Cushing data boosts oil price
Tony Sycamore May 5, 2020 6:00 AM
It’s been a relatively subdued session this morning in Asia. Even the release of the second edition of the Australian Bureau of Statistics (ABS) weekly jobs data that implies almost 1 million Australians have lost their jobs, failed to imprint on the AUDUSD. Possibly supporting the AUDUSD and other risk assets was a comment from Deputy national security adviser Matthew Pottinger, that the United States was not considering ‘punitive measures’ against China over its handling of the coronavirus, contradicting previous comments from the Trump administration.
It’s been a relatively subdued session this morning in Asia. Even the release of the second edition of the Australian Bureau of Statistics (ABS) weekly jobs data that implies almost 1 million Australians have lost their jobs, failed to imprint on the AUDUSD.
Possibly supporting the AUDUSD and other risk assets was a comment from Deputy national security adviser Matthew Pottinger, that the United States was not considering ‘punitive measures’ against China over its handling of the coronavirus, contradicting previous comments from the Trump administration.
Also supporting risk sentiment, a further stabilisation in key commodity prices overnight as the front month (June) West Texas Intermediate oil futures contract closed back above U.S$20/bbl.
More importantly, the July futures contract which is where most of the volume is now going through as traders look to avoid a repeat of last month’s chaotic price action into the expiry of the May contract, closed at U.S$22.78 /bbl and is trading another 5.79% higher today, at U.S$24.09/bbl.
The catalyst for the rally, news that inventories at Cushing (the largest oil-storage tank farm in the world and responsible for about 13% of total U.S. storage) rose only 1.88mb last week, the smallest increase since mid-March, providing encouraging signs that the required rebalancing between supply and demand is now underway.
Attention now turns to tomorrow morning's API data (6.30 am Sydney time) and the official EIA data due early Thursday morning.
Given the strong correlation between Cushing numbers and the EIA’s reports, this week could see the earliest confirmation that a medium term low is in place for oil and that a modest recovery is underway.
The technical picture is supportive of this idea. As can be seen on the chart below there is a five-wave decline in place from the U.S$62.95 high to last month's U.S$17.27 low. After a 5 wave decline, a countertrend rally is expected and this idea is supported by the emergence of bullish divergence via the RSI indicator at the U.S$17.27 low.
In summary, while medium term support at U.S$17.27 holds basis the July contract, allow for prices to make further gains towards short term resistance U.S$26.40/50 region.
Source Tradingview. The figures stated areas of the 5th of May 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.