Learn to Trade – Commodity Overview 1st September
Focus on Oil
Over the last five days we have seen Oil markets volatility increase as we approach the monthly roll however despite this no significant gains/losses have been registered. Given the question mark surrounding the health of the global recovery at the moment the most important event of the week may be the latest payrolls number from the US.
Thoughts from the trading floor
From a technical perspective Crude Light (Nymex) Oil Futures continue to trade within the same consolidation zone that has dominated since June. To the upside resistance lies at $78 and above that at $79.20. A breach of here may provide the market with the impetus to move on and test August highs at $82.97. To the downside support lies at $70.75 and below that at $69.50. Currently it appears that the recent trend of sideways trade looks likely to continue.
Last night the American Petroleum Institute reported that US inventories rose 4765K barrels last week. This compares to the analyst's estimate for the DOE report of +1200K. The API Gasoline showed a draw of 589K as opposed to the estimates for the DOE number of a 225K draw. Over the last few DOE releases we have seen a very muted reaction in the Oil markets however the large discrepancy in the Oil API and analysts expectation's may aid a reversal in this trend.
In recent times the Oil market has been heavily under the influence of US fundamental releases and the reaction of world equity markets. This considered the recent slump in jobs and housing data does not bode well for the short/medium term prospects for Oil. If we continue to see the economic recovery struggle and fears of a double dip rise we believe oil will follow equities into difficulties. That said this Fridays latest jobs report may hold the key to the short term direction of oil markets with the private payrolls number perhaps the most telling of the underlying economic strength.
Bull View
Bulls will be keen to see Oil break back above the $75 mark and in doing so trade above the 200 day moving average. Further confirmation of an improving macro picture in the US and a weaker USD will be needed to support their cause.
Bear View
Bears will be hoping for further deterioration in the US jobs and housing sectors starting with US payrolls this Friday. A break below yearly lows at $64.24 has to be their primary goal.
Futex View
We believe that the best strategy remains selling into rallies as long as equities remain under pressure. Our long term view involves the market breaking below yearly lows at $64.24 although we believe this may take several months to transpire.
Tags: American Petroleum Institute, bear, bull, Crude Light, DOE report, futex, futures, Nymex, Oil, Oil API, US, USD
