Oil rallied more than 15% since the OPEC meeting in Algiers, which saw members agree on freezing output in an attempt to stem the oversupply and thus decreasing price of oil which has many of the OPEC members scrambling to cover holes in their budgets. However, the highs of 52.20 could not be held as OPEC members began squirming and looking for way to remove themselves from the Algiers deal as they realize that the cuts are not sustainable and are leading to backlash from various groups internally. As it stands it looks like Saudi Arabia will be left holding the bag if its wishes to keep prices bid, but this will come at a cost of market share for the giant as a reduction in its output will be snapped up by others as the desperate members look to feed their crude income addiction.
Today`s US Crude Oil Inventories will is key as markets watch to see how the inventories build in the US is fairing. A lower than expected build will imply that there is excess demand in the system, keeping the price of crude bid as its producers breathe a sigh of relief. However, a higher inventory build will stoke the flames of oversupply and see OPEC member’s further backing out the Algiers deal as they look to maintain their crude incomes albeit at a price of falling crude prices.
Today`s key economic releases are as follows:
- New Home Sales expected at 601K
- US Oil Inventories expected at 0.7M
- Trade Balance expected at -1125M