Despite lower producer price indices and export data, as well as three consecutive devaluations of the Chinese yuan, the energy complex was spared an even greater drop by rumors of stimulus and freer monetary policy.
We witnessed a technical rebound last week, meaning one driven by speculative buyers spurred by indicators based on an analysis of market psychology and sentiment. Such reasoning differs from classical fundamental analysis of supply and demand.
That said, WTI sold for as little as $41.35 per barrel, breaking through the resistance level of $42.03 established on March 18, 2015. We have not seen prices this low seen since March 2009. An old saying, ''trend is your friend'', suggests that, for now, this devaluation does not appear to be substantial enough to change the dynamic.
Weekly inventory data reported a drop of 1.68 million barrels, but a surplus remains. Distillate inventories rose by 2.99 million barrels and gasoline inventories were down 1.25 million barrels. In general, refineries may run into a bottleneck, the crack ratio may rise, and we will see some support for fuel.
Mathieu Tessier