Report shows large build in crude oil stock

Quote of the Day

The art of being wise is the art of knowing what to overlook.

William James

After a strong move to the upside on Tuesday oil prices hit a wall after the API data showed a much larger than expected build in crude oil stocks (see below for a more detailed discussion of the report). Crude oil futures are in negative territory with WTI leading the way lower and losing further ground on Brent after a surprisingly large build in PADD 2 crude oil stocks in last night's API report. RBOB gasoline is the only commodity in the oil complex holding onto minor gains after a much larger than expected decline. For the moment the oil complex is trading mostly around the oil inventories and paying little attention to the modest rally underway in equities.

The sentiment is building that the US Fed will initiate some form of quantitative easing based on some speeches from Fed members as well as the details of the FOMC meeting minutes which were released yesterday afternoon. The minutes showed that some members wanted more substantial action at the August meeting but accepted a stronger forward guidance statement regarding short term interest rates. Whether or not a new round of qualitative easing emerges it will be at least until the end of September at the next FOMC before that is know. For now the markets will move based on perception as well as what the plethora of macroeconomic data suggest between now and then.

Today the first shot over the bow of employment data hits the media airwaves with the release of the ADP private sector jobs report. This is an early market mover ahead the more important US Labor Department nonfarm payroll data to be released on Friday morning. The next several days will be impacted by the macroeconomic data and can easily result in large swings in either direction for most risk asset markets including oil.

Over the last 24 hours all bourses in the EMI Global Equity Index table gained ground as shown in the following table. The Index gained almost 1% over the last 24 hours with the developed world markets leading the Index higher. The Index is now higher by 2.8% so far this week resulting in the year to date loss narrowing to 14.2%. The US Dow has been the best performing bourse in the Index for most of the year and is currently showing the smallest loss while being on the cusp of moving back into positive territory for the year. With US equity futures projecting a higher opening on Wall Street this morning the US market could wind up in the winners column by the end of the day if today's macroeconomic data is friendly. Equities have been a positive for oil price (except for this morning) as well as the broader commodity complex over the last few days.

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