Welcome to Crude Oil Today, my brief look at what's happening in oil markets and what it might mean for prices.
As ever, feedback welcome
Commodity markets were better bid last night.
Oil was higher after a big 6.1 million barrel draw in US crude inventories last week. So WTI is up 1.2% to $69.40 and Brent is up 0.80% to $73.93 after hitting a high of $74.56 as news the Saudis had shut shipments through the Bab el-Mandeb strait after ships were attacked by Houthi rebels out of Yemen.
Oil was higher after that big draw in inventories. There is a little disquiet that a large chunk of the fall was sourced from the west coast of the US. But the fact that inventory levels are now down at multi-year lows has given the bulls something to push off against.
Equally though the announcement this morning that the Saudis have closed some shipping lanes in the gulf because of rebal Houthi attacks also gives the bulls something to launch off.
Bloomberg’s Javier Blas tweeted, “#BREAKING: #SaudiArabia halts all shipments of crude #oil through the Bab Al-Mandab straits that link the Red Sea with the Arabian Sea (off the coast of Djibouti) after attack by Yemeni Houthi militias #OOTT #OPEC #Yemen”.
Saudi energy minister Khalid al-Falih said in a statement, "In the interest of the safety of ships and their crews and to avoid the risk of oil spill, Saudi Aramco has temporarily halted all oil shipments through Bab el-Mandeb with immediate effect".
For those of us unfamiliar withthe intricacies of Middle East shipping routes and supply lines, Bloomberg reports:
"The Bab el-Mandeb Strait, off the coast of Yemen, Djibouti, and Eritrea, connects the Red Sea with the Arabian Sea and is one of the world’s key shipping lanes for crude oil and other petroleum products. The strait allows for crude exports into the European market via either the Sumed pipeline that links the Red Sea with the Mediterranean through Egypt or the Suez Canal.
A full closure of the strait, which at its narrowest point is just 18 miles (29 kilometers) wide, would force tankers sailing from Saudi Arabia, Kuwait, Iraq, the United Arab Emirates "around the southern tip of Africa, which would add to transit time and cost," according to the U.S. Energy Information Administration."
All in all, it didn't drive prices too far. But both WTI and Brent are trying to form a base for a range. And at one point Brent was up 1.4% before slipping back after testing just shy of another retouch of the bottom of the former 1-year long uptrend channel.
If it's going to fail, it should do so here - soon.
Of course, we'll be watching what happens near Yemen and it's impact on oil markets.
But elsewhere over the next 24 hours, the ECB meeting and Mario Draghi’s press conference are the big events for forex traders and markets in general. No real change to the message that things are working back toward ECB targets and the taper is on track is expected. Also out are US goods trade balance, durable goods orders, Kansas City Fed index, jobless claims, and wholesale inventories.
Have a great day's trading.
Chief Market Strategist
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