Crude Oil Price Rebound May Be Short-Lived, EIA Data in Focus

2017-06-07 09:43:00 Ilya Spivak

Talking Points:

Crude oil prices correct higher, snap five-day losing streak
EIA inventory data on tap, gasoline vs. crude flows in focus
Gold prices surge amid risk aversion, challenge April high

Crude oil prices corrected higher after a week of consecutive losses but the rally stalled after API reported that gasoline inventories added 4.08 million barrels last week. Crude stockpiles shed a comparable 4.62 million barrels, hinting that refiners’ uptake is not being met with end demand. That disappointed hopes for a seasonal pickup coinciding with the US summer “driving season”. Meanwhile, the DOE cut the 2018 WTI forecast from $55.10 to $53.61 and said US output will hit a record above 10m b/d, helping to cap gains.

The spotlight now turns to official EIA inventory figures. Those are expected to show that crude stocks shed 3.14 million barrels last week while gasoline stores were reduced by 275k barrels. Statistics bolstering signs of sluggish demand on display in the API data set may put prices back on the defensive. News-flow from Qatar continues to be an important consideration as markets fret that a rift between it and other major gulf producers including Saudi Arabia may disrupt deliveries or derail OPEC-led output cut efforts.

Gold prices charged higher as risk aversion sent haven-seeking capital into government debt, depressing yields and offering support to non-interest-bearing assets. From here, a lull in top-tier scheduled event risk may translate into consolidation as markets catch a breath before Thursday’s explosive news-flow. The UK will hold a general election, ousted FBI director James Comey will testify in Congress and the ECB will deliver a monetary policy announcement.

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GOLD TECHNICAL ANALYSIS – Gold prices are testing resistance April’s swing top once again having reversed higher from support above the $1200 figure as expected. A daily close above the 50% Fibonacci expansion at 1300.73 targets the 61.8% level at 1321.10.Alternatively, a reversal back below the 38.2% Fib at 1280.35 exposes the 1256.74-63.87 congestion area anew.

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices corrected higher after testing support at the $47/bbl figure yet again, snapping a five-day losing streak. From here, a daily close above the 38.2% Fibonacci expansionat 48.17 opens the door for a retest of the May 29 high at 50.26. Alternatively, a push below 47.00 sees the next downside barrier at 45.82, the 61.8% level.