Originally published by Rivkin Securities
Oil prices were boosted on Thursday thanks to a weaker US dollar along with reduction in Saudi Arabian output. Energy minister Kalid Al-Falih on Thursday said that Saudi Arabia, OPECs largest member, had cut production below 10 million barrels per day and its 10.058 million barrel target following an agreement to cut production in November. The chart below highlights gains overnight, with both Crude Oil and Brent Oil up +1.57% and +1.58% respectively.
The US Dollar Index weakened against major peers, falling -0.37% against the euro, -0.66% against the Australian dollar and -0.70% against the yen. The under-performer was the pound, which dropped -0.32% as political risks continue to weigh on the currency. Euro gains come on the back of positive European data overnight as German GDP for 2016 rose slightly more than anticipated, up +1.9% against forecasts of +1.8% and a previous reading of +1.7%. Euro-zone industrial production also surprised to the upside, increasing +3.2% from +0.8%, higher than the +1.5% forecast.
The weaker dollar boosted commodity prices, with copper jumping +2.29%, iron ore +1.14%, spot gold +0.31% and spot silver +0.30%. A broad measure of commodities, the Thomson Reuters CRB index was also +1.39% higher.
In the US equity markets pulled back as technical indicators suggest the strength of gains in equities are fading. Both the S&P 500 and Nasdaq 100 finished trading -0.26% and -0.28% lower respectively. The second chart below shows the S&P500 from a technical aspect. The new all-time high from January 6th at 2,282.1has not been confirmed by momentum indicators, forming what is referred to as bearish momentum divergence. The formation of this divergence suggests that the price is now highly susceptible to a pullback in the near-term and a close below the 2,250 level opens up a retracement towards support around the 2,200 level.
Locally the S&P/ASX 200 index finished -0.08% lower despite trading in positive territory for most of the session and this morning we can expect a modestly higher open with ASX SPI200 futures up +7 points in overnight trading.
Chart 1 – Brent (Blue) and WTI (Purple) Crude Oil
Chart 2 – S&P500 Index
