Today’s Spotlight Market
Crude Oil futures bounced off support around the $40 level after the Energy Information Administration reported a larger than expected drawdown in Gasoline inventories. The large product numbers have been weighing heavily on the Oil market in recent weeks due to the anomaly in Gasoline levels. Oil also received a bit of positive news on the labor front, which has helped slow the sell-off. Tomorrow?s non-farm payrolls number is in focus and could help influence the near-term direction of the Oil market. ?
Fundamentals
Yesterday?s EIA report showed Crude Oil inventories rising by 1.4 million barrels, versus the analyst estimate of a 1.4 million barrel drawdown. However, this was not the news that moved the Oil market. Gasoline inventories fell by 3.3 million barrels on the week, far exceeding the analyst estimate of a 200,000 barrel drawdown. As mentioned earlier, Gasoline levels were an anomaly, with stocks actually increasing over the summer. This year, Gasoline inventory levels bottomed out in May and have shown month-over-month increases in June and July. Typically, we do not see inventory levels bottoming out until August before rebounding. The ADP reported that businesses added 179,000 jobs in July. While short of June?s 287,000 jobs added, the number was a solid showing, but probably not strong enough to compel the Federal Reserve to raise rates in September. This number is a win-win, in a way, for the Oil market, as the job creation was strong enough to stave off demand worries while, at the same time, potentially influencing the FOMC into inaction. Tomorrow?s Non-Farm Payroll report is expected to show the overall economy adding 180,000 jobs in July.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the September Crude Oil contact bouncing back strongly yesterday after closing below the 40.00 level on Tuesday. There is some support in the this area, which coupled with technically oversold levels may have triggered some short-covering. The Oil market is trading below the major moving averages. If prices are unable to hold around the $40 mark, prices may test support around the 35.00 level or, potentially, January lows.
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