Decline in US oil imports boosts trade balance

<p>The 7% decline in the US trade deficit (improvement in trade balance) to $41.5bn reflects the lowest level of oil imports in four years and […]</p>

The 7% decline in the US trade deficit (improvement in trade balance) to $41.5bn reflects the lowest level of oil imports in four years and a fresh record in exports at $195.8bn. Oil imports fell for three straight months, the longest losing streak in three years.  Unlike the decline in the trade deficit of 2009 that was largely a result of a slowdown in global trade, the current decrease in the trade balance is a combination of persistent declines in US oil imports and modest (but continued) rise in exports.

Since June 2011, the US trade balance improved 15%, imports rose by less than 6%, while exports gained 11%. Imports of petroleum products fell 30%, bringing down the “oil” trade deficit to a five year low of $14.7bn.

The better-than-expected June balance completes the trade figures for Q2, and is expected to lift the previously estimated 4.0% rise in Q2 GDP to about 4.3%, which would be the highest since Q3 2013.

If the US consumer recovery maintains its recent stabilisation, then any downward impact on pressure on imports may be absorbed by the continued decline in oil imports, whose aggregate three-month decline stands at 10%. Energy self-sufficiency has long been the basis of USD-positive forecasts since the start of the year, but the currency’s recovery hasn’t materialized until late spring.

USD hammers commodities

As the US currency advances further, all six major energy commodities are down on the year, led by natural gas. In the agriculture sector, five of the six top agricultural commodities are negative year-to-date, led by cotton (-25%), with the exception of Coffee’s 71% gain owing to uncertain weather. A world of difference on the metals complex, as five of the six top traded metals are up on the year (led by palladium), with copper being the only loser.

Taking a closer look at oil, US crude is on its way of posting its first quarterly decline in Q1 2013.  Further pullback is anticipated to reach the $94.00 territory from the current $97.51, while Brent oil may have reached the lows near $105. Cheaper oil could further reduce the US energy bill by means of USD value as well as quantity.

US trade deficit vs oil imports

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