Crude Oil, US Jobs, China, WTI, OPEC+, RBOB, OVX Index – Talking Points
- Crude oil I managed to pick up the lows last week, but the uncertainty persists
- OPEC+ may be looking to get more involved in the wake of previous production cuts
- The market structure could say something, will WTI rise?
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Crude oil retains recent gains to start this week after recovering to close last week. Some strong jobs data in the US lifted the market mood on Friday and boosted several risky asset classes.
253K non-farm payrolls were added in the US in April, well above the expected 160K and previously revised 165K. The unemployment rate reached 3.4% last month, the lowest level since 1969.
Sentiment was further boosted by Chinese tourist travel data which showed that 274 million domestic mainland trips were taken during the Golden Week holiday. This is a bright spot on the general market disappointment with the economic recovery when China reopens.
Crude Oil has been under pressure for most of the past week after what appeared to be a flash crash on Thursday.
West Texas Intermediate (WTI) crude futures traded nearly 24% lower than the peak seen in April following the OPEC+ production cut announcement. It has since recovered to be down just 14% today, trading above $71.
OPEC+ said their meeting in early June will be in person in Vienna rather than a virtual one. Some experts have interpreted this as possibly indicating that the cartel is looking to be more active in propping up oil prices and that further production cuts may be imminent.
Meanwhile, the monthly oil market report on OPEC+ is scheduled to be released on Thursday.
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On the downside, some structural factors may be undermining the black gold as RBOB crack prevalence decreases. The RBOB crack spread is a measure of gasoline prices relative to crude oil prices and reflects the refinery profit margin.
RBOB stands for Reformulated Oxygenates Blend. It is a negotiable grade of gasoline. If refinery profitability drops, this could lead to lower demand for crude oil. The decline in this index comes despite last week’s EIA inventory data.
Crude Oil’s recovery has seen volatility decline as measured by the OVX Index. Potential revealer of market satisfaction with current pricing.
At the same time, the price difference between the two front WTI futures contracts is relatively moderate and can indicate a degree of equilibrium in the market at present.
Crude oil price updates can be found here.
WTI Crude Oil, Crack Friction, Back Corrosion/Contaungo, Volatility (OVX)
– By Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @tweet on Twitter
– By Daniel McCarthy, Strategist for DailyFX.com
To get in touch with Daniel, use the comments section below or @tweet on Twitter