Cushing data boosts oil price

It’s been a relatively subdued session this morning in Asia. Even the release of the second edition of the Australian Bureau of Statistics (ABS) weekly jobs data that implies almost 1 million Australians have lost their jobs, failed to imprint on the AUDUSD.

Possibly supporting the AUDUSD and other risk assets was a comment from Deputy national security adviser Matthew Pottinger, that the United States was not considering ‘punitive measures’ against China over its handling of the coronavirus, contradicting previous comments from the Trump administration.

Also supporting risk sentiment, a further stabilisation in key commodity prices overnight as the front month (June) West Texas Intermediate oil futures contract closed back above U.S$20/bbl.

More importantly, the July futures contract which is where most of the volume is now going through as traders look to avoid a repeat of last month’s chaotic price action into the expiry of the May contract, closed at U.S$22.78 /bbl and is trading another 5.79% higher today, at U.S$24.09/bbl.

The catalyst for the rally, news that inventories at Cushing (the largest oil-storage tank farm in the world and responsible for about 13% of total U.S. storage) rose only 1.88mb last week, the smallest increase since mid-March, providing encouraging signs that the required rebalancing between supply and demand is now underway.

Attention now turns to tomorrow morning's API data (6.30 am Sydney time) and the official EIA data due early Thursday morning.

Given the strong correlation between Cushing numbers and the EIA’s reports, this week could see the earliest confirmation that a medium term low is in place for oil and that a modest recovery is underway.

The technical picture is supportive of this idea. As can be seen on the chart below there is a five-wave decline in place from the U.S$62.95 high to last month's U.S$17.27 low. After a 5 wave decline, a countertrend rally is expected and this idea is supported by the emergence of bullish divergence via the RSI indicator at the U.S$17.27 low.

In summary, while medium term support at U.S$17.27 holds basis the July contract, allow for prices to make further gains towards short term resistance U.S$26.40/50 region.

Source Tradingview. The figures stated areas of the 5th of May 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation