Crude Lower As Further China Easing Weighs On Commodities

After rising around 0.7% on Wednesday, oil prices have given up these gains during APAC trading today as the general pullback in risk following China’s announcement of further policy support has weighed on equities and commodities too. The fourth consecutive weekly drop in US crude inventories and 0.1% drop in the USD index have failed to support prices.

• WTI fell below $77 to a low of $76.86/bbl. It is currently down 0.9% to $76.93. Brent touched $81 but is now around $81.05. Both are above initial support levels.
• Today’s unexpected China stimulus included a 20bp MLF cut and a 2000bn liquidity injection, which follows Monday’s 10bp reduction in key rates. Markets have been concerned re demand from the world’s largest crude importer for some time and the monetary policy easing this week may be confirming those fears. The China Petroleum Planning and Engineering Institute estimates that gasoline demand will fall 3.2% y/y in H2 and diesel 6.4%, according to Bloomberg.
• The EIA reported a 3.74mn barrel US inventory drawdown for last week, the fourth consecutive decline amounting to a total of 24.21mn barrels. The level is now its lowest since the start of February. But next Wednesday’s FOMC meeting will be key to the oil outlook.
• Later US Q2 GDP, jobless claims, June durable orders and German July Ifo survey print. Also ECB President Lagarde speaks.