Data overnight is a mish mash but there is nothing in it to inspire an energy rally. After OPEC decided to study the impact of shale oil production as opposed to acknowledging the oversupply that already exists it took away the oil bull's last hope for a rally. Now with stocks faltering on turmoil in Turkey and some mixed data out of China and Europe, the downside slide looks to continue. With the latest comments by the Feds Williams that bond buying could be tapped by this summer if the economy performs as expected is another nail in the coffin for the bullish outlook. Without demand or the tailwinds of Fed stimulus, oil looks destined to get back into the $90s and if you slept through it Brent crude already dipped below triple digits. The fear of course is that when we hit that oversold point we could get that sharp dead cat bounce but other than that the downside still looks attractive.
The Chinese HSBC/Market Purchasing Managers' Index (PMI) for May slipped to 49.2, which was the lowest level since October 2012 and down from April's final reading of 50.4. Yet while oil sold off on the number, copper traders must have been expecting something worse because that market seemed to like it. Dow Jones said that "Shanghai copper futures rise 0.4%, tracking firmer equity markets, a weaker dollar and one of China's gauges of manufacturing activity. The official PMI reading for May released over the weekend recorded a better-than-expected upturn, while average housing prices released Monday showed May residential housing prices up 6.9% on year. The benchmark September copper contract gains CNY210 to settle at CNY52,970 /ton; aluminum, zinc and lead also settle higher."
The EU also had data that mixed emotions as the European PMI hit 48.3 last month from 46.7 in April, London-based Markit Economics said in its report. That's above an initial estimate of 47.8 and higher than expected in a sector that has been contracting since July 2011.
For oil we have said that it is in a trading range. We’ve tested the top now we will test the bottom that should be near the $88-range.