Oil gains on trade breakthrough despite inventory build

4:00 PM May 15, 2019

Summary:

  • Oil pushing higher after Trump delays auto tariffs

  • Weekly inventories: +5.4M vs -1.2M exp

  • Market at inflexion point longer term

 

There’s been two major news events for the price of Oil in the past half an hour with an unexpected boost on the trade front usurping the scheduled weekly inventory release in driving the markets and push crude up to its highest level of the day. Bloomberg has reported that US president Trump is set to delay the decision on auto tariff imports for up to six months in what is a surprise de-escalation in the recent trade wars after tensions were recently ratcheted up with China. The news is in fact more symbolic than anything and suggests that the recent increases on China are not part of a wider plan to increase tariffs on other countries and as such can be seen as positive for the global economy - and also positive for Oil demand.

The German Dax has been especially sensitive to the news and surged a scarcely believable 200 points in a little over 5 minutes in response. Source: xStation

 

Turning attention to the inventory data and the weekly headline showed a large build of 5.4M vs -1.2M expected. The prior was -4.0M. While the build is large it is smaller than the 8.6M seen in last night’s API reading while the subcomponents of the report were actually more positive for the market, with the drop in production the best news for oil bulls:

 
  • Gasoline: -1.1M vs -0.4M exp

  • Distillates: +0.1M vs -0.7M exp  

  • Cushing: +1.8M

  • US production: 12.1mbpd vs 12.2mbpd prior

 

The longer term picture for Oil is not too clear at present with some suggestions of late pointing to the market turning lower but then again the latest news seen as positive. Price has been oscillating around the 8 and 21 EMAs which recently printed a bearish cross but the 23.6% fib around 68.95 has stood firm in the face of any tests. Monday’s session saw price attempt to move higher, only to be met with a firm rejection and a large shooting star candle printed on D1. The high of the week from then around 72.60 is now seen as potentially key resistance with a push above there likely being accompanied by a bullish EMA cross and then the market could be seen well placed to resume the uptrend and retest 2019 highs of 74.70.

Oil is oscillating around the 8/21 EMAs in recent trade with the market indecisive as to whether the uptrend that has been in place since the start of the year will prevail. Source: xStation

 

 

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