Oil posts best weekly gain this year, up 8.6% to $49.71 on signs of market rebalancing

Oil prices edged higher on Friday, reaching new two-month highs and posting the strongest weekly percentage gains this year as investors digested signs of an easing oversupply.

U.S. West Texas Intermediate (WTI) crude futures ended Friday’s session up 67 cents, or 1.4 percent, to $49.71. It surged 8.6 percent on the week.

Brent crude futures were up $1.01, or 2 percent, at $52.50 a barrel a barrel by 2:34 p.m. (1834 GMT), rising more than 9 percent this week.

The front of the crude oil curve jumped into backwardation, with the month-ahead trading above the subsequent month, showing investors are not expecting recent gains to last. Brent also broke above its 200-day moving average, a key technical level, for the first time since May 30.

U.S. crude and gasoline inventories fell much more steeply than expected this week and the world’s biggest oil exporter Saudi Arabia said it would further reduce oil output in August.

“Positive signs came from the draw in gasoline stocks this week, as the U.S. moves into the peak driving season,” said Ashley Kelty, oil analyst at Cenkos Securities.

Oilfield services firm Baker Hughes reported the number of oil rigs operating in the United States rose by 2 to a total of 766 last week. The rig count has risen fairly steadily for more than a year, but the growth has recently moderated.

U.S. crude stocks fell sharply by 7.2 million barrels in the week to July 21 due to strong refining activity and an increase in exports, according to data from the Energy Information Administration (EIA).

Brimming U.S. crude supplies have been a challenge to production cuts to prop up prices led by the Organization of the Petroleum Exporting Countries, meaning weekly U.S. inventory data is closely watched.

U.S. crude oil production has been on the rise since mid-2016,but it dropped to 9.41 barrels per day (bpd) in the week to July 21, from 9.43 million bpd the week before. The decline was mainly due to a fall in Alaskan output, ANZ bank said.

Oil prices have been supported by a further agreement reached between OPEC and some non-OPEC members to limit Nigerian oil output and encourage several members to comply with their pledged production cuts.

Since the world’s major oil producers held a meeting in St Petersburg on Monday, crude prices have risen some 7 percent on expectations of deepening cuts.

Saudi Arabia, the OPEC’s de facto leader, said it planned to cap crude exports to 6.6 million bpd in August, about 1 million bpd below the level last year.

Despite bullish signs, some analysts’ assessments of the oil market remained bearish.

“We believe the latest price rise is on a fragile footing,” said analysts at Commerzbank, adding OPEC production was likely to rise in the coming months as the group has not officially capped output from members Libya and Nigeria.

Dollar declines as GDP data underwhelms

The U.S. dollar was broadly lower on Friday as a combination of underwhelming U.S. economic data and political uncertainty kept traders biased toward the euro and other world currencies.

The euro hit a session high after the release of U.S. second-quarter gross domestic product estimates that largely met economists’ expectations.

Some analysts pointed to a smaller-than-expected increase in U.S. labor costs, but others suggested the data was just an excuse for traders to continue the weak dollar trade that has sent the U.S. currency lower for much of this year.

 U.S. gross domestic product growth picked up to 2.6 percent in the second quarter, matching expectations of economists polled by Reuters, while growth in the first quarter was revised down to 1.2 percent.

“I think this just removes an obstacle,” said Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co. “The euro bottomed yesterday in New York trading and its been climbing ever since. If anything, the GDP number pushed an open door.”

The euro has risen nearly 3 percent against the dollar so far this month and more than 11.5 percent in the year to date. It is on track for its third weekly gain in a row and the fourth in five weeks.

On Friday, the euro moved higher against the dollar, and was last up 0.7 percent at $1.1756. On Thursday, the euro rose to its highest against the greenback in 2-1/2 years before retreating in later trading.

The weakness of the dollar has been most evident against the euro this year, but it has fallen against most major currencies as expectations for U.S. fiscal stimulus and an increased pace of overnight interest rate hikes from the Federal Reserve have dissipated.

“The dollar was rising (last year) on the basis of the U.S. being seen as probably the first major central bank to engage in a (monetary policy) tightening bias,” said Tom Hainlin, national investment strategist at U.S. Bank.

“Then ultimately we saw almost a synchronized amount of talk coming from major central banks that the U.S. wasn’t the only game in town in terms of slowing its easing bias or even tightening.”

