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On Wednesday, crude oil futures ended their five-day losing streak due to renewed hopes for a September interest rate cut by the Federal Reserve. This optimism offset worries about demand following data that revealed an increase in U.S crude and fuel stocks.
After the private payroll data from ADP revealed a hiring slowdown, leading to fewer-than-expected 152K jobs being added in May, U.S. Treasurys rallied on Wednesday.
Over the past five sessions, the yield on the two-year Treasury fell 4 bps to 4.73%, marking the longest decline streak in four years, while the 10- and 30-year rates ended at their lowest since March 28, at 4.29% and 4.44% respectively.
Based on the CME FedWatch Tool, traders now anticipate about a 67% probability of a Fed rate cut by September, a significant increase from less than 50% just last week.
John Kilduff, from Again Capital, told Reuters that non-oil related data was weak enough to provide the Fed with a reason to cut rates and stimulate growth.
Following a low point in early February, the primary oil benchmarks bounced back, with Nymex crude for July delivery settling at +1.1% to $74.07/bbl, and August Brent crude also finishing at +1.1% to $78.41/bbl.
U.S. natural gas futures continued to fluctuate, with the Nymex July contract closing at a high of +6.6% to $2.757/MMBtu.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
The U.S. Energy Information Administration reported a 1.2M-barrel increase in crude stocks for the past week, contrary to a predicted 1.6M-barrel decrease according to a Wall Street Journal survey. Meanwhile, gasoline and distillate stocks rose as refineries increased their capacity usage to 95.4% from 94.3% the previous week.
Matt Sallee, President of Tortoise Capital Advisors, expressed surprise to Bloomberg that crude remained stable despite the large increase, attributing a bit of this stability to recent drops in crude prices.
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