both sides reach a compromise, with the UAE to have a higher oil production baseline at 3.65 mil bpd for future oil deals. An OPEC+ meeting is said to be arranged soon to formalise the agreement.

WTI falls 1.5% to $74.10 but this is a dip worth buying into in my view as much of this is already priced in and it doesn’t really shake up the fundamentals by much.
Update: Oil dips quickly bought up as price jumps back to $74.85 from a low of $74.07.

Fed’s Powell: Monetary policy will deliver powerful support until recoveries complete

Prepared text from Fed Powell

Prepared text from Fed Powell
  • Full text of testimony from Fed Chair Powell
  • inflation is likely to remain elevated in coming months
  • expects inflation to ease
  • household and business balance sheets are quite strong
  • core financial institutions are resilient
  • Strong job gains expected to continue
  • household spending is rising at a rapid pace
  • business investment is solid
  • reaching the standard of “substantial further progress” this is still a ways off
  • expectations are that progress will continue
  • the Fed will provide advance notice before announcing a decision to make changes in Fed policy.
The Fed chair is not in a hurry to get to the taper despite the higher inflation. He will no doubt be grilled on the recent inflation trends today.  Earlier today ex  treasury Secretary Mnuchin said the Fed should immediately term asset purchases.
In the Chairs favor is that the 10 year yield is trading at 1.369% which is still well below the year high at 1.774% but up from the low last week at 1.25%. That low yield stalled at the 200 day MA. Yields are lower today after the run higher to 1.43% yesterday.
The 10 year yield

Germany says that supply bottlenecks don’t affect positive dynamics of overall economy

The German economy ministry brushes aside concerns from the impact of supply chain disruptions globally

  • Outlook for the industrial sector as a whole remains positive
  • Supply bottlenecks for intermediate products have dampening effect
  • But it does not affect positive dynamics of overall economy
  • German economic recovery seen to be at full swing at the end of Q2
This fits with the argument that most policymakers and lawmakers are stating for now, in that all of this is going to be ‘transitory’ and will work itself out once demand conditions pick up globally as the virus situation recedes.
That said, the environment remains challenging for emerging markets and that in itself cannot be underestimated as there is a ripple effect to the rest of the globe.
Anyway, speaking of supply issues, euro area industrial production for May is estimated to surprise downward because of that. Economist, Christophe Barraud, highlights the case for that in his post here leading up to the report later.
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