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Crude futures have recovered from intraday lows inflicted by worse than expected U.S. employment data. Rising unemployment and declining consumption should take its toll on demand for crude. Additionally weekly inventories registered a sizable surplus for the second week in a row. Despite the negative supply and demand fundamentals crude continues to prove resilient. In fact, yesterday crude showed a muted reaction to negative data compared to the large pullback in U.S. equities. Today crude is being buoyed by the positive performance of the EUR/USD in the face of another weak session in U.S. equities. Therefore, crude futures continue to carve their own path in the midst of volatile performances of both the Dollar and U.S. equities. The stability of crude is mysterious and we can only speculate as to the reasons behind recent resilience. Tension surrounding Iran's nuclear program could be buoying the price of crude. However, Iran made concessions and appears to be playing ball, so this line of reasoning doesn't carry much weight. Another possibility is that the regulation curbing trading of commodity futures could be lowering volatility. Lastly, investors may be reluctant to send crude out of its trading range due to the fear that OPEC will manipulate production to keep crude within its desired $68-$73/bbl trading range. We believe the last reason may be the more prominent driving force behind crude's resilience, yet we are merely speculating.
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