Crude in the green for St. Patrick’s Day

Share on twitter
Share on linkedin

4lcTo mark St. Patrick’s Day, the crude bulls have the luck of the Irish, as prices push on the green. As hopes of a production cut meeting next month rise once more, so does the price of black gold, Texas tea. Here are six things to consider on this 17th day of March:

1) In terms of overnight economic data, things were kicked off by Japan, with its trade balance rising to a surplus last month, driven by a much larger drop in imports (-14.2%) compared to exports (-4.0%). Across to Europe, and Eurozone inflation once again dropped back into deflationary territory, down 0.2% YoY for February (think: lower oil prices). Stripping out food and energy, core inflation came in at +0.8%, higher than the +0.7% expectation.

Eurozone inflation Eurozone inflation, % YoY (source: investing.com)

2) In terms of US economic data, weekly jobless claims have been strong again, coming in at 265k, versus 268k expected. The Philly Fed manufacturing index has followed hot on the heels of the NY Empire manufacturing print by showing regional strength, coming in at +12.4 – the highest level since last June.

3) Yesterday we discussed the potential for hawkish Fed talk to send crude prices lower as it provided a boost to the dollar. Well, the absolute opposite happened; talk of only two more US rate hikes this year sent the US dollar charging lower, propelling crude prices higher.

While much emphasis has been put on production freeze talks and short-covering for the recent reversal in crude prices, it needs to be acknowledged that the US dollar is at a 5-month low, as risk appetite has flipped, sending equities, commodities and emerging market currencies all charging higher.

So while producer jawboning has played its part in igniting a crude oil short-squeeze, central banks are as much responsible for the recent rally. Negative rates, stimulus measures and ongoing accommodative monetary policy have boosted market sentiment alike:

commodities and stocks

4) After yesterday’s weekly crude data, today’s attention switches to natural gas, and a likely minorly minor withdrawal from the weekly storage report. Consensus is for a single-digit draw, compared to -88 Bcf last year and -81 Bcf for the five-year average. This would leave storage at