Crude Oil after gaining initially saw its prices decline since last week, due to some mixed US economic data and a lukewarm US inventories data. The Crude oil supply concerns too eased out to further tamp down the Crude oil prices, as they posted losses for four consecutive days.

On Thursday last week, the WTI (Western Texas Intermediate) crude Oil futures, also known as Light Sweet Crude Oil, soared high, as it gained by 2.7% to $107.89 a barrel, on NYMEX. This was Crude oil’s record gain in several years. But, later on Friday, crude oil started reversing its rally on mixed US data, as the WTI crude dropped by 0.9% to close at $106.94 a barrel.

The US labor department released some upbeat unemployment data that initially drove up the Crude oil prices on Thursday last week. The US jobless claims had dropped by 19,000 to 326,000 in the week-ended July 27, against the analysts’ predicted reading of 345,000. Also, the US Institute of supply management’s PMI index rose to 55.4 in July from June’s 50.9, its highest since June 2011. This beat the expectations of rise to 52.0, signaling at a rise for Crude oil demand in US economy.

But, later on Friday weekend, the lukewarm US non-farm payrolls reversed Crude oil’s previous gains. The non-farm payroll employment increased by 162,000 jobs in July compared to June’s rise of 195,000 jobs. This thwarted the analysts’ expected rise of 175,000 jobs. Also, according to the US Commerce Department new manufactured goods orders in non-durable goods rose by 1.5% against expected increase of 2.3%, signaling at economic contraction.

Starting this week on Monday, Crude oil extended its weekend losses, as WTI crude dipped by $0.66 to $106.28 per barrel. This was after it hit a session low of $105.68. On Tuesday, WTI crude for September further declined as it plunged by 1.2% to close at $105.30 a barrel on the New York Mercantile Exchange.

Later on Wednesday, Crude continued its downtrend as the WTI crude dropped by 0.9% to close at $104.37 a barrel. But, on Thursday morning, there was some reprieve for Crude oil, as it pared back its losses with the WTI crude posting a 51 cents gain to hit $104.88 a barrel. In line with this trend, the Brent Crude, the international benchmark for Crude oil, also edged up by 41 cents to $107.85 per barrel in the ICE Futures exchange.

This week the Crude oil supply concerns started to ease off with Libya announcing an increase in output from its plants that were previously closed due to protests. Also, the new Iranian President Hassan Rohani has promised to make amends with the Western powers, which might possibly lift its oil embargo, further increasing global supplies.

The US inventories data was also downbeat with the EIA reporting that US crude oil stockpiles declined by 1.3 million barrels, disappointing the expectations of a drop by 2 million barrels. While the Gasoline and natural gas, showed an increase in their stockpiles. This further boosted the supply outlook for Crude oil and brought down its prices.

The US Dollar too strengthened against a basket of currencies, making Crude oil costlier for other currency holders. According to the US Commerce department, the US trade deficit narrowed down by 22.4%, more than expected. This along with the fastest growth in the US services sector strengthened the speculations of the Fed tapering its monetary stimulus by September this year. This was mirrored by Fed Bank of Chicago President Charles Evans comments that did not rule out tapering in September.

However, the China’s General Administration of Customs revealed that the Chinese exports grew by 5.1% last month, against a 2% forecasted increase. While the imports rose by 10.9%, against a 1% forecasted increase. This signaled at an expansion in Chinese economy, the second largest Crude oil consumer, increasing the global demand outlook for Crude oil. This saw the crude post gains on Thursday.

The Euro Zone too posted some upbeat manufacturing data last week and the US factory data already shows increase in demand. So, Crude Oil might possibly rally up on further increase in demand growth, notwithstanding a strengthening Dollar.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.