The U.S. Senate’s failure to pass a repeal of the 2010 Affordable Care Act overnight also hurt the greenback, analysts said.

The dollar fell 0.9 percent to C$1.2436 against the Canadian dollar after Canada’s May GDP growth was triple what economists had expected, rising 0.6 percent for the month and 4.6 percent year over year.

Dow posts record close as Wall Street shakes off Amazon’s fall

U.S. equities closed well off session lows on Friday investors shook off a sharp pullback from Amazon.com.

The Nasdaq composite ended 0.1 percent lower at 6,374.68 after falling as much as 0.7 percent. The tech heavy-index climbed its lows as Facebook, Netflix and Google-parent Alphabet erased earlier losses.

The Dow Jones industrial average closed 33.76 points higher at 21,830.31, notching intraday and closing highs.

The S&P 500 declined 0.13 percent to close at 2,472.10 after falling as much as 0.43 percent. Consumer staples led seven sectors lower.

Amazon.com shares fell as much as 4.3 percent on the back of much weaker-than-expected quarterly results. Amazon posted second-quarter earnings per share of 40 cents. Analysts polled by Reuters expected earnings of $1.42 a share. Sales, however, came in above expectations.

The stock closed 2.5 percent lower.

“What you’re seeing here is a market that’s being driven largely by earnings,” said Matthew Peterson, chief wealth strategist at LPL Financial. “It’s not surprising to see investors take profits on some bad news.”

The initial pullback in tech came a day after the sector dragged the broader market lower as investors took profits off the table. The major indexes notched a record high Thursday before tech rolled over midway through the session.

“The SPX and NDX saw ‘outside-down’ days yesterday, increasing the likelihood of downside follow-through in the days ahead,” Katie Stockton, chief technical strategist at BTIG, said in a note.

“It appears that typical August volatility may already be upon us. Initial support for the SPX is defined by the 50-day moving average, and secondary support is approximately 2400, about 3% below current levels,” she said.

Tech has been the best-performing sector of the year, advancing approximately 22 percent.

“The market has been looking for growth everywhere and it’s been tech that’s provided it,” said Tim Courtney, chief investment officer at Exencial Wealth Advisors. “We’ve been at this slow-and-steady growth rate and tech has been outperforming everything else.”

The major indexes posted a mixed weekly performance, with the S&P and Nasdaq ending slightly lower while Dow rose 1 percent in the time period. Investors also digested a slew of earnings reports this week. Earnings season continues next week as Apple is set to report Tuesday after the close.

Dollar falls on perceived ECB path, U.S. political roadblocks

The U.S. dollar hit its lowest level in more than a year against a basket of major rivals on Friday a day after the European Central Bank’s chief abstained from talking down the euro, while obstacles to U.S. President Donald Trump’s policy agenda also weighed.

ECB President Mario Draghi said on Thursday that financing conditions remained broadly supportive, and noted that the euro’s appreciation had “received some attention.” However, he did not cite that strength as a problem nor did he directly try to talk the currency down.

Draghi’s apparent lack of concern about the strengthening euro convinced traders that the central bank remained on track to potentially begin tapering its bond-buying stimulus later this year.

The dollar index touched 93.952, its lowest level since June of last year, and was last down 0.38 percent at 93.94. The euro touched $1.1677, its highest level against the dollar in nearly two years, and was last up 0.30 percent on the day at $1.1664.

“The fact that Draghi didnt necessarily argue too much against the strength of the euro … certainly gave the greenlight for individuals to want to own the currency again or actually add to their positions,” said Dean Popplewell, chief currency strategist at Oanda in Toronto.

The euro was last on track to gain 1.8 percent for the week, which would mark its second straight weekly rise against the dollar. The dollar index was set to fall 1.3 percent to mark its second straight weekly decline.

Against the yen, the dollar touched more than four-week low of 111.02 yen.

In addition to traders’ expectations that the ECB was staying the course toward tightening monetary policy, investigations into alleged Russian meddling in the U.S. election and possible collusion with Trump’s campaign were viewed as obstacles to the administration’s pro-growth agenda and negative for the dollar.

“Compounding the (weaker dollar) move is this latest news on the political front in the U.S. about the Russia investigation expanding to Trumps business affairs,” said Alvise Marino, FX strategist at Credit Suisse in New York.

