Oil retraces as deal optimism fades

CMC Markets

Crude oil’s 20% rebound overnight gave the energy sector a boost, with the S&P 500 energy sector rallying over 9%. WTI Oil prices came up to US$ 23.7 this morning, as traders scrutinize the possibility of an oil-cut deal to be reached any time soon.

Ultimately, President Trump’s twitter message alone, is insufficient to lift oil prices for a sustained period.

Technically, WTI-Cash has hit a 38.2% Fibonacci Retracement level of US$ 25.9 last night and has since retraced back. Some consolidation between US$ 22.0 to 25.9 could be seen in the days to come, while traders await more updates from Saudi, Russia and the US Shale Oil industry.

Last night’s US jobless claims turned out to be a huge market disappointment, with some 6.6 million people filing unemployment status. This has overshadowed tonight’s non-farm payroll reading, which is forecast to have dropped 100k in March. Even a significant lower reading wouldn’t surprise us much more, as traders have been shocked almost every day since we’ve entered 2020.

Luckin Coffee – China’s domestic ‘Starbucks’ – has plunged over 75% after the company disclosed fraud in accounting and overestimated sales by US$ 310 million. Trading volume of the share was 16 times of the daily average last night. The collapse of Luckin’s public image threatens Chinese branding and future IPOs in the overseas market, as investors might require higher risk premiums and more stringent audit measures of Chinese listings.

In Asia, the market is likely to finish the week with a balanced tone between rising jobless numbers versus more fiscal support. Equities in North Asia may continue to outperform EU and US peers as the virus spreading curves in Asia are much more flat than that of the west.

Crude Oil West Texas - Cash chart