EIA On Watch

Crude oil prices are a little softer today ahead of the latest EIA inventories release due later. Last week, the EIA reported a larger-than-forecast inventories surplus, reflecting weaker demand. However, looking at today’s expectations, the market is forecasting a 0.3 million barrel surplus, down sharply from the 7.9 million barrel surplus reported over the prior week. The start of the summer driving season in the US is expected to feed into higher demand which should help bring inventories down. If a further unexpected jump in inventory levels is seen, however, this should see the current weakness extend further near-term.

China Economy Fears

Crude has been curtailed recently, mainly as a result of fresh fears over the health of the Chinese economy. The recent PBoC rate cut was of a smaller amount than many were hoping, and as such has failed to deliver the demand spike that crude bulls were looking for. Looking ahead, the prospect of a fresh Chinese fiscal package holds some weight. However, with rates in the US, Eurozone and UK expected to move higher across coming months, the global demand outlook remains subdued for now. It would likely take a strong downside surprise in today’s data to help drive crude higher near-term.

Technical Views

Crude

For now, crude prices remain capped around the 72.61 level with the bear trend line sitting above as resistance also. While 65.34 remains as a floor, however, the focus is on an eventual break higher with the recent period of price action looking like the formation of a base. If we break back above June higher, 82.59 will be the focus point.