Crude oil prices have the potential to react strongly to supply disruptions because U.S. oil supply is below the five-year average. Crude prices surged to five-year highs after President Trump vowed to retaliate against Syria for a Chemical Weapons attack and taunted Russia about their threat to shoot down U.S. missiles if they were used against Syria.
U.S. futures are back in negative territory ahead of the open on Wednesday, as stocks continue to fluctuate against the backdrop of a potential trade war. Investors are also awaiting the release of the FOMC minutes from the March meeting.
A touch of risk aversion crept into financial markets on Wednesday, as the sense of relief over easing U.S.-China trade tensions was overshadowed by the rising geopolitical risk surrounding Syria. Asian stocks closed mostly mixed due to market caution, with European equities sinking lower as investors adopted a guarded approach. Although Wall Street ended higher on Tuesday as trade fears eased, geopolitical tensions could pressure U..S equity bulls this afternoon.
Traders and investors alike prepare for a gauntlet of news today. The only certainty in timing is CPI data due at 7:30 a.m. Central and the FOMC Minutes at 1:00 p.m. Central. A response from the White House to the chemical attack in Syria is imminent and Russia has said it will target the U.S. military if strikes hit Syria; there are reports that a second U.S. missile destroyer (one is already stationed) is heading to the Mediterranean Sea while Syrian leadership has reportedly fled the country.
Both yellow and black golds are currently finding support from heightened fear among investors that the United States and its allies may soon launch a military strike against Syria. This is in response to the suspected chemical weapons attack in the country. The fear is that there might be counterstrike by Russia, which could further damage Moscow’s relationship with the West.
Crude oil prices soared after we are seeing the reduced risk of a trade war but increasing risk of heating up the real war in Syria. After conciliatory remarks by Chinese President Xi Jinping promising to announce plans to open China's economy, including lowering tariffs for cars and enforcing the legal intellectual property and technology transfers of foreign firms in the country.
All is quiet on the Southeast front. Chinese President Xi Jinping soothed markets last night in his keynote speech at the Boao Forum. In a great deal of showmanship, he gave global markets exactly what they wanted and needed by promising to raise the country’s limits on foreign investment and lower import duties on products such as cars.
Crude oil bears are scattering after China is signaling they will start to open their markets and take steps to guard foreign intellectual property. The speech by the Chinese President seems to suggest that President Donald Trump’s tactics of playing hardball is having the desired effect. China, of course, had its currency pegged to the dollar until 2014 and has charged many countries unfair tariffs and realized that they were trying to defend undependable trade practices.
The energy sector ranked the last in sector performances in 2017. In June 2017, crude oil traded at a low of $42.37 per barrel and many analysts expected lower prices with a target of $40 or lower as energy market sentiment has been bearish. Crude oil turned bullish in August 2017, when it broke a pattern of lower lows and lower highs by failing to take out the June low.