Crude oil extends losses

Yesterday, front-month WTI fell to its lowest level since mid-January. It broke under the lows seen in early June, from where the last decent rally took place, and continues to close in on its December low point, around $68. There was a strong bounce in the afternoon which added $2.50 to the price. But both Brent and WTI are little-changed today. Fundamentally, it’s easy to see why oil should be so out of favour. Traders remain focused on the demand outlook, and have been rattled by recent economic data releases. For the most part, these have indicated a slowdown across the US economy, with Friday’s sharp uptick in Unemployment, and poor payroll numbers, only adding to concerns. There was some better news from the Services side of the US economy as yesterday’s ISM Services PMI indicated modest expansion and came in above expectations. But that can’t counter last Thursday’s weak Manufacturing data, which showed the sector that continues to contract. There’s also the question of future demand from China and Europe which remains unclear. The daily MACD continues to indicate a market which is deeply oversold. But not yet as oversold as it was at the end of last year. Markets should enjoy cheaper energy prices now, as history suggests they don’t stay low forever.