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CRUDE OIL HOLDS ONTO GAINS IN ASIA

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CRUDE OIL HOLDS ONTO GAINS IN ASIA

April 15 2015, 02.30pm GMT

STOCK.com

The price of crude oil has managed to retain its gains in Asia as expectations were met with the release of China’s first quarter GDP.

Although data for retail sales and industrial output out of China failed to meet expectations, this did not affect the gains in crude oil prices in Asian trading on Wednesday. This came as China’s first quarter GDP (gross domestic product) met investor expectations.

Also, according to the American Petroleum Institute (API) on Tuesday, there was a 2.6 million barrel rise in U.S crude stockpiles during last week; however there was also a reduction of 566,000 barrels of distillate supplies while gasoline inventories dropped by 4.1 million barrels.

Last week, with an increase of 10.95 million barrels of crude inventory for the week ending April 3, this gave rise to an all-time high in weekly buildup in over 13 years which caused a sharp decline in crude futures last week. Energy traders are eagerly anticipating the outcome of the EIA weekly storage report today to get a better indication of crude stockpiles which reached its highest levels in over 80 years rising to 482.4 million barrels. 

Meeting expectations, there was a rise of 7% year-on-year in China’s first quarter GDP with a lower gain of 5.6% in industrial output. Gaining lower than the expected 10.9%, retail sales gained only 10.2 percent while the 13.5% increase in fixed assets investment was lower than the expected 13.8%.

Chinese export data last month saw a decline of 15% year-on-year and this figure came on the back of nearly a 50% rise in exports the month before. Imports have also seen a decrease of 12.7% in March which is a further decline from the 20.5% in February.

Interestingly, despite the continuing conflict in Yemen, coupled with mixed long term forecasts, crude futures overnight rose sharply into positive territory on Tuesday. Yemen is well located on a large chokepoint for oil, in fact one of the largest chokepoints in the world, situated on the Bab el-Mandeb strait. By closing up the very narrow entryway, we could see a limited outflow of crude into the Gulf of Aden and this type of geopolitical risk would likely negatively impact energy traders.

Also, on Tuesday, crude oil prices stood their ground after the EIA (Energy Information Administration) released it 2015 annual energy outlook. In the release, it was estimated that prior to an increase of $76 a barrel in Brent crude in 2018, we may see the price average at around $56 a barrel for the rest of this year. Compared to current oil futures, this is a slower price increase estimate over the next two years.

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