API Data Eyed as Energy Traders Fly at Night Amid EIA Debacle

Crude Oil, WTI, Economy, PBOC, API Inventory Data – Talking Points

• Crude oil prices rise as economic signals support further growth
  US API inventory data price sensitive during EIA data outage
  23.6% Fibonacci and 20-day SMA provide potential resistance

  Crude oil prices were higher in early Asia-Pacific trade on Tuesday, extending yesterday’s gains, with Brent and WTI on track for a two-week losing streak. Energy traders pressed the buy button despite lower risk sentiment leading U.S. stocks to open the U.S. session lower.

However, encouraging U.S. economic data and pro-growth rhetoric from Chinese policymakers helped support cyclically-sensitive oil prices. Overnight U.S. durable goods data beat analysts’ expectations. Durable goods orders, a measure of business spending excluding transportation and military orders, rose 0.5% in May from a month earlier, beating a Bloomberg consensus forecast of 0.3%. The surprise quelled fears of an impending recession by showing the underlying health of U.S. manufacturing activity.

Meanwhile, the Asia-Pacific region will receive additional easing support from China, the economic powerhouse in the Eastern Hemisphere. Yi Gang, governor of the People’s Bank of China, pledged more financial support for the economy. The People’s Bank of China has so far been dovish on policy easing, but the comment is likely to provide more easing in key markets in the coming months.

China’s relatively low inflation rate compared to its major peers gives the People’s Bank of China some room to cut rates when most countries do the opposite. The People’s Bank of China last month cut its five-year loan prime rate (LPR) by 15 basis points after cutting the minimum mortgage rate for first-time homebuyers by 20 basis points. Further production cuts could boost economic growth and thus oil demand, although Mr. Gang’s comments alone appear to be enough to boost prices.

The American Petroleum Institute (API) will release U.S. inventories tonight for the week ended June 24. Crude inventories rose by 5.61 million barrels in the week to June 17, the highest level since February. If today’s data shows a similar build in inventories, it could put pressure on oil prices. The Energy Information Administration’s weekly report has been delayed indefinitely as the agency deals with technical issues related to its servers.

Crude Oil Technical Forecast

If prices continue higher after bouncing off the 38.2% Fibonacci level, the 23.6% Fibonacci retracement level and the falling 20-day simple moving average (SMA) could act as confluent resistance. A break above would propel the bulls to target the December 2021 trendline. Alternatively, if the rally reverses, the 38.2% Fibonacci may provide some resistance.

Crude Oil Daily Chart