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Crude up on the day

Last updated 6/22/2012 11:17 AM ET (GMT -5) 0 Comments - Add your comment

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David Morrison

Market Strategist, GFT

Follow @DMorrison_GFT

Yesterday’s dismal economic data helped to push crude lower again. Chinese and US Manufacturing PMIs came in below expectations, as did US Existing Home Sales and the Philly Fed Index. This came on top of disappointment that the US Federal Reserve decided against expanding its balance sheet in an effort to stimulate growth and boost employment. Oil was weaker in early trade this morning as investors responded to Moody’s downgrade of 15 international financial institutions. Brent traded at its lowest level in over a year and a half, while WTI has now fallen 28% since early March. Investors continue to respond to the slowdown in global growth by selling oil, as the outlook for demand weakens. Meanwhile, supply is currently ample. OPEC members continue to break their output ceiling of 30 million barrels per day although Secretary General Abdalla Salem El-Badri expects compliance by next month. Meanwhile, Wednesday’s Energy Information Administration release showed that US crude inventories rose by 2.9 million barrels last week – above the upper limit of the average range for this time of year, and confounding economists who were expecting a fall. Chart-wise, crude looks very oversold now and could be due a bounce. This morning Brent traded below $88.50 - a level which acted as resistance on a number of occasions in 2010. It has rallied off this level, but the big question is whether buyers will arrive in sufficient numbers to provide some upside momentum, or if the poor fundamentals come back to dominate.

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About The Author

David Morrison has worked in financial markets for over 25 years. He joined GFT in February 2009 to deliver commentary and research for derivatives products. Before then David had been instrumental in setting up two spread betting companies, managed trading desks, and implemented and ran successful risk-management strategies.

He has appeared on Bloomberg, Reuters, and Sky TV, and is widely quoted by financial newswires. He has written numerous articles covering economics and trading strategies using fundamental and technical analysis.