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Crude Oil Prices Vulnerable Despite Supportive Inventory Data

Talking Points:

  • Crude oil prices may drop on risk aversion despite supportive EIA data
  • EU to sound off about US tariff increase, may rekindle trade war worries
  • US retail sales may boost commodities, but only if risk appetite holds up

Crude oil prices were taken on a wild ride yesterday. The WTI contract surged as on-target US inflation data eased worries about Fed rate hike acceleration, sending the US Dollar lower. It turned sharply lower soon thereafter however, tracking stocks downward after US President Donald Trump suddenly fired Secretary of State Rex Tillerson. Gold prices built upon CPI-related gains as risk aversion sent bond yields lower.

Looking ahead, the US Retail Sales report may deliver another in-line outcome that reinforces status quo Fed policy bets, which might boost commodities as the greenback suffers further. That implies confidence in global growth and thereby the capacity for other central banks to catch up to the US central bank’s hawkish lead. S&P 500 futures are pointing tellingly lower however, hinting that may be too much to ask for.

Trade war jitters may re-emerge as a potent headwind for risk appetite. The European Commission is set to comment on the EU response to last week’s US steel and aluminum tariff hike. The regional bloc has not secured an exemption thus far and key officials have taken a combative tone on the matter. Rhetoric paving a path to retaliation might send the markets scrambling.

EIA inventorydata is also on tap, with crude stocks expected to add 2.4 million barrels. API figures published yesterday argued for a more modest 1.16 million barrel inflow. Prices might enjoy a bit of a lift if official figures hew closer to that outcome. The release’s market-moving potential is likely to be dulled if not altogether neutralized if swings in broader sentiment trends prove to be violent however.

See our free guide to learn what are the long-term forces driving crude oil prices!

GOLD TECHNICAL ANALYSIS

Gold prices are still clinging to support in the 1312.36-16.50 area (range floor, 38.2% Fib retracement). A daily close below this barrier exposes the 50% level at 1301.19. Alternatively, a rebound above range resistance at 1341.04 clears the way for a test of the 38.2% Fib expansion at 1352.40.

Crude Oil Prices Vulnerable Despite Supportive Inventory Data

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are oscillating within a typically bullish Falling Wedge pattern. Confirmation on a close above its upper boundary at 62.30 opens the door for a retest of 64.21, the February 26 high. Alternatively, a move below the 59.68-60.00 area (wedge floor, March 8 low) targets the February 9 bottom at 58.11.

Crude Oil Prices Vulnerable Despite Supportive Inventory Data

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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