“This is on top of the fact that Senate has not been able to pass anything meaningful on the healthcare front,” he said in reference to the collapse late on Monday of a Republican effort to overhaul the U.S. healthcare system.

The dollar touched its lowest against the Swiss franc in more than a year at 0.9468 franc.

Dow closes lower on General Electric’s stock drop

U.S. equities fell on Friday as General Electric led industrial stocks lower.

The Dow Jones industrial average fell more than 100 points before closing 31.71 points lower at 21,580.07. General Electric fell 2.9 percent to lead decliners.

The S&P 500 slipped 0.04 percent to close at 2,472.54, with industrials and energy leading decliners.

 The Nasdaq composite ended 0.04 percent lower at 6,387.75 and snapped its longest winning streak since February 2015.

General Electric reported better-than-expected quarterly results, but sales fell 12 percent year over year. The drop in revenue came as weakness in GE’s energy connections business offset strength in renewables and power units. GE also saw its net profit slump 58 percent year over year.

The three major indexes notched record highs this week as quarterly earnings from S&P 500 companies largely outperform expectations. Microsoft, Honeywell and Morgan Stanley are just a few of the companies that reported earlier this week.

“It’s been a strong week for stocks,” said Peter Cardillo, chief market economist at First Standard Financial, noting the S&P and the Nasdaq posted weekly gains. “There a bit of hesitance right now as we head into the weekend.”

Next week will be the busiest one this earnings season, with about 170 S&P 500 components scheduled to report.

“This is very much an earnings-driven market,” said Paul Springmeyer, senior vice president at U.S. Bancorp Private Wealth Management. “There have not been any major surprises yet. That to us is a tell-tale sign. If earnings continue to grow, stocks should keep higher.”

Calendar second-quarter earnings have mostly exceeded expectations this far. With 20 percent of S&P 500 companies having reported, 73 percent have beaten expectations and 77 percent have beaten on sales, according to John Butters, senior equity analyst at FactSet.

“They will have to walk a fine line between showing strong resolve to rebalance the market, while avoiding a sudden display of panic so soon after the May OPEC meeting,” she said.

Crude prices erased earlier gains after Reuters reported — citing a firm that forecast OPEC supply — that OPEC supply for July would increase 145,000 barrels per day from June. West Texas Intermediate futures for September delivery fell 2.5 percent to settle below $46 a barrel.

In Europe, equities fell broadly as the euro climbed higher. The German Dax fell nearly 2 percent and was on track for its worst day of the year. The common currency, meanwhile, advanced 0.42 percent to $1.167, building on Thursday’s strong gains.



Gold prices dip ahead of US non-farm payrolls data

Gold prices inched down early on Friday to hover around their lowest in nearly two months,
with investors waiting for key U.S. non-farm payrolls data later in the day.

Spot gold had fallen 0.2 percent to $1,222.65 per ounce by 0104 GMT. It has dropped 1.5 percent this week and could be heading for its biggest weekly decline since early May.

U.S. gold futures for August delivery declined 0.1 percent to $1,222.40 per ounce.

The dollar was steady in early Asian trade on Friday, on track for weekly gains but likely to tread water throughout the day as investors braced for the monthly U.S. employment numbers.

U.S. private employers hired fewer workers than expected in June and applications for unemployment benefits last week increased for a third straight week, pointing to some loss of momentum in job growth as the labor market nears full employment.

U.S. Treasury yields rose on Thursday, with benchmark yields touching nearly eight-week highs, on the prospect of hawkish global central bank policy and concern that rising oil prices could spur inflationary pressures.

U.S. President Donald Trump vowed on Thursday to confront North Korea “very strongly” following its latest missile test and urged nations to show Pyongyang there would be consequences for its weapons program.

Trump and Russian President Vladimir Putin are set to size each other up in person for the first time on Friday in what promises to be the most highly anticipated meeting on the sidelines of the G20 summit.

European Central Bank policymakers are open to a further step towards reducing their monetary stimulus but are likely to move slowly out of fear of causing market turmoil, minutes of
their last meeting showed on Thursday.

China’s central bank said on Thursday that it would strengthen the ability to adjust interest rates and improve efficiency of its medium-term lending facility (MLF), standing lending facility (SLF) and reverse repos operations.

An increase in taxes on gold sales in India could curb short-term demand from the world’s No. 2 consumer of the metal, the World Gold Council (WGC) said.

