Commodities Are Weaker, Inventory Levels Weigh on Crude Oil

Val Kensington - Author

May 4 2017, Published 7:36 a.m. ET

Crude oil

After a brief pullback on Wednesday, crude oil continued to weaken and traded lower in the early hours on May 4. The disappointing crude oil inventory report weighed on crude oil prices in the early hours.

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EIA’s inventory report

According to data released by the EIA (U.S. Energy Information Administration) on May 3, crude oil inventory levels for the week ending April 28 fell by 0.93 MMbbls (million barrels). The market expected inventory levels to fall by 2.3 MMbbls. A smaller-than-expected fall weighed on crude oil prices. The sentiment has been mixed in the crude oil market amid expectations of a supply cut agreement extension and an increase in US shale oil production and oil rigs. The market is looking forward to the release of oil rig count data by Baker Hughes on Friday.

At 6:25 AM EST on May 4, the West Texas Intermediate crude oil futures contract for June 2017 delivery was trading at $47.40 per barrel—a fall of ~0.88%. The Brent crude futures contract for July 2017 delivery fell ~0.89% to $50.34 per barrel. The PDR S&P Oil & Gas Exploration & Production ETF (XOP) closed at $34.69 after rising 0.06% on May 3.

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Copper prices have been losing strength amid increasing signs of a slowdown in China’s economy. China’s weaker-than-expected manufacturing data dented the sentiment in the copper market. A slowdown in the services industry, reflected by PMI data released overnight, weighed on copper prices. At 6:30 AM EST on May 4, the COMEX copper futures contract for July 2017 delivery was trading at $2.53 per pound—a fall of ~0.61%.

The PowerShares DB Base Metals ETF (DBB) fell 3%, while the SPDR S&P Metals & Mining ETF (XME) fell 3.1% on May 3. Gold (GLD) and silver (SLW) are weaker in the early hours amid higher expectations of an interest rate hike in June and the firmer dollar. Platinum is weaker, while palladium is stable in the early hours on May 4.


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