On Wednesday European markets closed higher as oil saw a nice rebound, and strong data from China brought risky assets back in play. The pan-European STOXX 600 index, which tracks all sized companies across 18 countries in Europe, closed higher by 0.7%. The same can be said about all the indices in the European market that closed in green territory as well. The FTSE 100 led the charge higher closing up 1.16% to 6161.63. The DAX and CAC 40 closed up by 0.64% and 0.81% respectively.
Oil Trades Higher With Inventory Decrease
Oil traded higher into the European close as the Energy Information Administration — EIA –showed that crude crude crude crude by a huge margin. The EIA stated that crude inventories dropped by 4.9 million barrels. This is an important metric for two reasons. One reason being that analysts were expecting crude inventories to rise by 2.9 million barrels, and did not expect a drop. That means that U.S. crude inventories soldat a quicker pace than what was expected. The other reason being that a large drop of inventories only occurs when there is high demand. This demand comes from refineries that convert crude oil into energy resources that can be used, such as gas. It was shown in the data, that U.S. refineries used over 16.4 million barrels a day on average. This new number is up about 199,000 barrels from the week prior. In addition, refiners operated at 91.4% capacity last week. With refiners operating at such capacity it could be possible they are trying to meet a possible gasoline demand spike for the upcoming summer. The high demand of oil is a great sign for economic activity, and it is also a great sign that the price of oil may edge higher. This is because the price of oil is controlled by supply and demand associations. Higher demand indicates that prices can be kept higher, while lower demand indicates nobody is interested in buying. At that point in time, crude inventories start to pile up bringing down the price of oil. This in turn will put pressure on global equities, and global economies that rely on exporting oil for profit. The good news here is that demand is high, therefore oil prices should begin to recover. U.S. crude oil closed higher by 5% to $37.75 a barrel, and Brent Crude oil settled up $1.91 to $39.76 a barrel.
