Crude oil prices are modestly higher for the second day in a row after a mildly bullish API oil inventory report release late yesterday. The gains in oil are primarily driven by short covering after a significant decline in prices that began in mid-June. The reported draw in crude oil and gasoline shown in the API report is acting as a short-term catalyst for today’s short covering rally as the market awaits the more widely followed EIA weekly oil inventory snapshot.
Nothing has changed in the overall picture as supply remains robust and demand growth is in question as China’s economy is showing all of the signs of slowing. Until there are clear signs that the global oversupply is starting to dissipate and/or at least there is an identifiable path toward rebalancing of the global market the oil complex is not likely to enter into any sustainable uptrend. The upticks that will occasionally occur (as over the last few sessions) are likely to be bouts of short covering and not the beginning of a major recovery rally. The aforementioned conditions will have to be evident before a new crop of long side investor/traders start to park money in the oil markets.
Global equities were slightly higher during the last 24 hours. The EMI Global Equity Index increased by 0.14% with the year-to-date gain coming in at 4.7%. The Index is still lower for the week with two of the ten bourses in the Index still in negative territory for 2015. Paris remains on top of the leader board with Germany in the second spot. The European Union bourses have been driven by the easy money policy of the European Central Bank, while the United States and Canada remain at the bottom of the leader board and in negative territory for the year. The U.S. markets are struggling as participants adjust to what will be a less accommodative Central Bank policy in while the Canadian markets are continuing to be impacted by the sharp decline in oil prices. Global equities have been a slight negative for the oil complex this week.