Conflicting Middle East Signals
On the back of a strong few sessions at the start of the week, oil prices have since given up their gains and reversed back on themselves. Crude futures are still positive on the week though price has retraced around half the gains seen initially. Uncertainty around risks in the Middle East continue to drive price action as the market ricochets between headlines. On the one hand, news that US and Israeli negotiators are set to resume ceasefire talks this week are exerting a clear downward effect on price. However, Israel’s continued assault n Lebanon and retaliation against Iran, both keep risks of further violence elevated.
Weak Factory Data
Away from the Middle East, focus continues to be on the broader supply/demand environment. A slew of weak factory data out of the US, UK and eurozone this week has kept demand expectations muted. All three economies saw further negative manufacturing PMI readings this week. Along with ongoing weakness in China, the data does little to suggest that demand will increase near-term.
Large EIA Surplus Seen
These demand concerns were underscored by the latest EIA inventories data on Wednesday. US crude stores were seen surging higher to 5.5 million barrels, well above the 1-million-barrel surplus the market was looking for. On the back of the prior week’s 2.2-million-barrel increase, demand levels look to have trailed off heavily recently. While this continues, crude prices look vulnerable to further downside near-term.
Technical Views
Crude
The sell off in crude has stalled for now into the 67.45 level and the bear channel lows. However, bulls have been unbale to get back above 72.61 and while this level holds as resistance, risk remain skewed towards further downside with 63.83 the next bear target.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.