- oil prices recover slightly after the API report
- Asian equities are moderately in the red
- AUD ignores better than expected trade report for May
Asian session has been mostly negative for equities so far with equities in both Japan (JAP225) and China (CHNComp) down by 0.4-0.5%. On the currency front we see a small risk-off tilt but this is not anything serious as the biggest move in G10 as of European morning is just 0.26% on NZDJPY and CADJPY (both down). Meanwhile oil prices recover as the API suggests a significant inventory draw.
On a macro front we have trade data from Australia from May which turned out better than expected. Trade surplus surged from just A$90 milion in April to A$2.47 bilion in May on a back of recovery in exports, up by 8.5% y/y. This partly reflects volatility in coal exports which this time turned out to be favourable. The data is positive for the AUD because it means a positive contribution to the GDP growth in the current quarter. However an impact on the AUD has been limited, AUDUSD is down 0.1% so far today.
Moving to oil, the API inventory data was able to halt price declines (which were close to 4% at that point) showing large inventory draws. Crude saw a draw of 5.76 milion barrels (mb), gasoline a draw of 5.7mb and distillates a minor build of 0.38mb. That’s far more than the consensus for the DOE (today, 4pm) assumes where draws of just 1.77 for oil and 1.59 for gasoline are expected.
Oil prices inched up after a strong API report but we are far from an upward trend that was brutally broken yesterday. Source: xStation5
We can see that the report had a positive impact on prices. However, it’s too soon to declare another reversal on oil. Prices tumbled sharply yesterday and it will take a lot of effort to restore an upward trend on this market.