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Recycled news fools the punters

Published Wednesday, September 2nd, 2015

Poor Chinese PMI data spiked the stock market rally yesterday. Numbers from the eurozone were disappointing and from the US uninspiring. September has therefore begun badly with US and European equity indices down around 3% across the board. The Shanghai Composite was down 5.8% at one point but ended with a loss of only 1.3%. It was down 4.6% again in today’s trading before clawing its way back to -0.4%, presumably with authorised assistance.

The poor Chinese numbers were not the cause of the renewed setback in oil prices. The cause was the realisation that the news that had excited punters on Monday was nothing new and was not worth even $1 bbl, never mind the $4 bbl that was registered. All of Monday’s gains were taken back yesterday. There will be more losses today if the EIA weekly stock figures come in anywhere near last night’s API number which showed a 7.6 million bbl increase in crude with a small 320,000 bbl draw at Cushing. Gasoline drew 1 million bbls and distillates built by 250,000 bbls.

Co-operate and we will give you a production cut

It should not come as a surprise, but it often does, that recycling old news can have much more of an impact second time around. We had an example of that on Monday. It was not old news recycled exactly, more of a repeat of what had been said many times before. The commentary in OPEC’s latest Bulletin is headed “Co-operation holds the key to oil’s future” and follows the last one released in May headed “Advocating oil market dialogue”. Their February Bulletin was headlined “Rational planning and compromise — a better way?”. What we heard on Monday quite clearly was nothing new or even repackaged.

to read the rest of the report, please click here

Posted by David Hufton