|News||Crude stable in Asia after ending with gains on Wednesday|
|Analysis||Crude oil hovered above $107 per barrel in Asia on Thursday after yesterday’s strong drop in gasoline supplies bolstered the demand outlook from the world’s largest economy.|
Crude is trading around $107.40 per barrel higher by $0.32 cents or 0.30% extending the gains from Wednesday. Support was seen yesterday on the unwinding of jitters in the market over the outlook for the global recovery with positive data from Europe and the US which helped crude correct some of the losses seen in the past couple of days.
Crude ended on Wednesday with 86 cents gain at $107.11 providing hope that the bullishness is not totally over with the daily closing above the marginal $107.10 areas.
The EIA report was the strong support. Despite the largest the expected buildup in crude inventories by 1.6 million barrels beating 1.0 million expected, the unexpected 7.0 million drop in gasoline supplies, the biggest in almost 13 years uplifted crude price. The focus now turns to gasoline inventories with summer driving season demand and seemingly fragile economic conditions and rising prices did not yet dent consumer demand from the world’s second largest consumer.
We also found support from the dollar which prevailed with weakness on the feds rate outlook. The ECB already shifted stance and other central banks are to follow, while for the US economy inflation is stable and the recovery is unstable and that is prompting expectations for prolonged fed exit of their loose monetary policy.
The dollar index gauging greenback’s performance versus its six major counterparts slipped ahead of the first chain of inflation data today to trade at 74.65 off high of 75.07 and around the lows at 74.61.
Yesterday’s closing was a good boost for crude yet not strongly above $107.10 areas which will keep the volatility ongoing. Trading below the breached key resistance at $108.70 with daily closing keeps the bearish correctional potential for crude intact over the coming period.
Volatility is expected with the lack of data in Europe, leaving the sentiment a dominant player in the equations, keeping the focus on the US economy with weekly claims and producer prices index on the watch for today.