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Bounce in oil helps to steady equities - AM Briefing
30 Mar 2017
US stock indices consolidate - Video Update
29 Mar 2017
Risk appetite returns - AM Briefing
29 Mar 2017
S&P500 - Topping out, or consolidating? PM Bulletin
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Risk appetite returns after the Trump wobble - AM Briefing
28 Mar 2017
Beware hidden relationships between seemingly unrelated markets - Trading Guides
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Risk assets slump in wake of Trump’s healthcare debacle - AM Briefing
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24 Mar 2017
Markets on hold ahead of crucial vote - Video Update
23 Mar 2017
Tranquil markets await big data - AM Briefing
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Investors rattled after equity sell-off - Video Update
22 Mar 2017
US Markets Snap 109-Day Streak - AM Briefing
22 Mar 2017
Crude oil update - PM Bulletin
21 Mar 2017
European markets stable on the open - AM Briefing
21 Mar 2017
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20 Mar 2017
FOMC post-mortem - Video Update
16 Mar 2017
Rate hike sends stocks higher - AM Briefing
16 Mar 2017
FOMC rate decision and Dutch election in focus - Video Update
15 Mar 2017
Oil rally gives markets lift - AM Briefing
15 Mar 2017
Crude trades at lowest levels since production cut agreement - PM Bulletin
14 Mar 2017
Politicians take centre stage again - AM Briefing
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Article 50 deadline approaches - AM Briefing
13 Mar 2017
European stocks push higher after Draghi’s hawkish stance - AM Bulletin
10 Mar 2017
Non-Farm Payroll look-ahead - PM Bulletin
09 Mar 2017
Fed rate hike seems certain - AM Briefing
09 Mar 2017
Market expects Fed to hike rates next week - Video Update
08 Mar 2017
Another twist in the French election - AM Briefing
08 Mar 2017
Odds slashed on Fed rate hike - PM Bulletin
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Investors lacking direction this morning - AM Briefing
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Fibonacci Retracement - extensions - Trading Guides
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Equities slip in early Monday trade - AM Briefing
06 Mar 2017
Modest profit-taking sees US indices post rare loss - AM Briefing
03 Mar 2017
Crude struggles to break above resistance - Video Update
02 Mar 2017
UK baffled by the origins of their favourite brands - PM Bulletin
02 Mar 2017
Fresh record highs for major indices - AM Briefing
02 Mar 2017
All eyes turn to the Fed - Video Update
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Here’s a daily chart for front-month WTI crude. Of particular note is last week’s sell-off which has seen the price break below the upwardly-trending support line that has built since early February. This chart also suggests a definitive rejection of resistance around the $54 level. Note that we’ve been highlighting this area for some time now and pointing out that crude needed to break and hold above here convincingly for the contract to make further gains.

https://www.spreadco.com/assets/14.03.17v1.png

Earlier today crude traded down to its lowest level since the end of November, back when OPEC and non-OPEC producers confirmed an agreement to cut production by around 1.8 million barrels per day. Today’s sell-off came as OPEC’s monthly report indicated that Saudi Arabian production unexpectedly picked up in February although output remained below its agreed quota. There’s also been some suggestion that producers could be unwilling to extend their output cuts beyond the June cut-off date - something the market had been banking on.

So far the oil market has failed to recoup the losses suffered last week. In fact, the continued sell-off suggests the possibility that some serious structural damage has been done to the market. There had been hopes that last week’s rout may have helped the market to rebalance somewhat as there had been a record build-up of speculative longs in recent months. However, there’s little evidence of any significant reduction in long-side positioning. This suggests that investors will remain wary that any negative news could result in a further avalanche of selling if speculative longs rush to reduce their exposure. So crude could remain under pressure for some time to come with every fresh US inventory update being a potential flash point for a sharp market move - up or down. The next report comes from the American Petroleum Institute later this evening with a further update from the US Energy Information Administration tomorrow afternoon.

For now the oil sell-off is having little effect on equity markets. However, this could change once tomorrow’s Fed meeting and rate decision are out of the way. Equities could also be affected if crude has another lurch lower and then continues to trade under $50 per barrel. Lower oil prices threaten the profitability of energy companies, damage the viability of all the new rigs which have restarted over the past twelve months, hurt the economies of oil-reliant states including Russia and Saudi Arabia while threatening the viability of the banks and other financial intermediaries which have provided finance to the industry. Cheap oil isn’t always a good thing.

Disclaimer:

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Category: PM Bulletin


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