Crude Oil Price Rise May Struggle On Incoming Supply, Demand Data

Crude oil prices are on the upswing, with the WTI contract tracking higher alongside bellwether S&P 500 futures amid a broad-based recovery in risk appetite following last week’s blood-letting. That seems to reflect a bit of moderation in worries about the spread of the Omicron variant of Covid-19.

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Markets seem to be coalescing around the consensus that this particular strain is more virulent but less lethal than its predecessors. That has stoked hopes for minimal economic disruption as governments scramble for information to tailor a policy response.

The absence of big-ticket event risk informing Fed policy speculation may be helping too, allowing the markets to digest the fallout from the central bank’s increasingly hawkish messaging. Policymakers are mum through the blackout period preceding next week’s FOMC rate decision and the data docket is relatively sparse.

Crude Oil Rise May Struggle On Incoming Trade, Output, Inventory Data

The volume of incoming news-flow will pick up in the day ahead. China will publish energy import and export data. The US is also due to report on cross-border sales. Meanwhile, the EIA will publish its short-term energy outlook while API produces a private-sector estimate of the weekly change in US inventories.

US stockpiles have cautiously edged up since mid-September while exports have dropped. Chinese exports have fallen too, which probably reflects both top consumers’ appetite for building inventories given the recent price spike and broader inflation worries. Updated EIA forecasts may see next year’s US production revised up.

Taken together, data pointing to more of the same might cap crude gains somewhat. Weak exports and a pickup in US output may signal that storage will be rebuilt relatively faster even as slowing economic activity cools demand. The JPMorgan Global Composite PMI gauge has struggled after receding from May’s peak.

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