|News||Crude off early highs on China tightening fears and EIA supplies|
|Previous||3.4 Million Barrels|
|Forecast||1.5 Million Barrels|
|Analysis||Cured started the day mixed and struggling to hold onto the gains; the mixed data and outlook for demand and supply is affecting the market amid the strong need to continue the downside correction.|
Crude oil futures for June settlement ended on Tuesday with gains to settle at $103.31 a barrel rising off the lows of $100.11 a barrel. Today the contract moved higher in the morning Asian trades to the high of $104.56 a barrel and started to fall from there to currently hover around $103.76 still with gains and above opening los of $103.31.
The market is mixed with the bullish support in the market for crude starting to wane as the market falls back from the intraday highs.
We saw crude gathering positive momentum since yesterday, where fears of flooding in the U.S. Gulf Coast refining hub and rising Chinese crude imports last month supported the rally. The API also reported a decline in gasoline inventories by 1.8 million barrels last week which is the focus in the summer driving season.
Nevertheless, the fears started to mount today after China reported strong inflation acceleration that awakened fears of further monetary tightening and the dollar gained grounds which was further pressure on crude to decline of its early highs for now and might be poised for more bearishness today with the EIA report due later.
The dollar index moved to the upside to the high of 74.66 and its now trading around those areas off the low of 74.48.
China’s consumer price inflation accelerated 5.3% in April on the year above the expected and the target by the government for the fourth consecutive month, which supported the expectations that China might take more steps to cool inflation and accordingly slow growth and demand on Crude.
The drop in gasoline inventories as reported by the API yesterday was also accompanied by a bearish pressure and continued buildup in crude stockpiles. Crude stockpiles yesterday added 2.9 million barrels.
As for the EIA report today, expectations are for a buildup of 1.5 million barrels last week slowing from the previous week’s 3.4 million barrels buildup. Meanwhile, gasoline inventories are expected with 0.75 million barrel drop from the previous 1.0 million barrels drop.
The volatility is expected to remain and crude will struggle to remain to the upside as the bearish pressure grows on the market. A strong drop in crude supplies from the U.S. today will support crude to continue to the upside or it will likely move south.