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Thursday, July 17, 2014

Crude bounces back from two month lows

EIA report shows larger-than-expected drop in inventories 


Crude-oil futures bounced back from two-month lows on Wednesday, 16 July 2014, adding to gains after a government supply report showed a larger-than-expected drop in inventories. 

Light, sweet crude futures for August delivery rose $1.24, or 1.2%, to end at $101.20 a barrel on the New York Mercantile Exchange. 

As per EIA, U.S. crude-oil inventories fell by 7.5 million barrels in the week ended 11 July 2014. Market had expected a decline of 3 million barrels. The EIA also said that gasoline stockpiles rose by 200,000 barrels, and distillate inventories, which include heating oil, increased by 2.5 million barrels. Market had expected gasoline inventories to increase 1.2 million barrels, and distillates stocks to increase 2 million barrels. 

The somewhat surprising lack of concern in the market place regarding geopolitics has prompted better risk appetite in the market place this week. Tensions are rising on the Gaza strip as Israel prepares to bomb Hamas targets in that region and possibly send in ground troops. European Union sovereign debt concerns, which last week resurfaced after a bank in Portugal was reported in serious trouble, are this week being ignored by traders and investors. 

There was upbeat economic news coming from China on Wednesday. The world's second-largest economy had a slightly better-than-expected second-quarter GDP growth rate of 7.5%, year-on-year. A 7.4% growth reading was expected. Asian stock markets were supported on the China GDP data on Wednesday. This news is a bullish underlying development for the raw commodity markets. 

U.S. corporate earnings reports are also be featured this week. So far, major companies' earnings have been mostly upbeat. 

Among other energy products, Nymex reformulated gasoline for August declined 1.61 cents to end at $2.8825 a gallon, while August heating oil advanced less than a penny to $2.8578.
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