Wednesday outlook: Oil prices drop as global supply rebounds

Oil prices dropped on Wednesday as the impact of the storm in the U.S. Gulf Coast that was anticipated on Tuesday was not as strong as initially expected. Global markets kept trading lower due to trade tensions. More commentary on Middle East markets, currencies and precious metals.

  
Traders work on the floor at the New York Stock Exchange (NYSE) at the end of the day's trading in Manhattan, New York, U.S., August 27, 2018.

Traders work on the floor at the New York Stock Exchange (NYSE) at the end of the day's trading in Manhattan, New York, U.S., August 27, 2018.

REUTERS/Andrew Kelly
  • Oil prices drop after jumping on Tuesday
  • Global markets keep trading lower on trade tensions
  • Abu Dhabi’s stock market rises on talks of merger between ADCB and UNB
  • The dollar edges down, remains at strong level
  • Gold prices retreat on a stronger dollar

Oil prices

Oil prices dropped in early trading on Wednesday, after jumping in the previous session as two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane. The impact of the storm was not as strong as initially expected, reducing its threat to oil producers.

U.S. West Texas Intermediate (WTI) crude futures were at $69.47 per barrel at 0139 GMT, down 40 cents, or 0.6 percent, from their last settlement.

International Brent crude futures fell 16 cents, or 0.2 percent, to $78.01 a barrel.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA, told Reuters that many crude futures traders were “caught long and wrong over the past 24 hours due to tropical storm buying frenzy”, adding that “prices pulled back considerably as the magnitude of the storm suggests production losses will be limited.”

Global markets

Asian shares dropped in early trading on Wednesday tracking a retreat on Wall Street overnight.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.5 percent.

MSCI’s gauge of stocks across the globe dropped about 0.5 percent on Tuesday, as trade tensions kept weighing on investor sentiment.

“The U.S.-Canada talks are due to resume today and this keeps trade issues at the forefront, with a wait-and-see mood prevailing in the equity markets,” Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo, told Reuters.

“Then there is the U.S.-China trade issue, in addition to turbulence in the emerging market currencies that the markets have to worry about,” Ichikawa at Sumitomo Mitsui Asset Management said.

Middle East markets

Abu Dhabi’s stock market gained 0.9 percent on Tuesday after Abu Dhabi Commercial Bank (ADCB), the emirate’s second largest bank, and Union National Bank surged in early trading on the Abu Dhabi stock market, following confirmation the lenders were in preliminary talks to merge.

The bank added that “similar and separate discussions have also commenced with the shareholders of Al Hilal Bank,” ADCB announced in a statement issued to the Abu Dhabi Securities Exchange.

ADCB stocks surged 12.8 percent to eight dirhams a share, the highest since August 2015. UNB jumped 14.8 percent to 4.43 dirhams, the highest since March this year.

Dubai’s index added 0.3 percent as Damac Properties added 0.5 percent. Emaar Development, a unit of Dubai property firm Emaar Properties, was up 1.9 percent. Dubai-based contractor Drake & Scull International was up 4.4 percent.

Saudi Arabia’s index added 0.3 percent. Shares in Saudi Real Estate Co jumped 6.6 percent after the company said it had signed a framework agreement with the Presidency of State Security.

Qatar’s index added 0.2 percent, Egypt’s index added 0.64 percent, Kuwait’s index gained 1 percent, while Bahrain’s index rose 0.3 percent and Oman’s index was flat.

Currencies

The dollar index edged down from a two week high of 95.737 reached on Tuesday and was trading early on Wednesday near 95.36.

The dollar had drawn strength on Tuesday from upbeat U.S. indicators supporting the case for further interest rate hikes by the Federal Reserve.

The euro was 0.15 percent higher at $1.1599 following a loss of 0.35 percent on Tuesday.

Precious metals

Gold prices were trading near one-week low early on Wednesday as the dollar remained strong despite the greenback trading a touch lower.

Spot gold was little changed at $1,191.45 percent at 0102 GMT, after touching a more than one-week low at $1,189.20 on Tuesday.

U.S. gold futures were down 0.1 percent at $1,197.90 an ounce.


 

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(Writing by Gerard Aoun; Editing by Mily Chakrabarty)

(gerard.aoun@thomsonreuters.com)

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© ZAWYA 2018

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