Notwithstanding a decline in risk sentiment that caused US stocks to decline on the first day of US trading, energy traders bought anyway.
Yet, optimistic economic data from the US and remarks in favor of growth from Chinese leaders supported the economically delicate prices of oil. Overnight US durables data exceeded analysts’ predictions. A gauge for business expenditure, durable goods orders with the exception of transportation and defense orders increased 0.5% month over month in the previous month, exceeding the 0.3% Bloomberg consensus expectation. By demonstrating the underlying soundness of US manufacturing activity, the shock allayed concerns over an impending recession.
China is also expected to provide more accommodating support to the Asia-Pacific area. Governor of the People’s Bank of China Yi Gang promised to boost financial assistance for the economy. The PBOC has indeed been cautious in its stance on easing policy up to this point, but the statement might be meant to get the markets ready for more easing measures in the coming months.
In contrast to most other countries, China has fairly low inflation, which gives the PBOC considerable leeway to decrease interest rates. In May, the Chinese central bank lowered the minimum mortgage rate for first-time home buyers by 20 bps, which was followed by a 15 bps reduction in the 5-year Loan Prime Rate (LPR). Though Mr. Gang’s statement itself appears to be sufficient to offer some optimism for prices, subsequent cuts are anticipated to spur economic development, which would boost the demand for oil.
For the last, US inventory data will be made public by the American Petroleum Institute (API) on June 28. The week before last saw a solid 5.61 million barrel rise in crude stocks, the largest weekly rise since February 2022. A comparable inventory gain indicated by tonight’s data would act as a catalyst for oil prices to increase. The Energy Information Administration’s weekly report is still being held up indefinitely while it works through server-related technical difficulties. Energy traders are left with a sizable information vacuum as a result of this information gap, making the API data even more important in the short term. Nevertheless, the API announcement on June 28 might affect crude prices more significantly than usual.