Crude oil is back on the defensive after a minor short covering rally on Tuesday on a combination of a bearish weekly API inventory report as well as bearish comments coming from Iran overnight. The API reported large builds across the board (see below for a more detailed discussion) while Iran said any break in OPEC solidarity or price war will lead to an enormous price dive shock.
The market sentiment remains bearish, the current and projected fundamentals remain bearish and all of the analysis and comments circulating around the media airwaves are bearish. At the moment there are still no signs suggesting that the oil price slide that began in the middle of June is coming to an end. As such there are still no signs that it is time for bottom picking as the selling momentum continues at an above normal level.
As I discussed yesterday the collapse in crude oil prices is hurting OPEC and several other non-OPEC producers like Russia much more than the United States as the United States is the largest consumer of oil in the world. Lower oil prices will eventually have a net positive impact on the US and broader global economy even though a percentage of high cost oil shale will be shut in temporarily until prices recover.
Global equities remained on the defensive over the last twenty four hours. The EMI Global Equity Index declined by 0.17 percent with the year to date gain narrowing to 1.8 percent. Japan was the big loser overnight declining by 2.25 percent. Global equities have been a negative price driver for both oil and the broader commodity complex so far this week.