Crude Oil Price Analysis for June 9, 2017

Crude oil prices rebounded slightly on Thursday following Wednesday’s route which say prices tumble in the wake of the larger than expected build in crude oil inventories.  The weather has been partially blamed on the weaker than normal demand, as cold wet weather in the North East of the United States has reduce summer driving to date. An Iran group blamed the Saudis for the twin attacks in Tehran, but the global geopolitics was unable to lift prices. S&P cut Qatar’s rating which remains on negative watch.

Technicals

Crude oil prices experienced a dead cat bound, following Wednesday’s slide. Prices are poised to test medium term trend line support seen near the $44 handle. A break of this level, which is the neckline of a topping pattern, could lead to a test of the November lows at $42 per barrel. Resistance on crude oil prices is seen near the 10-day moving average at $47.98.  Momentum is negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

Iran Blamed Saudis for Twin Attacks

Iran group blamed Saudis for the twin attacks in Tehran according to earlier headlines, citing comments from the Iran Revolutionary Guards. The unusual direct attacks in Tehran killed 12 and injured 43. Sunni-based ISIS claimed responsibility for the attacks in Shi’ite-based Iran. Crude oil has since settled 4% lower near $46.20 in the wake of the large EIA crude build, and as fresh rounds of instability in Qatar and Iran threaten to weaken OPEC, though any potential MidEast crisis tends to strengthen oil prices on supply chain risks.

S&P Cut Qatar’s Ratings

S&P cuts Qatar to AA- from AA and remains on negative watch. The ratings agency warned a further cut is possible. The spat with 5 Arab countries and cut in diplomatic ties will exacerbate Qatar’s external vulnerabilities, and could pressure economic growth. Additionally, along with the reduction in regional demand, corporate profitability could be eroded by declines in investments and a loss of investor confidence. Ratings could be cut again if domestic policy risks increase substantially, or if government indebtedness rises faster than expected. Note S&P had downgraded the outlook on Qatar to negative from stable back in March on concerns over the potential for growth in external debts to outpace the growth of its international investments

Canada’s Nome Home Price Index Surged

Canada’s new home price index surged 0.8% month over month in April after the 0.2% gain in March. The hefty increase in the index was driven by higher prices in Toronto and Vancouver. The new home price index grew at a 9.9% year over year rate in April, which was the strongest since May of 2008. A 9.9% year over year run-up in Toronto prices led the way. Recall that government measures to curb rising home prices in Toronto took hold in April, but not until late in the month.

U.S. initial jobless claims fell 10k to 245k in the week ended June 3 after the prior week’s 20k jump to 255k which was revised up from 248k. The drop is larger than expected after the big gain previously, but the Memorial Day holiday has likely impacted, along with the end of the school year. The 4-week moving average rose to 242k from 239.75k. Continuing claims dipped 2k to 1,917k in the May 27 week following the 5k drop to 1,919k previously.

Canada housing starts fell to a 194.7k growth rate in May from a 213.5k clip in April. The slowing was modestly below expectations, but not really surprising as activity moderates further from the lofty 252.3k pace in March. Multiple urban starts tumbled 10.2% to 178.5k units in May while single unit starts pulled-back 8.9% to a 59.8k pace. Meanwhile, the starts “trend” as measured by the six-month moving average edged up to 214.6k units in May from 213.4k in April, with CMHC noting that row and apartment unit construction has driven the improvement while more starts of the relatively more expensive single- and semi-detached housing units have moderated. Overall, Canada’s housing market has seen some moderation in sales, prices and construction of last, as government measures have had some success in cooling activity in the hot regions.