Originally published by AxiTrader
QUICK SUMMARY
Oil fell out of bed last night as worries over Chinese demand surfaced after the trade data yesterday and in the wake of Chinas hitting back in the tariff war targeting energy products including coal. The result is some big falls overnight with WTI down 3.5% and Brent 3.2% lower.
EIA inventory data was also less bullish for prices than expected with the crude draw of 1.35 million barrels was about 2 million barrels less than forecast. Gasoline surprised as well with a build of 2.9 million barrels not the 1.43 million draw anticipated.
BIGGER PICTURE
The battle over the Iranian sanctions continues.
After the Iraqi's aid they don't like the idea but will play along to protect themselves earlier this week the Chinese pushed back over the past 24 hours with the foreign ministry saying "China’s commercial cooperation with Iran is open and transparent, reasonable, fair and lawful, not violating any United Nations Security Council resolutions…China’s lawful rights should be protected”
The Germans also hit back at the US saying the Administration needs to think about EU interests.
That push back helped shape the narrative around oil at the margin.
But many folks are also citing Chinese trade data yesterday and the escalation of trade tensions as Beijing hit back with a new round of tariffs for the fall in oil overnight. Chinese data showed that it imported 8.48 million barrels of oil in June but separately Goldman Sachs (NYSE:GS) said imports from the US are down 70% in the three months to June.
Hence the issue about China impacting prices.
But it's to price that I'll defer this morning given I'm still a little out of sync with the day to day machinations of the narrative.
Last night's price action in Brent particularly has knocked it back toward the bottom of the recent downtrend within what looks like a shorter term but steeper downtrend.
Likewise WTI is pointing lower and nearing important support.
Will we see a launch from this critical levels where Brent and WTI launched their runs to 2018's highs. The charts suggest the answer is yes. And readers know it's usual for me to respect levels unless or until they break. But if the downside does give way then another $5 or so falls could be in the offing.
DATA:
We get machinery orders in Japan as well as Chinese PPI and CPI data. The ECB releases its economic bulletin, Canada releases housing data and then tonight besides jobless claims we get PPI data in the US.
Have a great day's trading.