Crude Range Trading, Conflict Fears Ease & Hope China Increases Demand

Oil hasn’t made up any of Tuesday’s losses during APAC trading today. Yesterday crude fell around 2% driven by a stronger greenback from better PMIs and stabilisation in the Middle East. Brent has been range trading and is up slightly to $88.11/bbl but off the intraday low of $87.92. WTI is flat at $83.75 after an intraday low of $83.45. The USD index is also little changed.

• The war risk premium has been reduced following US diplomatic efforts to stabilise the situation in the Middle East and increasing pressure on Israel to abandon a ground offensive. Crude markets were also reassured that the US and Saudi Arabia have been talking to ensure the conflict doesn’t escalate.
• On the demand side, China has increased the deficit ratio and issued more government bonds in an effort to stimulate the economy. There is hope that this will increase demand for oil given that China is the world’s largest importer.
• Bloomberg reported that US crude inventories fell another 2.67mn barrels after -4.38mn the previous week, according to people familiar with the API data. There was a 4.17mn barrel drawdown of gasoline stocks and -2.31mn of distillate. The official EIA data is released later today.
• Later Fed Chair Powell gives welcoming remarks and ECB President Lagarde speaks. On the data front, US new home sales and the German Ifo for September print. The Bank of Canada meets and is expected to leave rates unchanged.