Morning Brief: Crude Oil Price Spikes as US Inventories Fall: DXY rises

WTI Crude Oil price
WTI Crude Oil

Crude oil price spikes as US inventories fall

Crude oil price rose during the Asian session as traders reacted to the crude oil inventory data from the American Petroleum Institute (API). The data showed that inventories declined by more than 4.4 million barrels in the previous week. This decline was bigger than the 3.2 million that analysts polled by Reuters were expecting.

Later today, crude oil price will react to the widely-read monthly report by OPEC. This report will provide a picture of the current demand and supply dynamics and the impact of the supply cuts. Also, the price will react to the EIA inventory report. Analysts polled by Reuters expect the data to show that inventories declined by more than 2.8 million barrels after dropping by 7.37 million barrels in the previous week.

Crude oil price rose also because of the positive news from Russia. According to Vladimir Putin, the country had accepted a new coronavirus vaccine. News about the vaccine is positive for crude oil because it means that demand will increase as coronavirus-related risks reduce. The daily chart below shows that Brent crude oil price has been in a tight range in recent days.

Brent crude oil price has been in tight range

Crude oil price

US dollar index (DXY) rises

The US dollar index (DXY) bounced back as investors reacted to a jump in US yields. The yield on the ten-year rose to a two-year high ahead of a $38 billion auction later today. The rising yield led to more demand for the greenback, particularly from Japan, the biggest holder of US treasuries. As part of these dynamics, the Japanese yen is down by more than 0.25% against the dollar.

The US dollar also rose because of the overall weakness of peer currencies. In New Zealand, the kiwi declined below key support after the central bank delivered a dovish rate decision. And in Australia, the Aussie declined after data from the bureau of statistics showed that wages increased at the lowest pace on record. The daily chart below shows that the US dollar index has been in the green for the past five consecutive days.

US dollar index has been relatively strong

US dollar index

European stocks mixed

In Europe, futures tied to the DAX index and FTSE 100 are little changed while those tied to the CAC 40 are up by 1.40%. There is no visible catalyst to the current price action of these indices. Perhaps, investors are focusing on the United States, where stimulus talks have been deadlocked. In a statement yesterday, Mitch McConnel said that there had been no talks on stimulus since Friday. This was in contrast to the optimistic message sent by Steve Mnuchin on Monday. The treasury secretary assured investors that a deal would be reached later this month.

Economic calendar

The economic calendar will be relatively busy today. Among the notable data to watch will be the Swedish CPI data that will come in at 07:30 (GMT), Eurozone industrial production numbers (09:00 GMT), US mortgage numbers (11:00), US inflation numbers, and the WASDE report. The Japanese statistics office will release the producer price index data at 23:50.

Don’t miss a beat! Follow us on Telegram and Twitter.

DAX Index has bounced back

DAX Index

More content