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Energy Prices Mixed as Hurricane Irma Approaches Florida Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Thu Sep 07 17 23:27 ET

US dollar fell across the board, not only against the euro after ECB's announcement, but also against other major currencies as Category 5 hurricane Irma is poised for a direct hit on Florida on Sunday, adding to the destruction caused by hurricane Harvey. The DXY index fell -0.68%. Treasuries climbed higher, sending 2-year yields lower by -4 points to 1.27% and 10 year yields lower by -6 points to 2.05%. Wall Street had a mixed day, with both DJIA and S&P ending the day -0.1% lower, while Nasdaq -0.1% higher. In the commodity sector, crude oil prices were mixed. While the front-month WTI crude oil contract slipped -0.14%, the Brent contract added +0.54% for the day. For refined oil products, the RBOB gasoline contract dipped -0.74% while the heating oil contract gained +1.51%. Traders are monitoring the path of hurricane Irma, as the impacts of hurricane Harvey appeared to be severer than expected, as the inventory report suggested. Precious metal prices rose across the board with the benchmark Comex gold and silver contracts rising +0.54% and +1.12% respectively.

EIA's report recorded another week of decline in crude oil inventory. In the week ended September 1, total crude oil and petroleum products stocks jumped +7.03 mmb to 1310.42 mmb. Crude oil inventory rose +4.58 mmb to 462.35mmb with stocks increasing in ALL PADDs. Cushing stock gained +0.8 mmb to 58.03 mmb, while utilization rate plunged -16.9% to 79.7%. For refined oil products, gasoline inventory increased +3.2mmb to 226.74 mmb as demand decreased +6.94% to 9.16M bpd. Production slumped -10.23% to 9.52M bpd while imports fell 43.39% to 0.48M bpd during the week. Distillate inventory decreased -0.94 mmb to 147.77 mmb as demand was up-3.91% to 4.06M bpd. Production slipped -11.14% to 4.49M bpd while imports sank -30.95% to 0.11M bpd during the week.

At the ECB press conference, President Mario Draghi admitted a "preliminary" discussion about QE tapering has begun. He noted that the central bank would "announce when we are ready...we think we have much of what we need in October", signaling more details would be announced at the meeting on October 26. Draghi acknowledged the improvement in the economic outlook. However, he noted that the members were "dissatisfied" with the subdued inflation, warning that headline CPI could fall to the negative territory towards the end of the year. He also warned of euro's appreciations, cautioning that "the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability".

On the dataflow, the final reading on US non-farm productivity was revised higher to a +1.5% growth in 2Q17, from the preliminary reading of +0.9%. The market had anticipated an increase of +1.2%. Initial jobless claims increased t o 298K in the week ended September 2, from 236K in the prior week, sending the 4-week moving average to 250K. The market had anticipated a milder increase to 242K. The continuing claims fell -5K to 1 940K in the prior week.

Today in Asia, Japan released that its GDP growth in the second quarter was revised lower to +0.6% q/q, from +1% previously. This came in lower than consensus of a +0.7% growth. Separately, current account surplus widened to 2.03 trillion yen in July, from 1.52 trillion yen a month ago. The market had anticipated a milder widening to 1.65 trillion yen. In European session, we would release reports of manufacturing and industrial production for the UK, Swiss unemployment rate, and German trade balance report.


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