Crude oil inventories dropped 1.8M barrels last week

Fundamental Analysis

GBP

"It is now hard to see where a pay revival in Britain will come from."

— Martin Beck, Oxford Economics.

Pay growth in the United Kingdom dropped below inflation for the first time in more than two years, official figures revealed on Wednesday. The Office for National Statistics reported that wage growth, excluding bonuses, advanced 2.1% on an annual basis in the March quarter, the weakest gain since the three-month period to July 2016. Thus, pay growth adjusted for inflation dropped 0.2%, the first decline since the Q3 of 2014. Including bonuses, average hourly earnings increased 2.4% in the Q1 of 2017, after rising 2.3% in the three-month period to February. Nevertheless, the unemployment rate fell to 4.6%, the lowest in more than forty years, suggesting that the British labour market remained strong despite weak wage growth. Meanwhile, market analysts expected the jobless rate to remain unchanged at 4.5% during the reported month. However, the claimant count change rose a seasonally adjusted 19.4K in April, following an upwardly revised climb of 33.5K in the preceding month. If pay growth remains below inflation growth consumer spending will likely stop supporting economic growth in Britain.

USD

"The numbers beneath the surface were rather mixed with gasoline stocks falling only slightly on weaker demand and sharply higher imports suggesting sufficient availability of crude oil internationally despite OPEC cuts."

— Carsten Fritsch, Commerzbank AG

Crude oil inventories in the United States dropped less than expected last week, a weekly report showed on Wednesday. The Energy Information Administration reported US crude stockpiles fell 1.8M barrels in the week ending May 12, following the preceding week's drop of 5.2M barrels and falling behind expectations for a 2.5M-barrel decline. US production fell 9K barrels per day to 9.305M barrels per day, the first drop in 13 weeks. Nevertheless, the production levels remained below the EIA's 2017 production target of 9.31M barrels per day. Wednesday's report also showed that US crude imports climbed 577K barrels per day last week, whereas exports advanced 400K barrels per day. Total US inventories decreased 3% to 520.8M barrels last week. The data suggested that the OPEC production cut deal started bearing fruit at last. Thus, oil prices jumped shortly after the release, with Brent futures hitting $52.45 per barrel and WTI futures climbing to $49.50 per barrel. In the meantime, gasoline inventories declined 413K barrels during the same week, while analysts held forests for a 731K-berrel plunge.

CAD

"The data overall should maintain confidence in the manufacturing sector, especially with a solid increase in new and unfilled orders."

— Tim Clayton, Economic Calendar

Canadian manufacturing sales rebounded in March but less than expected amid higher demand for motor vehicles and higher sales in the food industry. Statistics Canada reported on Wednesday that manufacturing sales rose 1.0% in March, following the preceding month's downwardly-revised fall of 0.6% and slightly missing analysts' expectations for a 1.1% gain. In volume terms, sales were up 0.2%. Data showed that sales rose in 16 out of 21 industries in the reported month, representing 71% of the total manufacturing sector output. The largest gain of 2.1% was posted by the transportation sector. The following increase of 2.1% was mainly driven by highest sales of vehicles and vehicle part. Furthermore, food sales climbed for the second straight time, rising 2.6% to a record high of C$8.9B. Sales of meat and dairy products contributed the most to the rise. New orders rose 2.6%, marking the fourth consecutive increase. Wednesday's data also showed that inventories advanced 1.2% to a record high of C$72.7B, with the inventory-to-sales ratio remaining unchanged at 1.35.

AUD

"For almost 18 months, the trend unemployment rate has been relatively stable, at around 5.7 to 5.8 per cent. We haven't seen this stability since the May 2007 to October 2008 period, when it remained around 4.2 to 4.3 per cent."

— Bruce Hockman, ABS Macroeconomic Statistics Division

The Australian unemployment rate dropped unexpectedly last month as companies created more new jobs. The Australian Bureau of Statistics reported on Thursday that companies added 37.4K new jobs to the economy in April, following a downwardly revised gain of 60K in the previous month and surpassing forecasts for an increase of 5,000 jobs. However, they were all part-time, while full-time employment lost 11.6K jobs in the reported month. Thus, the unemployment rate fell to 5.7% in April, whereas analysts expected the jobless rate to remain unchanged at 5.9%. The number of people looking for a full-time job dropped 12.3K to 514.2K, whereas the number of people looking for a part-time job fell 6,8000 to 218,000. Moreover, the participation rate remained unchanged at 64.8% in April, beating expectations for a decrease to 64.7%. Other data released by the Melbourne Institute showed that consumer inflation would probably climb 4.0% year-over-year in May, following the prior month's 4.1%. Back in the Q1 of 2017, the Bureau Statistics reported that its CPI advanced 2.1% on an annual basis.

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