The weekly trading ranges in the two main crude oil futures contracts inaccurately indicate an uneventful period, with prices struggling for direction. WTI moved in a $2.22/bbl range, whilst its European peer managed an even narrower band of $1.92/bbl. The structure at the front, whilst not exactly telling the story of a tight underlying oil balance, remained solid.
The current pathway to market enlightenment is a narrow road of tracking interest rates. With such shared and crowded focus, foreign exchange, equity and commodity markets start to ball up in a defensive but positive stance. One can never keep a good stock market down in modern climes and even with tepid global manufacturing (as discussed below), buoyant bourses take heart in either good or bad news.
The next Fed rate decision is less than a week away, and the latest salient data, the ADP jobs report, was published yesterday. It showed that the US private sector cut 32,000 jobs, led by companies with fewer than 50 employees, which shed 120,000 positions. As one of the Fed’s mandates is full employment, the report may have been the final piece of the puzzle falling into place, and the emerging picture now suggests a clear lowering of borrowing costs next Wednesday.
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