Gold demand in India lost steam this week as consumers held off after stepping up purchases ahead of a new tax policy effective this month, while fresh buying in China also remained sluggish despite a slide in global spot prices.


Oil prices slump over 1% on rise in US output

Oil prices fell by more than 1 percent early on Friday, with U.S. crude futures dipping below $45 per barrel as news of a rise in U.S. production added to earlier reports that OPEC output was also on the rise.

Brent crude futures, the international benchmark for oil prices, were trading down 58 cents, or 1.2 percent, at $47.53 per barrel by 0137 GMT.

U.S. West Texas Intermediate (WTI) crude futures were at $44.95 per barrel, down 57 cents, or 1.3 percent.

 News of the production rise outweighed positive sentiment from falling crude and gasoline inventories in the United States.

Oil prices were initially stronger of the back of the better than expected drawdown in inventories… However, the exuberance was short-lived, as the market turned its attention to another increase in U.S. production,” ANZ bank said on Friday.

U.S. crude inventories fell by 6.3 million barrels in the week to June 30, to 502.9 million barrels, according to the U.S. Energy Information Administration (EIA). Gasoline stocks fell by 3.7 million barrels, to 237.3 million barrels.

The data suggested strong demand in the United States, but this was offset by a 1 percent rise in weekly U.S. oil production to 9.34 million barrels per day (bpd). Since mid-2016, that’s an increase of more than 10 percent.

The rising U.S. output comes as supplies from the Organization of the Petroleum Exporting Countries (OPEC) rose for a second month in a row in June, according to Thomson Reuters Oil Research, despite its pledge to hold back production between January this year and March 2018.

OPEC exported 25.92 million barrels per day (bpd) in June, 450,000 bpd more than in May and 1.9 million bpd more than a year earlier.

Dollar poised for weekly gain as investors await US jobs data

The dollar was steady in early Asian trading on Friday, on track for weekly gains but likely to tread water throughout the day as investors braced for monthly U.S. employment data later in the global session after downbeat jobs figures overnight.

The dollar index, which tracks the greenback against a basket of six major rivals, was slightly higher on the day at 95.836, up 0.2 percent for the week.

The dollar was flat on the day against its Japanese counterpart at 113.23 yen and was up 0.8 percent for the week in which it scaled a peak of 113.69, its highest level since mid-May.

Investors awaited the Labor Department’s June nonfarm payrolls report. Economists polled by Reuters expect U.S. employers to have added 179,000 jobs last month, above May’s relatively small gain of 138,000.

“Asian investors don’t want to chase the dollar up today, ahead of the nonfarm payrolls, in case the numbers disappoint,” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

Ahead of Friday’s jobs data, the ADP National Employment Report showed private-sector payrolls increased by 158,000 jobs last month, coming in below the 230,000 jobs created in May and below economists’ expectations for a rise of 185,000.

Separate figures from the Labor Department showed initial claims for state unemployment benefits increased 4,000 to a seasonally-adjusted 248,000 in the week ended July 1, marking the third straight weekly increase in claims.

The U.S. services sector index, released by the Institute for Supply Management on Thursday, rose to 57.4 in June, compared with a forecast of 56.5.

The employment index, however, fell to 55.8, compared with 57.8 in May, suggesting the labor market could be cooling.

But the dollar was bolstered by higher U.S. Treasury yields which rose even after the uninspiring data, amid concerns that the U.S. Federal Reserve will begin unwinding its bond holdings sometime this year.

The benchmark U.S. 10-year yield touched a nearly eight-week high of 2.391 percent on Thursday. It last stood at 2.374 percent in Asian trading, above its U.S. close of 2.369 percent.

Minutes from the Fed’s June meeting released on Wednesday showed that some policymakers wanted to announce the beginning of the central bank’s reduction of its massive debt portfolio by the end of August, but others wanted to wait until later in the year.

The euro edged down 0.1 percent on the day to $1.1417, and was down 0.1 percent for the week.

European Central Bank policymakers are open to a further step towards reducing their monetary stimulus but are likely to move slowly out of fear of causing market turmoil, minutes of their last meeting showed on Thursday.

Faster economic recovery in the euro zone is giving the ECB room to pare its extraordinary stimulus measures, Bundesbank President Jens Weidmann said on Thursday.