Relief Rally In Crude As China Cuts Rates & Fed Expected To Pause

After several days of sinking, oil prices rallied on Tuesday. They were already rising following the cut in China’s short term rates, but the close-to-expected US CPI data gave it impetus and it rallied further. The data added confidence to the view that the Fed is likely to be on hold today, thus helping the demand outlook. WTI rose 3.2% to $69.35/bbl after an intraday high of $69.83 and Brent +3.3% to $74.14 after a high of $74.66. The USD index was 0.3% lower.

• Tuesday’s rally didn’t unwind all of Monday’s decline but WTI is approaching resistance at $71.30, the 20-day EMA, and Brent at $75.59. WTI is currently trading around $69.14.
• Bloomberg is reporting that API recorded crude inventories rose 1.02mn barrels last week after a 1.7mn drawdown the previous week, according to people familiar with the data. Gasoline stocks rose 2.075mn and distillate +1.39mn. The official EIA data is published today.
• The US will buy 12mn barrels of oil to replenish the SPR this year. 3mn is due for delivery in August and another 3mn is currently being sought. The SPR is at a 40-year-low and the administration is taking advantage of favourable prices to refill it but looks set to do so in small increments to minimise the impact on the market.