Oil struggles after weak Chinese data & and inventory build
- Chinese house prices, retail sales & industrial production have disappointed
- API inventories unexpectedly rise
- WTI crude tests support at $70.00
Oil prices are falling for a second straight day and have traded lower in five of the six past sessions.
Traders remain cautious amid concerns over the outlook for global oil demand amid weaker-than-expected data from China, after a surprise rise in US crude inventories and despite an upbeat oil demand report from the IEA.
Global demand concerns have dragged on sentiment toward oil after a series of disappointing data releases from China in April. Retail sales and industrial production rose by less than forecast, and house prices fell for an 11th straight month. China’s property sector is key for the economic growth outlook as it accounts for around 20% of the country’s GDP.
Still, the IEA are confident that oil demand will continue to rise thanks to the recovery in China after Chinese oil demand hit a record 16 million barrels a day in March. The energy agency expects global consumption to grow by 2.2 million barrels per day this year.
Attention will now turn to EIA oil stockpile data, which comes after the API release showed that US stockpiles rose by 3.6 million barrels in the week ending May 12, defying expectations of a 900,000 barrel draw.
Oil outlook – technical analysis
After running into resistance at 83.40, the 200 sma, oil has been trending lower. It trades below a multi-week falling trendline and is testing support around 70.00 the psychological level.
A break below here and 69.35 the weekly low is needed to extend the downward trend towards 66.85 the late March low.
On the flip side, buyers could look for a rise above 71.70, the weekly high, and 72.40, the February low to bring 74.00 the May high into focus.
EUR/GBP rises ahead of inflation data, BoE's Andrew Bailey
EZ CPI is expected to confirm a rise to 7%, core CPI to cool to 5.6%
BoE Andrew Bailey to speak after mixed UK jobs data
EURGBP trades range bound, look for a breakout.
EURGBP is rising for a second straight session, ahead of eurozone inflation data. The data is expected to confirm that CPI ticked higher to 7% YoY in April, up from 6.9% in March. Core inflation is expected to cool to 5.6% YoY from 5.8%.
Sticky inflation is likely to prompt hawkish commentary from ECB speakers, with De Guidos and Panetta set to speak.
Meanwhile, the pound is struggling after mixed UK jobs data which showed that unemployment unexpectedly rose to 3.9% from 3.8% and vacancies fell for a 10th straight month. Average earnings ticked higher to 6.7%. The fact that the pound fell suggests that the market sees the cracks in the jobs market as a reason for the BoE to be less hawkish.
BoE Governor Andrew Baily is due to speak later and could offer some clarity on the central bank’s stance in light of the jobs data.
EUR/GBP outlook: technical analysis
After breaking below the multi-month rising trendline and the 200 sma at the start of the week, the pair has traded in a sideways fashion, capped on the upside by 0.8735, the weekly high and 0.8660 the weekly low. The RSI below 50 keeps sellers hopeful of further downside.
Sellers could look for a break below 0.8660 to bring 0.86 into target.
Buyers will be looking for a rise above 0.8735 and the 200 sma at 0.8750. to bring 0.8780 the rising trendline resistance and the 50 sma into target.
