The Week In Hindsight, 09 May 2014
Both oil benchmarks turned a corner this week following better than expected US employment numbers last Friday and news of worsening violence in Ukraine, which saw trading commence for the new week with prices biased toward the upside.
This was while most economic data for the week remained broadly positive across developed markets. ISM Non manufacturing figures released late on Monday in the US showed confidence among purchasing managers in the non – man sectors reaching the highest level since November 2013, before one of the harshest winters in decades began threatening to suffocate the recovering economy. This was followed by better than expected unemployment data on Thursday and a number of positive figures for the UK economy, including services and manufacturing survey data.
While both benchmarks suffered a minor drop late in the week following a public display of discouragement for separatist rebels from Russian President Vladimir Putin, the overall takeaway from the week is a positive one. With a rebound in both US & UK economic numbers under way and expectations that some form of stimulus will be announced by the ECB over the months ahead still very much alive, the growth argument for elevated oil prices remains relevant.
In addition to positive outcomes for general economic data, the US Crude Oil Inventories Weekly Report by the EIA showed a rapid draw down of stockpiles over the week after a month long period which saw them rise to record levels, stoking concern over the health of the US recovery and the future health of the US production industry given that incidences of oversupply are only likely to increase as the economy moves closer toward achieving energy independence.
Although the evolution of the crisis in Ukraine does have the potential to influence prices in both directions over the coming weeks, each of the above are supportive of benchmarks remaining stable at the current levels with, if anything, a bias toward further upside.
Brent / WTI (Black)