JASPER’S MARKET SQUAWK 12-01-2023

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JASPER'S MARKET SQUAWK 12-01-2023

WTI Soars Higher Despite Crude Stockpile

Oil prices closed Wednesday’s session 2.6% higher despite EIA reporting a massive build in crude stockpiles as demand from China countered the surplus inventory. Oil is expected to remain highly unpredictable as markets try to weigh in on the impact of China’s rebound and the efficacy of western sanctions on n oil.

Chart: EURUSD

Key factors for today:

• WTI surprises markets after API and EIA stockpile build


• Dollar relatively flat despite hints at a less hawkish Fed


• Markets patiently wait for CPI inflation from the US


• EU-UK debacle on Northern Ireland protocol resurfaces


• ECB members have become increasingly hawkish

EIA crude inventories confirm API report

The US DOE confirmed yesterday’s API extraordinary build in inventories, showing a 19M bbl increase compared to the 0.5M bbl drawdown expected. US oil exports dropped to 8.7M bpd from 10.5M bpd in the prior month. Additionally, the Freeport LNG terminal said it would delay the restart of a terminal in Texas until February. WTI rose to a 9-day high at $78/bbl, where it found resistance. Natural gas ended the session 2.36% down but recovered from a drop to a 19-month low at $3.30/cf. Oil has support at $76/bbl, whereas natural gas resistance has it at $3.75/cf.

Some hints of Fed relative dovishness

Fed’s Collins (who isn’t on the FOMC this year but is seen as inclined towards hawkishness) said she was leaning towards a 25bp hike at the next meeting. Note that non-voting members often “float” policy changes ahead of committee meetings. The US index was relatively unchanged on Wednesday as the market prepares for the CPI report. USD/JPY, on the other hand, showed a 0.16% gain for the session, as it reversed after meeting a ceiling of 132.90. Bears eye 131.00 for further clues on short-term price action.

Ghost of Brexit resurfaces

After several weeks of generally favourable comments from both sides of the English Channel over resolving the Northern Ireland protocol, UK foreign minister Cleverly said yesterday there remained “genuine differences” with the EU and still gaps to be resolved. Cable closed higher by a mere 0.12% but remains mixed in a tight 10-pip range, with $1.21 being the floor.

Hawkish ECB comment support euro

ECB’s Olli Rehn was the latest to say that rates will have to rise “significantly” and reach restrictive levels. The comments were in line with a message given by Holzmann and Villeroy recently and contradicted Centeno’s softer tone from yesterday. EUR/USD rose 0.33% on Thursday but persists below $1.08. $1.0712 is support.

On the docket

• US inflation CPI

FX 1-day relative performance (USD)

• Yen 0.59% higher than the greenback


• Euro, pound and loonie nearly unchanged


• Swiss franc and Kiwi 0.16% lower vs USD


• Silver and gold up 1.10% and 0.39%


• Crude and brent mixed on 1-day

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