WTI fails to break above resistance - again
Yesterday crude oil staged another attempt at an upside breakout. So far in February we’ve seen front-month WTI stall when it has attempted to break above the $78.30-$78.80 area. But it managed to cut above here yesterday, although it ultimately failed to close in on $80. Once again, it ran out of upside momentum as it pushed up into the $79.20-$79.70 band. This area has held as resistance on four separate occasions since November and is becoming something of a barrier to higher prices. The latest update on US inventories showed a bigger-than-expected build in crude stockpiles. But the draw on gasoline was bigger than expected while the draw on distillates was much lower than anticipated. All-in-all it was a bit of a wash.
The US dollar lost ground while precious metals and stock indices rallied following this afternoon’s update on US Core PCE. The Fed’s preferred inflation measure came in as expected, and crucially, January’s year-on-year number showed a continuation of the downward trend in this data series, coming in at +2.8% from +2.9% in December. Investors had been worried that Core PCE may have followed the CPI and PPI in ticking higher. But this latest release has reduced concerns that the Fed may push out its first rate cut beyond June. Consequently, there was a pick-up in positive market sentiment. Crude oil had a brief knee-jerk rally but this quickly unwound.
The US dollar lost ground while precious metals and stock indices rallied following this afternoon’s update on US Core PCE. The Fed’s preferred inflation measure came in as expected, and crucially, January’s year-on-year number showed a continuation of the downward trend in this data series, coming in at +2.8% from +2.9% in December. Investors had been worried that Core PCE may have followed the CPI and PPI in ticking higher. But this latest release has reduced concerns that the Fed may push out its first rate cut beyond June. Consequently, there was a pick-up in positive market sentiment. Crude oil had a brief knee-jerk rally but this quickly unwound.
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