A Look at Crude Oil After the Chinese GDP numbers

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Friday morning during the Asian session, oil prices slipped from its yesterday’s higher closing as economic slowdown of major oil consuming nation reported today early morning. China’s second quarter GDP growth cools down to 7.6 percent, from first quarter 8.1 percent. Crude oil import of China has also declined near 15 percent in the last month. So, lower import and slow down of China economic growth might continue to weigh on oil prices.  With market focus on China, the surprise of the morning was an unexpected decline in Japanese industrial production which was projected to decline 3.1% but reported at 3.4% down. This will weigh on the price of energy as the day progresses.

On other side, due to slow growth central bank may go for any easing. On speculation of this, oil prices may gain some points in later. Another bearish factor for the day is down gradation of Italy bond rating by Moody Credit Rating Company. This may weigh on euro, which will ultimately weigh on oil prices. Consider the bullish factor for the day which is US sanction on Iran oil tankers and other major four companies. Thus, supply fears may create positive impact on oil prices. Other than this, US producer price index is likely to fall and Michigan confidence index is likely to climb up. Positive economic data expectation may support oil prices. Overall, we may expect oil prices to trade in a positive direction with limited gains.

Currently, gas futures prices are trading above $2.858/mmbtu with gain of near 0.30 percent in early Asian trading. Today we may expect gas prices to continue the positive trend supported by its intrinsic fundamentals.  As per National Hurricane centre, tropical storm Ellen has been strengthen with 90 knots in Eastern Pacific region, which may create supply concern to add positive direction in on gas prices.  As per US Energy department, natural gas storage has increased by 33 BCF in the last week. However, fall in power sector consumption by 1.5 percent, may limit the gain in gas prices.  As per US weather forecast, temperature is expected to remain high in eastern region, which may create demand for gas consumption. Yesterday’s EIA inventory showed higher than expected levels in stock, and markets immediately shedded Natural Gas, only to return towards the end of the day and drive prices back up. The commodity was trading at 2.76 after the release before climbing back to 2.83 by the end of the session.

Today, will be subject to news flow, from the EU, caution is advised. 

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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