Crude Corrects on Tariff News
Crude oil prices have turned sharply lower through the back end of the week with the futures market dropping more than 3% from yesterday’s closing price, now down almost 5% from the month’s highs. An uptick in investor uncertainty linked to sweeping US trade tariffs, announced yesterday, has seen a sharp downturn in demand expectations. Risk markets were seen tanking across the board in response to the tariff announcement with global growth forecasts slashed accordingly.
Weakening US Demand
This outlook was amplified yesterday by a much larger-than-expected inventories surplus reported by the EIA, reflecting a fresh decline in US domestic demand. The EIA recorded an inventories surge of more than 6 million barrels, a stark contrast to the 3.3 million barrel decline seen over the prior week and well above the -0.4 million barrel decline the market was looking for.
Bearish Risks
Looking ahead, crude prices are vulnerable to further downside as traders digest the details of the new tariffs and the fallout develops. A drop in the US Dollar has the potential to offset some of the downside impact in crude. However, if US recession fears become more prominent again, crude should continue lower all the same. Focus now turns to tomorrow’s US jobs report where any undershooting of forecasts should push oil prices lower near-term.
Technical Views
Crude
The rally in crude has stalled for now into the 72.61 level with price since retreating sharply lower. Momentum studies are turning lower here also, reflecting risks of a deeper push. 67.45 will be the next support to watch, with bulls needing to defend the level to prevent a deeper drop towards 63.83.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.