Oil Grinds Higher Ahead of Inventory Data

U.S. futures are pointing to a relatively flat open on Wednesday following a lacklustre start in Europe where indices are paring recent gains, weighed down by gloomy global growth forecasts.

While slowing global growth is not a new story for investors, the decision by the World Bank to cut its growth forecast from 2.9% to 2.4%, citing sluggish growth in advanced economies and weak global trade, among other things, has put a dampener on things. Perhaps if it wasn’t such a quiet start to the European session, this could have been brushed off but with not much happening so far today, what little there is, is negative.

We are seeing further gains in oil today, building on Tuesday’s advances which came as data from API showed that crude inventories fell last week by 3.56 million barrels, the third decline we’ve seen in four weeks. It would appear that the rebalancing of the oil markets is very much underway, the only questions now are how temporary these supply disruptions are and how high prices can go.

While I do think WTI could continue to grind higher for now, I do think it’s going to find significant resistance around $53.50-54. A move above this level would be quite bullish. It will be interesting to see if the EIA crude inventory figures confirm yesterday’s API release, which could be the catalyst for further gains in oil later on today.

WTI Daily

Dollar And Yields Define Market Direction

We’ll also get JOLTS jobs opening data from the U.S. for April, which is expected to decline for the first time in five months, potentially raising further questions about the strength of the labour market. I still believe the labour market is very strong, regardless of the recent jobs data but I imagine the Fed will want to see it bounce back quickly if it’s going to consider raising rates in July. It will also be interesting to see whether the NIESR U.K. GDP data for the three months to May indicates an ongoing slowdown in the economy in the lead up to the referendum.

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.