The commodity market surged Thursday as led by the energy complex. WTI crude oil for August delivery recaptured the 70-level and ended the day +2.3% higher at 70.23 as Nigeria's turmoil intensified and the dollar plummeted. Currently trading at 70.7, the black gold seems to have gained momentum again in the near-term.
RBOB gasoline jumped +3% to 1.9 as Exxon Mobile announced it shut a fluid catalytic cracker at the Baytown refinery, fueling worries about short-term supply tightness. Natural gas added 2.2% to 3.84 as the US Energy Department reported that storage rose 94 bcf, lower than consensus of 100 bcf, to 2651 bcf in the week ended June 19.
Crude oil price found strength as the MEND, the most famous rebel group in the Niger River Delta, announced that they destroyed Shell's Bille-Krakrama pipeline, linking to the Bonny crude oil terminal -one of Nigeria's major export hubs. The MEND's attack has escalated since it began last month and it may reduce Nigeria's oil production to 1.3-1.4M bpd, down from 1.8M bpd in 1Q09. According to OPEC, the largest oil exporter in Africa produced 1.721 and 1.74M bpd in April and May, respectively.
Stock markets with both the Dow Jones Industrial Average and S&P 500 soared more than +2%. Commerce Department's downward revision in 1Q09 GDP to -5.5% from -5.7%, as well as the Fed's decision to let one of the emergency loans expire and trim sizes of the other two boosted market sentiment as it signaled economy is improving. The good news outweighed the unexpected rise in initial jobless claims which increased to 627K, compared with consensus of +602K, in the week ended June 20 following an upwardly revised 610K in the prior week.
In Asia, the equity markets extend gains with the MSCI Asia Pacific Index adding more than 1% as driven by energy and material shares. In Japan, the Nikkei 225 Stock Average climbs +0.7% while in Australia, the S&P/ASX rises +1.4%.
The dollar pares gains made after the FOMC meeting as decline in Treasury yields drives investors away to higher-yield assets. USD plunges -0.2% against the euro and franc in Asian session, following a -0.4% yesterday. The greenback surged +1% and +3% against the euro and franc respectively Wednesday. Against commodity currencies, the slides are even more serious as spurred by surges in commodity prices and wider interest rates differentials.
Gold price extends yesterday +0.5% gain and rises to 942.4 today, with USD's weakness and economist's comment that China should increase its gold reserve as the driving forces. Li Lianzhong, the head of the economic policy research of the Chinese Communist Party, said that the government should buy more gold rather than US Treasuries as the USD is poised to fall. According to the State Administration of Foreign Exchange, China's gold reserves increased +76% from 6 years ago to 1054 as of April.
