Crude Rises Following Larger than Expected Inventory Draw

European stock markets continue to recover and the DAX managed to climb back above the important 12300 mark, although only a close above 12330 will convince chart watchers that this is not just a technical correction in a still intact downtrend. The stronger Ifo helped European bourses to finally claw back some of their recent losses Tuesday and with the positive momentum on global stock markets continuing on Wall Street and Asian markets overnight, and with U.S. futures extending gains ahead of the Fed decision European bourses are improving and even German carmakers are bouncing back after positive results from Daimler. Crude oil prices moved higher following a larger than expected inventory draw.

Crude Oil Rises Following Larger than Expected Draw

Crude oil prices are higher on the session, but well off the highs, after gapping up following a larger than expected draw in crude oil inventories reported by the American Petroleum Institute.  The API reported that crude oil stocks declined by 10.3 million barrels, more than 5-times what was expected and the largest draw of the year. Gasoline inventories increased by 1.9 million barrels while distillates declined by 111K barrels.  Prices shot up to the mid-48 level, but leveled off near 48.25.

UK preliminary Q2 GDP came in as expected at 0.3% quarter over quarter and 1.7% year over year, up from Q1’s 0.2% in the case of the quarter over quarter figure and down from Q1’s 2.0% year over year in the case of the year over year figure. The data affirms the pronounced stagnation in the economy that was seen in Q1, following 2016’s average quarterly growth of 0.6%. Relatively high inflation rates, following the sharp drop in sterling since the Brexit vote last June, and consequential erosion in consumer spending power and confidence, have been weighing on UK growth.

Italian economic sentiment fell back to 105.5 from 106.3 in the previous month. Consumer confidence still improved to 106.7, but by contrast, French consumer confidence fell back to 104 from 108. After the record beating German Ifo reading yesterday, the numbers are a reminder that things may be as good as they get for the Eurozone now and that while the recovery remains intact momentum may be stalling somewhat. More arguments then for Draghi and Co to remain cautious about QE tapering.

Australian CPI came in weaker than expected and core inflation rate stayed below target for a sixth straight quarter. The consumer price index rose 0.2% in the Q2 and 1.9% year over year, well short of the 2.2% increase expected. Underlying inflation rose 0.5% in the Q2, from the first, which matched market forecasts. The annual rate of 1.8% was again short of the Reserve Bank of Australia’s long-term target band of 2% to 3%, where it has been since the start of 2016.