0217 GMT: Crude oil futures fell in mid-morning trade in Asia June 17 as a hawkish slant from the US Federal Reserve sent the US dollar soaring, but markets remained supported by bullish data from China’s National Bureau of Statistics and the US Energy Information Administration.
At 10:17 am Singapore time (0217 GMT), the ICE August Brent futures contract was down 77 cents/b (1.04%) from the previous settle at $73.62/b, while the NYMEX July light sweet crude contract was down 72 cents/b (1.00%) at $71.43/b.Market analysts attributed the downward trajectory in oil prices to a stronger US dollar, which IG market strategist Yeap Jun Rong said was fueled by hawkish signals from the latest Federal Reserve meeting concluded June 16.
”The Fed may have delivered a more hawkish message for markets than many would have expected, with Fed officials leaning towards two rate increases by the end of 2023 based on median estimates, he said in a June 17 note. “With the more hawkish tilt in the Fed’s dot plot, the US dollar has broken out of its previous consolidation zone, jumping to its six-week high,” he added.
At 10:17 am Singapore time, the ICE US Dollar Index was trading at 91.32, up 0.9% from its previous settle. Strength in the US dollar makes dollar-denominated assets like oil futures more expensive for investors holding foreign currencies, and hence dents the demand for such assets.
The fall in crude prices in early Asian trade came despite support from National Bureau of statistics data June 16 that showed China’s crude throughput in May rose 4.4% year on year to a record high of 60.5 million mt.
May marked the first time China’s monthly crude throughput has crossed 60 million mt, and analysts said throughput was expected to remain high until year end, when demand seasonally slows down as winter approaches and independent refineries run out of crude import quota.
Data from the EIA was also shoring up sentiment in the market, showing that US commercial crude stocks fell 7.35 million barrels in the week ended June 11 to a four-month low of 466.67 million barrels.
The strong refinery runs underpinning the draw also led to US gasoline inventories rising 1.95 million barrels to 242.98 million barrels in the week, leaving them above the five-year average for the first time since mid-February. US distillate inventories fell 1.02 million barrels over the same period to 136.19 million barrels, the data showed.
The EIA data echoed the market’s expectation of strong downstream products demand in the US amid the country’s rising vaccination rates and easing mobility restrictions.
Total product supplied for all refined products — the EIA’s proxy for demand — surged to 20.57 million b/d in the week ended June 11, up 16% from the week before and the strongest since early February. The increase was led by sharply higher demand for both gasoline and distillates, which climbed 10.3% and 27%, respectively, to 9.36 million b/d and 4.34 million b/d.