Crude OIl Today - Evaporating inventories in the North Atlantic support prices

Market Analysis /
Greg McKenna / 31 Aug 2018

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

QUICK SUMMARY

There are some really interesting things going on beneath the surface of crude markets at the moment and on balance they are supportive of prices. But how the renewed chat of a Chinese, perhaps even EU, trade battle emanating from the Oval Office will impact is harder to tell. 

Luckily there is a clear and important level of overhead resistance to watch and push against in WTI.

Overnight though Oil was higher again as inventories in Africa and Europe are drawn down and as Iranian supply drains away faster than anticipated. WTI is up 0.8% at $70.04 while Brent is at $77.53 up 0.5%.

BIGGER PICTURE

Oil is up again this morning as price consolidates the breaks in Brent and WTI. You have to wonder if it can sustain these prices in a world where President Trump doubles down on his battle with the EU and China at the same time. He has to do that first of course, so far it’s just reports from Bloomberg being reported in the echo cahmber of Twitter. But having listened to parts of his interview this morning he does seem serious.

So assuming the trade war is about to escalate again the question traders will be wondering about is global growth, demand for crude, and China’s purchase of US crude.

In the meantime though news via Reuters that the “overhang of homeless crude in the Atlantic Basin has halved in recent weeks, suggesting oil traders are bracing for a further supply loss from Iran due to U.S. sanctions and a new rally in prices” supports prices where they are at the moment.

That's a very big draw folks. 

And in that context, I was interested to see a tweet go past from Crudehead referencing oil and security analyst Sara Vakhshouri saying Iran's product will fall more this time than hte last round of sanctions because Trump will be harder on them is worth noting. 

Source: Twitter Screenshot
Source: Twitter Screenshot

That in itself is supporting prices. 

And of course we hear OPEC is trying to entrench its expanded influence with non-OPEC members via a formal agreement. That too serves to underwrite prices. 

It’s a balance traders have to try to figure out.

Looking at the chart this $70.40/50 region for me looks critical. A break would be decisive. But I'm more likely to lean against it looking at the charts. 

Click on me, I'll expand
Click on me, I'll expand

Please note I talk about both Brent and WTI each day in my Markets Video.

 

DATA:

On the day Kiwi traders will be watching consumer confidence in New Zealand. We also get South Korean construction, industrial production, and retail sales data. Japan has production, unemployment, and Tokyo prices, while here in Australia we have the RBA financial aggregates data (debt) out.

Chinese official PMI’s are to be released as well and tonight it’s German retail sales French and Euro Area inflation, Indian GDP, Canadian PPI and the Chicago PMI in the US – along with Michigan consumer confidence.

Have a great day's trading.

Greg McKenna

Chief Market Strategist

gregmckenna.com.au

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