Weekly Report

Monday 13 Feb 2017 - Friday 17 Feb 2017

ENERGY

Crude Oil -  Crude oil prices closed the week marginally lower, although within familiar ranges, as opposing OPEC's cut to rising US inventories and production, kept investors clueless for a fifth consecutive week. Brent crude futures closed the week at $55.71 per barrel, while US West Texas Intermediate crude futures dropped to stand at $53.41 per barrel.

US inventories remain bloated after the Energy Information Administration (EIA) reported a build in crude oil inventories for the week ending February 10 of  9.5 million barrels, bringing the total stockpile to 518.1 million barrels, resulting inventories being above the upper limit of the average range for this time of year. Late Tuesday, the American Petroleum Institute (API) reported a build of 9.94 million barrels.

According to the same report, US  crude oil imports averaged 8.5 million barrels per day for the week, down by 881,000 barrels from the week before. Over the course of the past four weeks the average per day was 8.5 million barrels. Also, refinery inputs were 435,000 barrels per day less than the prior week’s average, bringing the average inputs to approximately 15.5 million barrels per day.

Gasoline and distillate productions decreased last week, with the first averaging about 9.0 million barrels per day, and the second averaging over 4.5 million barrels per day. Total motor gasoline imports averaged 604,000 barrels per day, while distillate fuel imports averaged 16,000 barrels. Total motor gasoline inventories increased by 2.8 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 0.7 million barrels last week but are above the upper limit of the average range for this time of year.

The oilfield services company Baker Hughes, reported that the US oil rigs´ count increased by fifth straight week, up by 6 to 597. 

Natural gas - Natural gas futures for March  delivery fell  for third consecutive week, this one for about 2.3% to $2.837 per million Btus, after the latest weekly EIA data showed a smaller-than-expected weekly decline in U.S. natural-gas supplies

Data from the US Government agency showed that supplies of natural gas fell by 114 billion cubic feet for the week ended February 10, less than the 126 billion  decline expected. Total stocks now stand at 2.445 trillion cubic feet, down 303 billion cubic feet from a year ago, but 87 billion cubic feet above the five-year average. On a positive note, the report showed that gas in storage in the US was 2.4 trillion cubic last week, 303 bcf less than last year at this time. However, it's still 87 bcf, or about 3.5% above the five-year average of 2,358 Bcf.

Prices began the week elevated, with cold weather, but unseasonable mild temperatures during the week contributed to smaller-than-average net withdrawals. Total US consumption of natural gas fell by 4% compared with the previous report week, according to data from PointLogic. Week-over-week, power burn declined by 2%, industrial sector consumption decreased by 2%, and residential and commercial sector consumption declined by 7%. Natural gas exports to Mexico increased 3%. Warm winter weather is expected to persist and keep price subdued.

According to Baker Hughes, the gas rig count rose to 153, up by 4 rigs in the week.

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FOREX

Forex - It was a meaningless week in terms of price, as the dollar closed the week mostly unchanged against most of its major rivals, with the Japanese yen outstanding due to its continued strength. Despite FED's Yellen testimony before the Congress, which raised odds for a March rate hike as her comments were quite hawkish, is quite evident that investors remain in cautious mode amid the increasingly risky political environment.

US President Trump pledging for a tax reform, and announcing on Friday that the country will fight for low energy prices, which opposes to his concerns about a "too strong" dollar to be competitive, with speculative interest rushing to take profits out of the table after the Yellen-triggered spike to multi-week highs.

In Europe, the Minutes of the ECB latest meeting showed that the Central Bank is in no rush to retrieve QE, based on the consideration that the recent inflation surge was temporary. Policy makers said that policy reviews are  not likely until June, after the French and Dutch elections. Germany will go to the polls in September. In France, presidential candidate Marine Le Pen reiterated her desire to leave the euro, calling it a "leash" to force countries into determinate policies, even against people's will, putting the Greek case back on the spotlight.

With no Brexit headlines making the rounds, traders focused in macroeconomic data to decide on Pound, which were for the most disappointing, preventing the GBP/USD pair from recovering the 1.2500 level. Furthermore, data clearly indicates that consumers are feeling the Brexit pinch. Inflation continues advancing at a fast pace. UK CPI rose 1.8% in January when compared to a year earlier, its highest level in almost three years, even despite the MoM reading came in at -0.5%. Producer price inflation (input prices), meanwhile, surged to 20.5% from a revised previous 17% and well ahead of its 18.5% consensus forecast, due to rising energy costs. Output prices also rose by more-than-expected, but at a slower pace, up by 3.5% YoY from  previous 2.8% and against an expected advance of 3.2%. The monthly employment report showed that salaries, on the other hand, rose at a slower-than-expected pace during the three months to December, although on a positive note, the economy got closer to full employment in January this year. Another sign of consumers' concerns came on Friday, as retail sales  fell in January by 0.3%, while when compared to January 2016, sales rose by 1.5%, below the 3.4% advance expected and the lowest growth since November 2013. Without fuel, monthly sales decreased by 0.2%, whilst the annual reading came in at 2.6% from previous 4.7% and the expected 3.9%.

The Japanese yen outstood for its self strength this week, fueled by falling US Treasuries yields, and in spite of stocks' gains and poor Q4 GDP readings in the third world's largest economy. Japan's economy grew at an annualized rate of 1.0% in the three months to December, posting a fourth straight quarter of expansion, but below expectations of 1.1% and a previously revised 1.4%. On a quarterly basis, GDP rose by 0.2%, against a 0.3% advance expected by economist. US Treasury yields surged post-Yellen testimony, with the 10-year benchmark flirting briefly with 2.52%, resulting in the USD/JPY pair trading as high as 114.95 mid-week, but as yields retreated, the JPY gained momentum, with the 10-year yield ending the week at 2.42%, and the pair settling below 113.00 for the week.

The Canadian dollar trimmed its weekly gains  to close it flat around 1.3100 against the greenback, with no major news coming from Canada, and softer oil prices driving the currency. Prime Minister Trudeau spoke at the EU Parliament last Thursday, working on  a trade deal between his country and the Union. He also met US President Trump at the beginning of the week,  but as many other worldwide leaders, seems that he traveled into his neighbor country to try to find out what he can expect from the new administration.

The Australian dollar extended its consolidative phase against the greenback, settling midway in its 0.76/0.77 range, although the pair managed to post a three-month high of 0.7731. Data coming the country was mixed, as the economy added 13.5K new jobs, whilst the unemployment rate fell to 5.7%, both beating expectations, although the economy lost 44,800 full-time jobs in January.

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INDICES

Indices - Wall Street continued its rally to records,  with the three major indexes closing at all-time highs. The Dow Jones Industrial Average closed the week at 20,624.05, up 1.75% for the week. The Nasdaq Composite ended at 5,838.58, up by 1.82%, while the S&P added 1.51% to finish at 2,351.16. The upward momentum in US equities eased by the end of the week, as the three indexes barely added some points daily basis, as investors paused buying ahead of a long weekend in the US, with markets closed due to a local holiday next Monday. Stocks rallied on hopes that President Trump will shortly announce a tax reform and easing regulatory policies that will benefit corporations.

European equities closed the week with modest gains, with the German DAX settling at 11,757.02, up 0.77% for the week, and the FTSE 100 adding 0.57%, to end at 7,299.96. European equities were backed by Wall Street's rally to record highs, although local political woes offset the positive mood coming from overseas investors. The banking sector was in the spotlight, with equities struggling from direction. Mining-related equities were among the best performers, as gold held near the three-month high posted early February. Big names from both sectors will disclose their earnings during this upcoming week, anticipating more interesting volatility for these days.

The Japanese Nikkei closed the week lower at 19,234.62, down roughly 150 points, undermined by yen's persistent strength. Toshiba was the worst performer after the company said Tuesday that it would take a $6.3 billion write-down of its nuclear power plant construction business, delaying its earnings report, and with the shares further affected by a downgrade warning on Friday by S&P Global. Toshiba shares fell over 27% in the last four trading sessions.

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COMMODITIES

Commodities –  Gold prices advanced for a third consecutive week, backed by political uncertainty fueling demand for the safe-haven asset. The precious metal has proved resilient to dollar's strength, as a sharp decline following FED's head Yellen statement before the Congress, rising the possibilities of a March rate hike was quickly reversed. The commodity, however, was unable to surpass the previous weekly high, indicating that the market may have met an interim top. Still, and given the risk-averse environment, a sharp decline seems unlikely, supporting some further consolidation ahead. 

Copper futures closed the week in the red at $2.705/lb, despite continued concerns over supply shortages. Woes in the Escondida mine in Chile continue, with the union now on talks with BHP Billiton representatives. Still, an agreement has not been reached. Weighing on price was a report showing that Peru’s copper output hit a record high of 2.35 million tons in 2016, supported by investment in new projects and the expansion of the Cerro Verde mine. Silver for March delivery settled marginally higher at $17.99 an ounce, after touching a fresh yearly high of $18.12 an ounce on Thursday, nearly trimming all of its post-US election losses.

Raw Sugar for May delivery closed the week at $20.26 cents per lb, down 0.20 cents, as the recent rally in prices has resulted in some governmental interventions to cap prices. In Indonesia, new import licenses have been issued, while the sugar will have a top of $0.93 cents per kilogram starting March. Hopes that Brazilian production will approach to records during the next season, also  capping  gains.

Coffee for May delivery pared losses and edged marginally higher  at $149.07, after being under pressure for the previous three weeks. Mixed production conditions in Brazil maintained price contained, as precipitation differ sharply in different regions, with better production of Arabica and losses in the Robusta sector amid dry weather.

Cocoa futures closed higher at $ 2008, helped by news that Ivory Coast Cocoa workers are on strike due to low pay and low prices, although the country also anticipated a near record production of between 1.9 and 2.0 million tons. Recent defaults from local industry in West Africa, also hurt prices.

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