OIL: Crude Rallies On Trade Hopes & Less Expected US Output
Oil prices rose strongly on Tuesday and have continued to rally during Wednesday’s APAC session following the announcement that the US and China would meet over coming days in Switzerland to discuss trade with the de-escalation of tensions the first item to be dealt with. Oil has been worried about the impact of increased protectionism on global oil demand and so the market will watch the talks closely for progress.
- US Treasury Secretary Bessent and Trade Representative Greer will meet China’s Vice Premier Lifeng on the weekend. Bessent noted that current tariff levels are “unsustainable” and that de-escalation needs to occur before they “can move forward”.
- Yesterday’s rally in crude was driven by the EIA revising down its US oil output projection to 13.42mbd in 2025 as it believes that lower prices will drive firms to extract less shale oil.
- WTI rose 3.3% to $59.00/bbl on Tuesday more than unwinding Monday’s losses following OPEC’s announcement of increased output from June. It reached a high of $59.84 but is still trading below that despite the 1.0% increase today. The benchmark is currently around $59.70 and up 2.3% this week. Short-term gains are seen as corrective though and the bear trigger is at $54.67. Initial resistance is at $61.49, 20-day EMA.
- Brent was up 3.0% yesterday to $62.04/bbl after reaching $62.80. It is up 0.8% to $62.66 in today’s APAC trading. Despite this week’s 2.3% increase, a bearish theme persists. Gains over April 9-23 are seen as corrective and so the rise in recent days is likely to be too. Initial support and bear trigger is $58.00, while initial resistance is at $64.46, 20-day EMA.
- Bloomberg reported that US crude inventories fell 4.49mn barrels last week, according to people familiar with the API data. In terms of products, distillate stocks rose 2.24mn but gasoline declined 1.97mn. The official EIA data is out later on Wednesday.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GOLD: Gold Losing its Lustre as Trade War Intensifies.
- Gold has benefited more than most in the trade war build up yet with it now in full swing, even it is suffering.
- Gold lost ground for the week last week for only the second time this year.
- Falling by -1.52% gold has been hit by the broadening trade wars’ potential impact on the global economy.
- Gold follows a general commodities rout with London’s Metal Exchange having the biggest decline since early 2020.
- Having touched highs of $3,134.17 at the start of last week, gold saw forecasters restating their year end forecasts higher and higher.
- Gold has fallen dramatically since, breaking through $3,000 this morning to be at $2,982.20.
- Gold has traded through the 20-day EMA of 3030.25 with the next key technical level, the 50-day EMA of 42,945.25
OIL: Crude Falls Further But Appears To Have Stabilised, WTI Below $60
Oil prices fell sharply on Friday and have continued the downtrend during APAC trading so far today in response to expectations that global growth and thus demand for crude will be severely impacted by the imposition of significant tariffs on US imports and China’s retaliation. This concern has driven Saudi Arabia to reduce its benchmark Arab Light by $2.30/barrel for Asia in May, which is pressuring markets today. The pullback in overall risk appetite continues with AUDUSD down 0.7% and S&P e-mini -3.6% today.
- WTI is down 3.4% to $59.87/bbl today after falling 6.9% to $62.32/bbl on Friday. It reached a low of $60.45, which it has breached today. The benchmark has broken below 4 support levels, including the bear trigger.
- Brent fell 5.8% on Friday to $66.06/bbl off the intraday low of $64.03. It is down a further 3.3% to $63.44 at the start of today’s APAC session. It has broken the bear trigger at $67.95 and key medium-term support at $67.87 as well as level 4 at $66.55. Not only has the bullish theme been cancelled but a bearish one has been strengthened.
- Earlier in 2025, oil prices fell on news that OPEC would go ahead with the start of its output normalisation in April but the size of the increase in production was larger than expected, which has exacerbated recent price moves. Forecasts have been for a market surplus in 2025 for some time and it could now be worse with lower expected demand and higher-than-forecast OPEC output.
JGBS: Sharp Rally In Cash Bonds, Cash Earnings Will Concern BoJ
In early-Tokyo trade, JGB futures are sharply higher, +60 compared to settlement levels, with cash US tsys bull-steepening, benchmark yields 5-15bps lower, in today’s Asia-Pac session.
- Labor & Real Cash Earnings have printed higher than expected at +3.1% y/y and -1.2% y/y respectively versus estimates of +3.0% and -1.3% and priors +2.8% and -1.8%. The same Sample Base measures printed +2.4% y/y and +1.9% y/y respectively versus estimates of +2.9% and +1.9% and priors +2.0% and +3.0%.
- The local calendar will also see Coincident & Leading Indices data later.
- President Trump's tariff announcement has sparked a huge fall in equities and bond yields as investors anticipate that the US economy will be hit hard.
- That said, the market has realised this is not just a US problem. A raft of Asian economies have reached out to the US looking to remove either levies on US imports or open trade talks. However, China unveiled a 34% duty on all US imports, and this will be front centre as the market attempts to digest the implications of this in the Asian session.
- Cash JGBs are 5-12bps richer across benchmarks, with the belly leading. The benchmark 10-year yield is 10.3bps lower at 1.114% versus the cycle high of 1.596%.
- Swap rates are 6-10bps lower. Swap spreads are mixed.
