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Crude Oil Holds the High Ground as Risks Swirl in BoJ Aftermath. Will WTI Rally?

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Crude Oil, API, EIA, OPEC, US Dollar, BoJ, NZD/USD, WTI, Brent- Talking Points

  • Crude oil has been supported despite uncertainty around it
  • The Bank of Japan’s move is still being deciphered for ramifications
  • Volatility has pulled back today. If it lifts off again, will WTI go higher?

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Crude oil held onto overnight gains today as the fallout from yesterday’s surprise move by the Bank of Japan continues to reverberate throughout markets.

US crude inventories decreased by 3.1 million barrels last week according to data from the American Petroleum Institute (API).

This was well below the slight decline that was anticipated. Oil traders will now look to today’s Energy Information Administration (EIA) stockpile figures for clarity on the situation.

OPEC also weighed in yesterday by saying that they will remain proactive and pre-emptive.

Further delays to the re-opening of the Keystone pipeline have also been announced. The connection links the Canadian oil fields to the US gulf coast.

The WTI futures contract is above US$ 76 bbl while the Brent contract is near US$ 80 bbl at the time of going to print.

Japan is a major energy importer and the surge in the Yen this week may assist their capacity to shore up supplies as they head into their winter.

Yesterday’s volatility in the Asian session has been replaced by relatively sedate price action across most markets so far today. The implications of the Bank of Japan’s decision are yet to be fully digested.

Wall Street managed to eke out some small gains that fed into a mixed APAC equity session. Australia’s ASX 200 found firmer footing while Japan’s Nikkei 225 slipped again. The rest of the region was mostly flat.

Swimming against the tide in Japan is the bank and insurer stocks. These entities could gain from a higher interest rate environment.

Speculation is growing that the BoJ might move out of the negative interest rate policy (NIRP) stance. Further tightening by another major central bank may impact global growth.

Treasuries have added a couple of basis points across the curve today, adding to the large gains seen yesterday, particularly at the back end of the curve.

Currencies markets have settled down somewhat, except for the New Zealand Dollar. It is notably lower while the US Dollar is mildly firmer across the board. Gold is steady above US$ 1,800.

Canadian CPI will be released later today alongside US mortgage and home sales data.

The full economic calendar can be viewed here.

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WTI CRUDE OIL TECHNICAL ANALYSIS

WTI crude oil rallied off its 12-month low of 70.08 seen earlier this month and that level may provide support ahead of the December 2021 low of 66.12.

The price has been unable to overcome the 21-day simple moving average (SMA) of late and it may continue to offer resistance ahead of the recent high of 77.77. That level may offer resistance

Further up, resistance might be at the breakpoint of 82.63 or the recent peaks of 82.72 and 83.34. The 55-day SMA is also currently near that high of 83.34.

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