Spot Crude Oil Rallies; Anticipating PPI and Inventory Data
March 17th, 2010 Posted in Oil and Precious Metals
Spot crude oil prices saw their biggest lift in the past three months yesterday after the Fed held interest rates steady and did not change the wording in the accompanying rate statement. The gains could be compounded today with positive momentum behind the commodity. Traders will need to follow two major events that should be moving the spot crude oil market today; the producer price index and the weekly crude oil inventory data.
Yesterday spot crude oil prices jumped 2.9% to close the day higher at $82.28 after an opening price of $79.95.
After the announcement by the FOMC to hold interest rates steady and no changes to the wording of the accompanying rate statement, traders bid up the price of spot crude oil. Volume was high yesterday as this non action by the Fed was a positive for spot crude oil trading. This shows the fed is not intending on pulling on the economic reins of U.S. economy in the near term, allowing for an economic environment that can propel further growth.
A weaker dollar also helped to create a ripe trading environment for rising spot crude oil prices. The dollar fell broadly yesterday, while the EUR/USD tested the resistance level of 1.3800. Spot crude oil prices and the dollar typically have a negative correlation as crude oil is denominated in USD. A rally in U.S. equities also contributed to an environment conducive to bullish spot crude oil prices.
Now that the momentum is behind the commodity, we may look for further gains in spot crude oil trading. Due to be released today at 12:30 GMT is the U.S. PPI. Market economists expect the measure of inflation to fall by 0.2%. A result in line with expectation should be a positive for spot crude oil prices. Also to be released today is the weekly crude oil inventories report from the U.S. Energy Information Administration. A result less than the market expectation for a 0.6M barrel increase in inventories could help spot crude oil prices test the $83.90 resistance level. This price level is seen as a necessary hurdle for the next major breakout in the price to occur.
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Tags: Crude oil inventories report, Forex Trading, PPI, spot crude oil, spot crude oil prices, spot crude oil trading
