The Energy Information Administration (EIA) reported a drop of 4.9 million barrels of crude a month for a total of 463 million. The forecast was around 2 million barrels less, so the above expectations. The real story was in gasoline inventories that rose 700,000 barrels for a second straight week gain. The fact is that the American driving season is now in effect setting the expectation of smaller inventories. The price of oil fell against the USD and the Canadian dollar followed suit.
The USD/CAD gained 0.445 percent in the last 24 hours. The currency pair broke through the 1.24 price level as the crude and gasoline inventories were published, but has settled slightly lower at 1.2391. The Canadian economy is highly dependant on commodity exports and the lower oil price guided the price of the currency on a day with no major Canadian economic releases. This week the market will keep all eyes on the wires looking for soundbites out of Europe on the status of the agreement. The U.S. economy will release the weekly unemployment claims which can further boost the case of a stronger USD, ahead of next week’s non farm payrolls report. The Canada day holiday on July 1 and Friday’s July 3 to make way for American’s independence celebration on July 4 means next week will be a short one, but full of fireworks as major indicators will be released with the possibility of Greek drama still in the background.
The Greek debt deal agreement continues to hog headlines as the hope of a final agreement by this week was put in doubt as creditors and the government of Greece shared a couple of shots across the bow. The Eurogroup having learned their lesson from previous negotiations tried to set expectations on a hopeful but low probability of success on Wednesday’s meeting. The fact that dates for meetings on Thursday and Friday were set up from the start is a signal that while the new Greek proposal was a good start, there is still a lot of work to be done. Even an agreement on the negotiation table might fall flat, if the European parliament or the Greek one for that matter reject the outcome of what looks like long work days for European leaders and the Greek negotiating team.
The U.S. final gross domestic product (GDP) for the first quarter of the year offered no surprises as the third revision came in at the expected –0.2 percent. The contraction of the American economy was well documented and several members of the Federal Reserve have commented on the transitory nature of the factors that had a negative effect on the first quarter. The question remains if those factors will truly disappear or continue to be a drag on the economy on the second quarter.