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
Oil is higher.
The narrative for last nights move being that Chinese stimulus and infrastructure spending will boost oil demand as it has in the past. WTI rose 1.1% to $68.72 while Brent was 0.5% higher at $73.44.
China’s stimulus wasn’t lost on oil traders it seems.
The stories this morning are all of the last time China stimulated there was a big increase in demand for oil on the back of the infrastructure spend. And while prices for both Brent and WTI were higher overnight I’m not convinced necessarily that this is a narrative that will have enduring legs for the oil complex. I say that because my sense is the Chinese want to spend more time working on the consumption side of the economy through the tax cuts which have been announced.
That means the resource utilisation, or intensity, for every dollar of stimulus is lower than it was in the past. So I think this is just a little bit of narrative fitting and headline following. In the end, China is stimulating because it needs to and oils fall hasn't really been about China at all recently.
We'll see I guess.
In the meantime we’ve seen API crude inventory data show a draw of 3.16 million barrels. Let's see what EIA shows tonight for crude and then for gasoline and distillate to get a truer picture of demand.
On the charts, WTI may have found a base around $66.50 for the time being. At least that’s the tentative sign and while I’ve had orders to sell Brent the last two nights price has rallied away from the levels I set. Good news really, I’m not short in a rallying market.
So, Having tested and rejected the old up trend channel once this week the question for me is whether that’s on the cards again for Brent. The level to watch is $74.75.
Longer term I retain my downside targets.
EIA data tonight is the big news for oil traders in the next 24 hours. Traders appear to be looking for a draw of 2.2 million barrels of crude and 1.1 million of gasoline.
Elsewhere the day the big event here in Australia for markets is the release of Q2 CPI. The Reuters poll says the market is expecting a 0.5% headline rate which will take the yoy rate to 2.2%. Similar quarterly expectations are held for the weighted median and trimmed mean measures which are expected to print 1.9% yoy. A big number would be a very big number for the Aussie and potentially rates markets. A miss shouldn’t change rates pricing but might undermine the Aussies overnight strength.
NZ trade is also out and tonight we get German Ifo business climate, conditions, and expectations. New home sales in the US may be of interest as well. That's an important indicator of underlying aggregate demand I reckon.
Have a great day's trading.
Chief Market Strategist
The information provided here has been produced by third parties and does not reflect the opinion of AxiTrader. AxiTrader has reproduced the information without alteration or verification and does not represent that this material is accurate, current, or complete and it should not be relied upon as such. The Information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted
US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower