Chinese Stimulus, US Housing and Unemployment Keep Crude Hanging

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Crude Oil for the month of September contract is trading above $94.50/bbl with gain of more than 0.20 percent in early electronic trading. Oil traded near a three-month high after U.S. stockpiles dropped to the lowest in four months amid rising demand in the world’s biggest crude consumer.

The EIA inventory report showed at third straight weekly decline in inventory levels more than expectation and speculation of monetary easing in second largest oil consuming nation China might be supporting oil prices currently.

Most of the Asian equities are trading high driven by speculation of easing to increase export in China. This alone will support oil prices which are likely to trade on higher side during throughout the day.

However, during European session, oil may come under little pressure driven by weak euro outlook. The shared currency is likely to remain subdued as concern of Germany not supporting ECB for bond purchase may hold the euro under pressure. This is tied to the Constitutional Court matter which will not be decided until September 12th although new cases have been filed and accepted by the courts putting pressure on the euro and the ECB.

Other than eurozone CPI which is likely to fall further in July, and may weigh on the currency and on oil prices.

During US session, unemployment claims may climb up further in the last week, whereas slight improvement in housing sector can be seen. Most importantly, speculation of easing by Federal Reserve to support the unemployment rate may create positive sentiment and expectation of higher demand.

This may continue to support oil prices on higher side on today’s session. This is the jigsaw facing traders the evaluation of eco data against the odds of Fed monetary stimulus. With retails sales soaring, industrial production printing well, home builder confidence elevated, there are only two pieces that need to be added, jobs and housing.

Traders will have to interpret this data, if both of these items are negative, then we should crude pushed up on hopes of monetary stimulus, if both reports are positive, the likelihood of stimulus decreases but crude should trade up on demand.

Gas prices are trading above $2.761 in international market with gain of more than 0.40 percent from yesterday’s closing. As per US Energy department, natural gas storage is likely to inject by 30 BCF in the last week. Thus, higher rate of injection might be weighing on prices. National Hurricane Center states that there is 10 percent chance of tropical storm formation in Gulf region which may create supply disturbance to support gas prices.

On the other side, declining consumption due to mild weather condition may weigh on gas prices in today’s session. AccuWeather forecasts show that temperature is likely to remain normal which may not pull gas demand high.   

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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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