The moves in globally traded oil futures markets have recently seen a long break of $80 a barrel, with question marks in place as to whether it is a supply and demand imbalance or a generic reaction to the Usd losing value.
The noise from earnings season can be discounted as a reason for the moves; global earnings reports are not showing top-line growth, and therefore are not creating a demand shortage of potential near-term growth.
Regional economic outlooks are not at all strong, they may be balanced, but no economy globally is growing at a pace that oil inventory numbers look to be easily depleted, and U.S. inventory numbers are confirming that refinery capability is high.
Therefore it must be speculative interest, and the naughty speculators must be to blame for higher prices. Before we can say ‘Jack Robinson’, the U.S. Administration will be up and running with theories and plans to adjust openly traded, supply and demand driven, markets. However, without speculative interest to balance the requirements of those actually taking delivery of crude, the markets would be far more volatile.
The open contract oil volumes, momentum, and order flows just do not to look be loaded with speculative interest, and therefore the moves in oil look to be the inverted reaction to Usd weakness in the global market, as assets classes are bought, empowered by the security of most economies having a central bank safety net wrapped around them.
The currency trade is in Usd/Cad, not only as a pair that inversely tracks the oil market moves when viewed on a monthly basis, but as the pair that has dropped to levels that have the Bank of Canada on high alert in regard to $1 soon to equal C$1, it would seem.
Both oil and cad may get an adrenaline rush at on Thursday as the Bank of Canada issues the statement that explains their recent rate meeting thought process, and also then holds a press conference that creates volatility in the forex market, and that by default may impact the oil trade.
Disclosure: No Positions