Crude Holds Onto Gains But Off Highs Following Disappointing China Data

Oil prices have extended Monday’s gains during today’s APAC session, despite April China data coming in on the downside. They are up another 0.4% with WTI around $71.40/bbl following an earlier intraday high of $71.79 and Brent about $75.56 after a high of $75.95. Both are approaching resistance levels of $73.93 and $77.61 respectively. The USD index is flat.

• While the hoped for surge in demand from China is looking less likely, the US announced that it will buy up to 3mn barrels of sour crude in August for the Strategic Petroleum Reserve (SPR), helping to support oil prices.
• Despite the weaker-than-expected China data, processing of crude remained near a record high. China’s disappointing post-pandemic recovery plus expectations of a US recession have weighed on oil prices this year. The market also continues to be nervous about the US debt ceiling talks.
• Supply issues persist though with Canadian wildfires disrupting around 300kbd of crude and issues with shipments from Iraqi Kurdistan persisting. However, Russian shipments continue to indicate that output isn’t being reduced there.
• Later the IEA publishes its monthly outlook report and industry data on US fuel stocks is also released.
• The Fed’s Mester, Barr, Williams, Goolsbee and Logan are all scheduled to speak today. US April retail sales will be watched closely. NY Fed services business activity for May, April IP and March business inventories print as well. UK and euro area employment data, euro area Q1 GDP and Canadian April CPI are released.