Crude Oil, US CPI, Fed, Colonial Pipeline, PPI – Talking Points:
- Crude oil prices trim gains as US CPI data inspires risk aversion
- Colonial Pipeline restart may hurt WTI, eyes on US PPI data next
- Oil trading within an Ascending Triangle, key resistance March high
Growth-linked crude oil prices managed to end Wednesday’s session higher despite broad-based risk aversion in financial markets. The fastest pace of headline consumer price growth since 2008 pushed up Treasury yields and sent the Dow Jones, Nasdaq 100 and S&P 500 tumbling. The pain was felt across the world, with most Asia-Pacific indices trading in the red to start off Thursday’s session.
Having said that, WTI gave up most of its gains as it tracked Wall Street equities lower into the close. US government data reported that local crude oil inventories shrank to the lowest since late February last week. This is continuing to support the notion that the economy is steadily recovering from the coronavirus as stockpiles continue to evaporate from last year’s glut.
Prices were also elevated by the temporary shutdown at the Colonial Pipeline on the East Coast. Energy Secretary Jennifer Granholm announced late in the day that the pipeline will restart operations. The anticipated increase in supply may have also weighed on oil prices. This is as surging coronavirus cases in India, the world’s third-largest consumer of oil, is clouding the outlook for energy prices.
With that in mind, all eyes are on US wholesale inflation data over the remaining 24 hours. PPI final demand is expected to clock in at 0.3% m/m in April. Higher-than-anticipated readings could further boost inflation expectations and drive up Treasury yields. But, ongoing dovish commentary from the Federal Reserve could calm the bond market and thus crude oil prices.
Crude Oil Technical Analysis
WTI crude oil prices appear to be trading within an Ascending Triangle on the daily chart below. In the event of a turn lower ahead, keep an eye on the floor of the chart pattern which could hold. Further gains would place the focus on the ceiling, estimated between 66.37 and 67.94. A breakout higher could open the door to resuming the dominant uptrend.
Crude Oil Daily Chart
–— Written by Daniel Dubrovsky, Strategist for DailyFX.com
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