Oil prices gave back some of last week’s gains Monday on a combination of concern over the possibility of a change in the inventory destocking pattern and high US crude oil production coupled with a mixed performance in the external markets.
Crude oil futures remain in a downward sloping linear regression trading channel but with an elevated level of volatility.
The last few weeks have seen a bit of negativity in the weekly fundamental snapshots with the EIA monthly fundamental forecast also biased to the bearish side. Later in the week both OPEC and the IEA will release their monthly projections with the market watching very closely at their forecast of forward global inventories and crude oil production.
On the external front, the US dollar was weaker versus most major currency pairs providing support for the oil and broader commodity complex. However, the US equity market gave back a modest portion of Friday’s post labor report gains ahead of tomorrow’s US inflation gauge.
However, most international markets were higher as they played catch up to Friday’s surge in US equities. The correlation between equities and the direction of oil prices has been stronger than the relationship with the US dollar over the short term.
Overall the externals were a positive for oil prices Monday.