Originally published by AxiTrader
QUICK SUMMARY
Refineries are running at 98% but there was still a massive 6.8 million build in inventories the EIA reported last night. No guessing what that’s done to prices. WTI is down 3.28% at $64.88 and Brent is off 2.44% at $70.76.
BIGGER PICTURE
Oil has broken down in WTI terms but not quite in Brent terms.
I say that with reference to the two daily charts this morning (Brent below but I’ll discuss both in my video). The key here is that the conjecture about what the Saudis are up to remains and now we’ve seen that even though the refineries are running hot there has been an unexpectedly big build in inventories.
Of course there is optimism that China took US crude of the tariff list that went into force overnight.
But I saw a report on CNBC this morning which says there has been no China-bound Crude loaded from US ports this month. That’s very interesting and may be an issue for inventories. I’m not sure, but it’s worth keeping an eye on.
Here’s Brent, you can see the support. If $70.50 break we could see a move toward the bottom of the downtrend around $66.
Another thing I wanted to highlight was a story I saw on CNBC overnight.
We've all been focussed on the Middle East, on Iran, on the Saudis, and on US sanctions and how this will all mesh with production. But while we've done that US shale has just quietly kept on keeping on.
Yet analysts told CNBC this week that, "the explosion in U.S. tight oil production has long been the dominant supply catalyst within the energy complex but now finds itself at the tail end of concerns. Even so, its ascent continues apace".
That same analyst, Stephen Brennock of PVM Oil Associates also said, "U.S. shale doom-mongers should not get ahead of themselves. They ought to remember that the U.S. shale patch is in better financial shape than ever … When it comes to U.S. shale, it is still very much a case of the only way is up".
Which is all shorthand for the production boom will continue I guess.
And while the globe wonders and worries about supply out of the Middle East Longview economics director and senior economist, Harry Colvin, said US supply, "can and will, fill in most of that [Mid-East] gap".
Just something to keep in the back of our minds. Especially when the price charts are starting to point lower.
DATA:
On the day the big one here in Australia is employment. The market is expecting another 15,000 new jobs after last month’s huge 50.900 increase. But I noticed the big lift in the Westpac unemployment expectations index in yesterday’s Consumer Sentiment survey. Do they know something? We’ll know at 11.30am this morning – standby.
Offshore we get Chinese FDI, UK retail sales, EU trade, and then housing data, jobless claims and the Philly Fed index in the US.
Have a great day's trading.