Oil update: Volatility around inventory data

Stephen Innes SPI Asset Management

Crude's maligned meander lower still finds buyers on dips, likely a function of pre-China PMI/NPC positioning, but the grind higher gap lower trend could extend until US inventories drop. So we should expect volatility around US inventory data releases.

The market has underestimated Russian production, SPR-driven exports and various dark fleets that sess global inventories remain higher than expected.

Since China is the most persistent driver for the outlook, we could be nearing a short-term make-or-break moment for Oil prices. If China's PMI fails to inspire or during the NPC policymakers were to maintain the status quo, i.e. a marginal increase in fiscal stimuli, oil traders would likely remain cautious about China's recovery. As a result, Oil prices would likely continue to underperform and could be at the mercy of the USD outlook (Hawkish Fed.)

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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