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Political Uncertainty Trumps Financial Markets Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Wed May 17 17 23:30 ET

Reemerging US political uncertainty was responsible for the selloff in the global financial markets. It was reported that US President Donald Trump might have asked former FBI direct James Comey to drop his investigation into former National Security Adviser Michael Flynn. Despite the President's denial, investors were concerned that growing congressional crisis would delay the pro-growth economic policy, especially the plan to cut tax and expand infrastructural spending. Wall Street slumped with the DJIA and S&P 500 indices plunging -1.78% and -1.82% respectively. Financial sector was the biggest loser with shares in Morgan Stanley down -5.6% and those in Goldman Sachs losing -5.3%. The VIX, fear index, jumped +42% to 15.16. European shares were also pressured with the broad European Stoxx 600 index down -1.2% for the day. US dollar slumped against major currencies with the DXY index plunging to a fresh 6-month low of 97.33 before recovery. In the commodity sector, crude oil strengthened against the tide as the US reported decline in inventory. The front-month WTI crude oil contract rose to as high as 49.5 before settling at 49.07, up +0.84%, while the Brent contract rose +1.08% and settled at 52.21.

Former FBI Director James Comey allegedly says in a memo that Trump has asked him to drop the investigation into ex-national security advisor Michael Flynn. As Reuters noted, "reports that US President Donald Trump had asked then-FBI Director James Comey to end a probe into his former national security adviser have raised questions over whether obstruction of justice charges could be laid against the president". The case has heightened concerns that political issues might postpone, and raise the difficulty of, the implantation of Trump's economic plan, a theme underpinning the rally of US stock market after Trump's victory in the presidency. Together with the recent disappointing inflation report, the market has been very worried about economic growth outlook in US, although expectations of a Fed funds rate hike in June remains intact.

The DOE/EIA reported that total crude oil and petroleum products stocks increased +4.27 mmb to 1339.7 mmb in the week ended May 12. Crude oil inventory dropped -1.75 mmb to 520.77 mmb with stocks dropping -5.51 PADD 3. Cushing stock increased -0.44 mmb to 66.31 mmb while utilization rate added +1.9% to 93.4%. For refined oil products, gasoline inventory dropped -0.41 mmb to 240.67 mmb as demand was up +0.04% to 9.45M bpd. Production decreased -0.32% to 10.02M bpd while imports fell -26.97% to 0.7M bpd during the week. Distillate inventory fell -1.94 mmb to 146.82 mmb although demand rose 1.84% to 4.22M bpd. Production gained +1.74% to 5.04M bpd while imports gained +40% to 0.16M bpd during the week.