Oil prices tumbled yesterday after an unexpectedly large buildup in gasoline stockpiles and the US dollar fell after weak data made investors question the current path of interest rate increases from the Federal Reserve.
Energy stocks led Wall Street lower, while Treasury yields fell Oil prices fell to their lowest in over five weeks following the US gasoline data and International Energy Agency (IEA) data projecting an increase in non-Opec production.
“Oil futures are being dragged down by petrol futures. The industry continues to turn a crude oil surplus into a gasoline and distillate product surplus,” Andrew Lipow, president of Lipow Oil Associates in Hous-ton said.
US crude fell 3.57 per cent to $44.80 per barrel and Brent was last at $47.01, down 3.51 per cent on the day.
The dollar index touched its lowest since November 9 as the biggest drop in retail sales in 16 months and retreating inflation pressures were seen affecting monetary policymakers’ view that the economic soft patch was transitory.
“The numbers cast serious, serious doubt on whether there will be another hike this year,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
The dollar index fell 0.54 percent, with the euro up 0.55 percent to $1.1276.
The Japanese yen strengthened 0.83 per cent versus the greenback at 109.18 per dollar, while Sterling was last trading at $1.2806, up 0.44 per cent on the day.
US interest rates futures rose after the weak data, suggesting traders reduced their bets on a possible third Fed interest rate increase in 2017.
“We think this effectively takes September off the table,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York, in reference to the impact of the data on the probability of a September Fed rate increase.
Benchmark 10-year notes last rose 27/32 in price to yield 2.1151 percent, from 2.207 per cent late on Tuesday.
Energy sector shares tracked the slide in crude prices and weighed on the S&P 500, which had been trading higher earlier in the session.
The Dow Jones Industrial Average rose 9.06 points, or 0.04 per cent, to 21,337.53, the S&P 500 lost 2.38 points, or 0.10 per cent, to 2,437.97 and the Nasdaq Composite added 7.87 points, or 0.13 per cent, to 6,228.24.
The pan-European FTSEurofirst 300 index lost 0.18 per cent and MSCI’s gauge of stocks across the globe gained 0.18 per cent.
Emerging market stocks rose 0.63 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.73 per cent higher.
Gold rose after the weaker-than-expected US data knocked the dollar. Spot gold added 0.9 per cent to $1,276.44 an ounce. US gold futures gained 0.78 per cent to $1,278.50 an ounce.