Crude oil initially plummeted to a 6-week low of 73.83 after the US Energy Department reported the crude oil and petroleum product inventories surged to a record high in the week ended August 13. Crude stockpile dropped for a third consecutive week but the pace obviously slowed down. Gasoline inventory slid for the first time in 8 weeks. However, the decline was too small and it's likely for inventory to resume the increase as the driving season ends.
Distillate stockpile continued to soar despite rebound in demand. The set of data depicts that oil supplies in the US remain ample. Against the backdrop of economic slowdown, it will take more time than previously feared for demand to absorb the surplus.
The black gold, however, rebounded later in the session as driven by Wall Street's strength. The front-month WTI contract erased most of the losses made earlier and ended the day at 75.42, down -0.42%. US bourses opened lower following weakness in Europe but then recovered as application for refinancing rose to a 15-month high. The MBA mortgage application index surged +13% in the week ended August 13 while refinancing jumped +17% to the highest level since May 2009. Purchases, however, slipped -3.4%. M&A talks also spurred equity-buying.
Citigroup said in a report that there will be merger & acquisition activities in the home-building industry after slumps in housing sales. Potential acquisition targets, such as Ryland Group and Beazer Homes rallied after the report. Moreover, the market speculates that BHP Billiton will increase the price for acquiring Potash Corp. The rumor triggered selloff of the acquirer but sent the target higher.
Broad-based decline in commodities weighed on gold which plunged below 1220 at one point. Buying interests then emerged and pushed the precious metal higher. At the 5th straight day of rally, the benchmark contract climbed +0.25% to settle at 1231.4.
We have a bunch of economic data from the US and the UK today. Notwithstanding its volatile nature, the market will close monitor the weekly US initial jobless claims which surged to a 6-month high last week. Consensus forecast claims have eased to 480K in the week ended August 14 from 484K in the prior week. The Philly Fed's manufacturing survey probably improved to 7.5 in August from 5.1 a month ago. The Conference Board will also release its leading indicator for July with economists anticipating a gain of +0.1%, following a -0.2% contraction a month ago.
In the UK, retail sales probably grew +0.4% m/m in July after rising +0.7% a month ago. The country's public sector net borrowing (PSNB) may have dropped to 5.1B pound in July from 14.5B pound a month ago.