Oil and gas still trying to rise in price - 8.6.2023

On Wednesday, the US dollar index continued to trade in the range of 103.6-104.6 points. United States Trade Balance in April, as usual, was in deficit. It reached its highest level in six months and amounted to -$74.55bn. The US foreign trade deficit almost coincided with forecasts and therefore did not have a particularly strong negative impact on the US dollar. After its publication, according to the CME FedWatch Tool, the probability of a Fed rate hike of 0.25% to 5.5% at a meeting on June 14 increased to 32.2% from 21.8%. As we can see, most investors still expect that the rate will not change.

The Bank of Canada (BoC) unexpectedly raised rates yesterday to a 22-year high of 4.75% from 4.5%. Now it is even higher than Canadian inflation, which was 4.4% y/y in April. May inflation data will be released on June 27. The Canadian dollar, of course, strengthened after the rate hike.

The final Japan Gross Domestic Product for the 1st quarter was released this morning. Unexpectedly, its growth was increased to +2.7% y/y compared to +1.6% y/y in the first assessment. In addition, there were other positive Japanese economic data. This contributed to the slight strengthening of the yen, as good statistics reduce the likelihood of a rise in Bank of Japan (BoJ) rates at the June 16 meeting.

The yuan weakened to a 6-month low (7.15 USDCNH) after the release of weak foreign trade data for May. In addition, investors do not rule out a reduction in the rate of the Central Bank of China after the reduction of rates of commercial banks on deposits in US dollars.

Bitcoin quotes show increased volatility. Now they are about $26,500. Players are trying to predict the further development of the situation after the claims of U.S. Securities Exchange Commission to Binance and Coinbase crypto exchanges. Some optimists claim that this will help bring the crypto markets and crypto businesses together.

There was no single trend on the US stock market yesterday. The Dow is up, while the S&P 500 and Nasdaq are down. Against the backdrop of a possible increase in demand for oil, oil companies Marathon Oil Corporation (+4.9%), Halliburton Company (+4.2%), Marathon Petroleum Corp (+4.7%), as well as an equipment manufacturer Caterpillar Inc (+3.9%). Shares of Warner Bros Discovery and Paramount rose 8.4% and 3.9% on plans to go online with Amazon's Prime Video channels platform. At the same time, the shares of Amazon itself corrected down by -4.2% after rapid growth. We also note the correction of Alphabet shares by 3.8%. The weekly US unemployment data and April's Wholesale Inventories data will be released today.

On Wednesday, oil rose in price by the end of the day. Several factors look positive at once. Official data from U.S. Energy Information Administration (EIA) confirmed the reduction of US oil inventories for the week (-0.45 million barrels). Oil imports to China increased in May, which contributed to the reduction of the trade surplus to a 13-month low. The Organization for Economic Co-operation and Development (OECD) has raised its forecast for global economic growth in 2023 to +2.7% and in 2024 to +2.9%. This is more than the World Bank's forecast of +2.4% in 2024.

Natural gas in Europe rose to $302 per 1,000 cubic meters on ICE Dutch TTF. US gas prices on Henry Hub soared to $2.34 mmBtu. For 7 days, natural gas in the US rose in price by 7.6% and became the leader among liquid Commodities (commodities traded on stock exchanges). For reference: the leader of the fall over the same period was sugar (-2.8%)