Oil slipped lower on Thursday following a smaller than forecast drawdown and on rising concerns over the health of the global economy. Following an almost 2% rally in the previous session, investors were questioning their earlier bullishness.
EIA reported weekly declines of 1.1 million in crude stocks, versus the 3 million draw down forecast and the 5 million barrels reported the previous day by the API.
US refineries consumed less oil crude than the previous week and 2% less than a year ago, despite summer being a traditionally strong season for demand. The most obvious reason for this is slowing demand in the US, which would tie into the weakening US economy story, particularly after data showed that US factory order slumped -0.7% in May.
Investors will now look towards the non-farm payroll data tomorrow for further clues over the health of the US economy. A weak reading could see the price of oil dip as it would further fuel concerns over future demand expectation.
Levels to watch:
We would look for a break above $57.50 to open the door to resistance at 58.30/40. Beyond this $59.45/50 would come into play. On the downside, the bears would need to break down support at $56.50 to progress to $56.00 and down back towards $53.40.
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.