The best way to describe the global crude oil markets is with the words volatility and uncertainty. For three trading session’s oil prices soared as a massive short covering rally sent prices up above $10 per barrel (27.5%). Then reality hit on Tuesday with the energy sensitive manufacturing data out of China and the United States coming in well below the expectations suggesting that oil demand is not ready for a growth spurt anytime soon. The disappointing economic data resulted in crude prices giving back about half of the three-day gains in just one session with the market remaining under modest selling pressure to start today’s trading session.
Last night the API reported a large surprise build in total crude oil stocks in the United States suggesting that even with the EIA’s downward revision in crude oil, production the market remains oversupplied. Certainly, the API data is not as reliable as the more widely followed weekly EIA inventory data, which will be released later this morning. If the EIA data is in sync with the API data we could experience another very volatile and lower trading session today.
Even though the charts may suggest that a short-term bottom may have formed in the oil complex, this is still a debatable topic with more reasons to suggest that the downtrend trend is not yet over as the global supply will continue to outstrip demand for the foreseeable future. After the weak performance in the complex over the last twenty four hours the pattern suggests to me that the spec community may very well be resetting shorts once again.
Global equities continued to decline with the EMI Global Equity Index falling another 1.61% widening the year to date loss to 6%. On the week the EMI Index has already lost close to 3 percent. Six of the ten bourses in the Index are in negative territory for 2015 with Hong Kong remaining at the bottom of the leader board. London and Paris are tied for the top spot on the leader board. Overall global equities remain a negative price driver for the oil complex.