Morning View: Added Supply Boosts the Price of Crude Oil

Morning Recap:
The price of Crude Oil rallied last night on the back of falling US Oil production. There is a supply side concern suggesting that there could be a quicker production response to rig declines than previously anticipated. The US Oil industry is centred in North Dakota where the number of producing wells hit a record high, spurning the concern. Add USD weakness and tensions in the Middle East and we see price at an important level which I discuss in my Chart of the Day below.

Last nights ‘datapalooza‘ as I heard it called around the office, saw a less than impressive US retail sales number, signalling consumers were in no rush to spend on the push into spring. There doesn’t seem to be too much of a concern over this print for the economy as a whole, with fundamentals for consumer spending remaining positive.

Locally in Australia, the Reserve Bank was warned by the IMF that it should look to be cutting already historically low interest rates more still. Their thinking is to prevent Australians from becoming fearful of falling wages and weaker employment prospects.

“Less wages would mean less demand, and that in turn would mean less inflation and you could see a spiraling effect of lower and lower wages and inflation until the economy is ground down” was what was mentioned.

The thinking from economists on what was said is that the IMF’s point about “inflation expectations” is a serious one. This is because once consumers and employers believe inflation will be much lower in the future, they will start behaving accordingly. This will then impact on wage growth and spending.

On the Calendar Today:
This morning we have 2nd tier Westpac Consumer Sentiment out of Australia, followed by the big Chinese GDP release.

Definitely keep an eye on your economic calendar later tonight with a whole raft of central banks on the board.

Wednesday:
AUD Westpac Consumer Sentiment
CNY GDP
CNY Industrial Production

EUR Minimum Bid Rate
CAD Manufacturing Sales
EUR ECB Press Conference
CAD BOC Monetary Policy Report
CAD BOC Rate Statement
CAD Overnight Rate
CAD BOC Press Conference

Chart of the Day:
CL-OIL Daily:

Click on chart to see a larger view.

CL-OIL 4 Hourly:

Click on chart to see a larger view.

Pushing up to the important level on the CL-OIL chart we spoke about on Twitter last week. Last week we got a rejection off the level but price hasn’t managed to follow through and we are back testing the level again today.

One more bounce back down, or is it 5th times a charm? Either way you choose to play it, you have a pretty solid level to manage your risk around here.