Crude Oil Rebounds Following Surprise API Draw

Crude stuck to the bottom of its two-week range, holding above its 20-day moving average. Losses on Monday came on heightened trade concerns, with a glob al trade war likely to crimp crude demand. In addition, reports that Russian production grew to 10.97 million barrels a day, a nearly one-year high, has kept a lid on oil prices. A surprise inventory draw reported by the American Petroleum Institute on Tuesday helped prices remain buoyed, ahead of Wednesday’s Department of Energy’s inventory report.

Technicals

Crude oil prices rebounded near support at the 20-day moving average at 63.  Resistance is seen near the 10-day moving average at 64.54.  A close above the 10-day moving average would lead to a test of the March highs at 66.55. Momentum is negative to neutral as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The relative strength index (RSI) is printing a reading of 51, which is in the middle of the neutral range and the flat trajectory of this index reflects consolidation.

Inventories Unexpectedly Declined

The American Petroleum Institute reported a surprise draw of 3.28 million barrels of United States crude oil inventories for the week ending March 30, after analysts had anticipated a modest build in crude oil inventories of 250,000 barrels. Last week, the American Petroleum Institute reported major build, of 5.321 million barrels of crude oil. The API reported this week a build for gasoline for week ending March 30 of 1.123 million in gasoline stockpiles, a surprise given the 1.26-million-barrel draw that analysts had expected.

Vehicle Sales Could Buoy Crude Oil Prices

U.S. vehicle sales totaled 17.48 million in March on an annualized basis, according to Autodata seasonally adjusted numbers, compared to 17.08 million in February. That included a 9.2% decline in car sales and a 16.3% jump in light truck sales. That’s above median forecasts for a flat 17.0 million sales total. The news may be giving stocks, USD-JPY and yields a late nudge higher, though individual auto maker sales were already pointing higher earlier.

U.S. chain store sales declined

U.S. chain store sales declined 1.9% to 116.7 in the March 31 week, according to The Retail Economist, after jumping a very strong 4.3% in the prior week. Despite the drop, sales fared “reasonable well,” said the report, supported by Easter. The 12-month pace slowed only slightly to 3.4% from 3.6%, with some calendar effect from Easter. Dollar stores continued to pace the industry, along with strong gains in drugs, discount, online-only, traditional grocery, as well as non-apparel specialty stores and home improvement stores.

NAFTA Deal Could Come Next Week

Trump administration is seeking a preliminary NAFTA deal by next week, and will host cabinet ministers in Washington in order to bring about a successful result. The White House seeks to have the leaders of Canada and Mexico gather at the Summit of the Americas that begins April 13 to announce the general outline of a new trade agreement. Details of the agreement would continue to be discussed. This upbeat story follows President Trump’s tweet from Sunday, where he said the Mexican government “must stop the big drug and people flows, or I will stop their cash cow, NAFTA. Need Wall!” Tweets aside, the escalating trade spat with China and recent tumble in Wall Street has fueled speculation that the Trump administration is looking for a win on NAFTA.