Market News & Analysis


Top Story

Crude up despite worst Chinese GDP showing in 30 years

In the previous week, oil prices had ended a three-week losing streak but there was no immediate bullish follow-through as this week got underway. But oil prices have pared their weekly losses, with both Brent and WTI rising noticeably on Thursday before adding to their gains on Friday morning despite a poor Chinese GDP report. At the time of writing, both contracts were still probing their session highs but remained marginally lower on the week.  

In other words, oil prices have stabilised over the past couple of weeks. During this period, we have also seen equity prices rise noticeably as a result of optimism over the US-China trade situation and Brexit. So, the gains can be partially explained away by improved risk appetite as a trade deal is seen as being positive for the Chinese and global economies, and in turn demand for oil.

China, which is the world’s second largest economy, expanded at its slowest pace since the early 1990s last quarter, according to official data released on Friday. While this provides more evidence that the trade war is taking a toll on growth, the more up-to-date data showed industrial production rose a surprisingly large 5.8% y/y rise last month when expectations were for a smaller 5.0% increase. Industrial output has therefore grown at a faster pace for the first time in three months but remains to be seen whether this spike is just an outlier (like in the case of March and June) or the start of something more profound.

From the supply-side of things, news that US crude oil inventories climbed last week by the most in almost six months suggests supply remains plentiful here. Further sharp increases in crude stocks, if seen, may keep price gains in check, although ongoing intervention from the OPEC+ group means the downside will be limited as well. So, overall, we are talking about a range-bound market, but with prices being near the range lows, the probability of a several-dollar rally has now increased.

From a technical point of view, the fact that WTI has broken above the 53.70-54.00 resistance range is bullish. But more work is needed from the bulls. They need to push prices above sturdy resistance in the $54.90-$55.00 range to trigger fresh buying interest. Otherwise, there is a risk that today’s gains could evaporate as we head towards the second half of the day.


Source: eSignal and City Index.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.