Originally published by Rivkin Securities
Oil prices continue to fall despite API data indicating another larger than expected inventory drawdown, although both gasoline and distillates stockpiles grew. Libya is continuing to ramp up production, as wells are brought back online after years of civil war crimped output. Libya plans to continue increasing production, which is one of the reasons the oil traders are sending prices lower. WTI oil prices are now at US$43.43, a full 14% below the price just one month ago and back at nine-month lows, a chart of which can be seen below.
From a technical perspective, the next major support zone is in the US$40 region, where we find the major July 2016 low and the 50% retracement level of the February 2016 to February 2017 advance.
US stock markets were down overnight with the Dow Jones Industrial Average dropping 0.29% and the S&P 500 performing substantially worse with a 0.67% fall. The Nasdaq 100 gave back half of yesterday’s gains as the ‘FANG’ (Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), Google (NASDAQ:GOOGL)) stocks all fell. ASX futures are down 0.5% this morning indicating a weak open. The market has been choppy recently with decent sized moves in both directions. At the current level, the S&P/ASX 200 is almost unchanged for the year to date as a rally towards 6,000 in late April has been undone in the last six weeks. The banks, as well as Telstra (AX:TLS), which make up a large proportion of the index, have been holding the market back.
The Reserve Bank of Australia (RBA) meeting minutes released yesterday revealed some interesting insights into the thinking of the board regarding interest rates. The committee spent time discussing the risk that ultra-low interest rates can lead to a build-up of financial risks that could potentially lead to a recession. The high level of household debt, together with a low savings rate, are causing concern amongst policy makers indicating that the RBA will be very reluctant to further reduce rates and therefore 1.5% may be the low point in this interest rate cycle.
Data releases:
- No Significant Data