#AceFinanceReport – Dec.22: The only major economic data released Wednesday were existing home sales for November, which hit 5.61 million units, and weekly mortgage applications, which rose 2.5 percent.
http://cnb.cx/2hcHm8 As the holidays approach, investors expect trading volumes to drop significantly, which may lead to volatile swings within the market. “The trains to Manhattan have started to thin out as some market participants have already commenced their holiday vacation plans,” said Jeremy Klein, chief market strategist at FBN Securities, in a note to clients.
Overseas, however, European equities traded mostly lower amid concerns over the stability of the region’s banks. Earlier, Monte dei Paschi di Siena — Italy’s third-largest lender — said it could run out of cash in four months, much faster than the originally forecast 11 months.
Meanwhile, Spanish banks must repay customers more than $4.2 billion after Europe’s top court unexpectedly overturned a Spanish ruling that capped liabilities relating to a disputed mortgage clause, posing a new challenge to some lenders.
Banco Popular, the sector’s weak link and seen as a potential takeover target, faces about $343 million in new charges. Its shares led losses among Spanish banks and fell 5.82 percent.
“Spanish banks have made provisions for what they would have to pay in the event of a negative outcome but with the stocks lower anyway, apparently by not enough. Spanish banks tried to protect themselves from [negative interest rate policy] and now will get penalized for it,” said Peter Boockvar, chief market analyst at The Lindsey Group.
In corporate news, Twitter‘s CTO Adam Messinger announced is leaving the company after five years. Meanwhile, Amazon was hit by a strike at its German warehouses in a dispute over pay and working conditions. The strike is scheduled to run until Dec. 24.
In oil markets, U.S. crude settled 1.5 percent lower at $52.49 per barrel after the Energy Information Administration said crude stockpiles rose by 2.3 million barrels last week.
The U.S. dollar fell 0.29 percent against a basket of currencies, with the euro near $1.043 and the yen around 117.5
Oil prices finished sharply lower Wednesday after the U.S. Energy Information Administration reported a larger-than-expected climb in crude stockpiles.
Late Wednesday morning, EIA indicated that domestic crude supplies grew by 2.26 million barrels in the week ended Dec. 16. Stockpiles had been expected to fall by 2.3 million barrels, according to a survey of 13 analysts and traders by The Wall Street Journal.
The unexpected rise and a conflicting report late Tuesday that showed a large decline, resulted in prices for crude-oil futures sinking after trading in positive territory earlier.
On the New York Mercantile Exchange, West Texas Intermediate crude-oil futures for delivery in February CLG7, -1.41% fell 81 cents, or 1.5%, at $52.49 a barrel, breaking a string of three straight positive sessions.
Meanwhile, February Brent crude LCOG7, -1.46% on London’s ICE Futures exchange declined 89 cents, or 1.6%, to $54.46 a barrel.
Late Tuesday, the American Petroleum Institute reported that U.S. crude inventories showed a drawdown of 4.1 million barrels in the week ended Dec. 16, while gasoline stocks fell by 2 million barrels and distillates dropped by 1.5 million barrels. The EIA and API reports, the latter representing producers’ voluntary account of weekly stockpiles, have often shown big discrepancies in weekly stocks.
Wednesday’s decline for crude-oil prices threatens to snap a three-day win streak for WTI oil.
“Today’s EIA report should provide some headwinds to the week’s crude rally as a build of 2.3 million barrels stands in stark contrast to analyst expectations and yesterday’s API expectation of a more than 4 million barrel draw,” said ClipperData oil analyst Troy Vincent.
A climb in crude stocks unnerves market participants on the heels of a sweeping agreement by members of the Organization of the Petroleum Exporting Countries and other major oil producers to restrain unchecked production that has resulted in a global glut of oil and a precipitous price drop since a 2014 peak.
However, some investors found cause for optimism. The EIA report also indicated that gasoline inventories declined by 1.3 million barrels and distillate inventories, which include heating #oil and diesel fuels, dropped by 2.42 million barrels on the week. The WSJ poll showed analysts estimating gasoline stockpiles to have grown by 1.1 million barrels and stockpiles of distillates to have fallen by 900,000 barrels. The decline in those inventories suggests that overall supplies may be shrinking rather than ratcheting higher, which may prove supportive for crude prices over the longer term.
Phil Flynn, senior market analyst at Price Futures Group, said the headline number for EIA might be sending crude prices lower, but was heartened by the greater-than-expected declines in distillates and gasoline.
“I would say that the headline crude number was less supportive but I wouldn’t necessarily call it a bearish report. Demand is still strong and the drawdown in distillates was larger than anticipated. Everything was bullish except for the headline crude build,” Flynn said.
The inventory data interrupted trading activity that has remained muted ahead of the December holidays. Crude prices have been bolstered by expectations that OPEC will stick to a deal to reduce the global oil supply by almost 2%.
However, the market can’ t shake doubts about producers’ commitments to production caps.
Russia is among 11 non-OPEC producers that agreed to cuts along with the #OPEC cartel and yet Moscow aggressively increased its output in November, calling into question the country’s commitment to the deal. Russia is the world’s top crude producer, and has pledged to cut 300,000 barrels a day.
While Russia is expected to substantially raise its mineral-extraction tax for next year, the crude export duty is set to decrease, “making crude exports in January more attractive vs. this month,” said JBC Energy in a research note.
Looking ahead, #oil investors will be watching China’s final November oil data. The report was scheduled to be released Wednesday but the government said in an email it had postponed the publication, without elaborating.
In its preliminary report, China said crude imports last month rose 18% from the previous year to 32.35 million metric tons, or roughly 7.9 million barrels a day.
In other trading, Nymex reformulated gasoline blendstock for January RBF7, +0.60% —the benchmark gasoline contract—rose about a 1.2 cents, or 0.8%, to end at $1.6055 a gallon, while January heating oil HOF7, -1.45% lost 2.87 cents, or 1.7%, at $1.6401 a gallon.
Natural gas surges
Meanwhile, natural-gas futures for January NGF17, +9.87% surged 27.9 cents, or 8.6%, to close at $3.5420 per million British thermal units, marking the highest daily gain for natural-gas futures since Dec. 28, 2015, according to Dow Jones data.
Natural-gas futures have benefited from a recent cold snap in the U.S. that is expected to shrink existing natural-gas supplies.
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