FX:Crude oil futures higher ahead of U.S. supply data
Forexpros - Crude oil futures were higher during European morning hours on Wednesday, as the U.S. dollar came under broad selling pressure while investors continued to watch negotiations between Democrats and Republicans to avoid the U.S. fiscal cliff.
Oil traders were also looked ahead to closely-watched weekly supply data on U.S. stockpiles of crude and refined products from the U.S. Energy Information Administration later in the day.
On the New York Mercantile Exchange, light sweet crude futures for delivery in January traded at USD88.90 a barrel during European morning trade, up 0.45% on the day.
New York-traded oil prices rose by as much as 0.6% earlier in the session to trade at a daily high of USD89.05 a barrel.
Oil’s gains came as the U.S. dollar weakened against most of its major counterparts, as sentiment was boosted by signs of progress in handling the sovereign debt crisis in the euro zone.
The euro climbed to a six-week high against the U.S. dollar, while the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.1% to trade at 79.57, the lowest level since October 22.
Oil prices typically strengthen when the U.S. currency weakens as the dollar-priced commodity becomes cheaper for holders of other currencies.
Renewed hopes for fresh stimulus measures in China lent further support. Comments from a meeting of China’s new leaders Tuesday, the first following November’s leadership change, implied that supportive economic policy would remain in place.
Party chief Xi Jinping said that policy makers would continue fine-tuning fiscal and monetary policies to ensure stable growth in the world’s second largest oil consumer.
Oil traders now looked ahead to weekly data from the U.S. government on oil supplies later in the day to gauge the strength of demand from the world’s largest oil consumer.
The report was expected to show that U.S. crude oil stockpiles declined by 0.32 million barrels last week, while gasoline inventories were forecast to rise by 1.76 million barrels.
After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories fell by 2.22 million barrels last week, while gasoline stocks increased 5.71 million barrels.
Market players were looking ahead to a flurry of economic data out of the U.S. later in the day, as investors attempt to gauge the strength of the country’s economic recovery.
The U.S. was to release a report on ADP nonfarm payrolls, as well as official data on factory orders. In addition, the Institute of Supply Management was to produce a report on service sector activity.
Meanwhile, on Friday, U.S. nonfarm payrolls, which are a key gauge of employment, will be released for November.
Investors also remained concerned over the looming fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1, unless a divided Congress and the White House can work out a compromise in the four weeks left before the deadline.
There are fears that U.S. lawmakers will repeat the same political divisiveness that led Standard & Poor's to downgrade the U.S.’s AAA rating in August 2011 and tip the country back into a recession.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery added 0.4% to trade at USD110.26 a barrel, with the spread between the Brent and crude contracts standing at USD21.36 a barrel.
