Crude oil price surged to as high as 72.21 after the Eurozone's GDP in 2Q09 showed much smaller contraction than previously anticipated. However, the benchmark contract trimmed gains as both US' retail sales and jobless claims disappointed the market. The gauge finished the day at 70.52, +0.5%.
While heating oil added +0.6% to 1.9, gasoline price dropped -0.3% to 2.02. Natural gas lost -4.1% to close at 3.34 despite lower-than-expected increase in gas supplies. US retail sales declined -0.1% mom in July, worse than consensus of +0.5%, after rising +0.8% in the prior month. The figure was very disappointing this was already helped by the government's 'cash for clunkers' program. Excluding auto, the regains plunged -0.5%, following a gain of +0.5% in June.
Initial jobless claims rose to 558K in the week ended August 8 from 550K a week ago. The market had expected a decline to 540K. In fact, the result was not as bad as the market interpreted. Continuing claims dropped to 6.2M in the week ended August 1 from 6.3M in the prior week while insured unemployment rate declined to 4.7% from 4.8%. These suggested the employment condition has improved.
Natural gas storage increased +63 bcf to 3152 bcf in the week ended August 7. This was lower than market expectation of +66 bcf. However, NYMEX gas futures still plunged to the lowest in 4 weeks. This was because supplies have increased +23% from the same period last year while the rise in storage has widened to 19.6% from 5-year average from 19.1% in the previous week.
The precious metal complex rose Thursday as USD declined. The gold futures climbed +0.4% to 956.5 while the silver contract soared to 2-month high at 15.15 before settling at 14.99, +2.8%. USD slid against major currencies as investors believed that weak US data would reinforce the Fed's stance to keep interest rate low for a long time. Moreover, the dollar plummeted against the euro as the 16-nation region's GDP in the second quarter contracted only -0.1% qoq, compared with consensus of -0.5%, after a sharp fall by -2.5% in the first quarter. There have been talks about risk appetite and dollar movement since the beginning of the year.
Seemingly, it's true for most of the time that risk aversion leads to rise in USD while increase in risk appetite leads to decline in USD. However, statistics tells us this is not always the case. More importantly, we have seen the opposite happened several times recently. For instance, better than expected non-farm payrolls data in June and August boosted sentiment and increased risk appetite. However, USD rallied, rather than plunged. This was because strong US economic data fueled speculations on Fed rate hike. In fact, risk aversion is not always USD-positive.
Overview:
Despite continued weakness in the US dollar and higher equity market crude closed near flat yesterday. This reluctance of the energy complex in reacting to the bullish guidance from financial markets could be interpreted with the EIA stats data. For weeks the supply/demand balance has been on the bearish side and in the face of increasing talks of a sooner than expected recovery in the US economy a respective significant improvement in crude demand is yet to be seen. And that's bound to make a few bulls nervous.
Technical Report:
We saw crude moving higher in early trading reaching an intraday high of $72.22 and it seemed the market is on course oh challenging last weeks high of $72.88 on Aug 7th. However the rally was followed by profit taking as bulls were not ready to stay in the market for too long pushing crude price back into negative territory. The session finished near flat with crude toying again with the 9 day moving average and technically remaining on a path of consolidation.
The short and medium term trends are bullish while the long term trend is bearish.
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