The Royal Rumble of US Crude

US Crude rallied over 6% yesterday - marking the biggest single day gain for 7 weeks -  despite the prospect of sanctions being lifted on Iranian exports & also despite storage levels being maxed out! (As discussed in post : Is Iran about to flood the Oil Market?) 

Let's take a step back to Thursday, when top analysts from Goldman Sachs & Morgan Stanley remained very bearish and did not expect any real turnaround in the price of Oil. 

The Boost for Stocks 

This morning the FTSE 100 was lifted by the major Oil Stocks and the US Future exchanges are also trading higher of the back of this lift. 

The Stock Market has been affected by the bullish US $ and this brief relief has become a catalyst for the gaining energy sector - as also yesterday's 2% rise in the S&P Energies showed. 

Why is a weaker USD & rising Oil better for Stocks?

The rising USD has been putting a dent on the earning of multinationals - affecting the major corporations! Hence the reason why we saw a nearly 3% decline in earnings season for the last quarter - For the first time in 6 years!  

The Oil Price collapse did not help the Stock market either - However, the recent rallies in Oil have supported more bullish traders searching for a technical bottom in this greasy commodity. 

Post NFP turnaround? 

Probably the most highest miss of recent times was Friday's NFP result - around 120K less than expected!  - Traditionally NFP sets the tone for monthly trends & we saw some of this "worse than expected" NFP being priced from the ADP release. However, did we really expect it to be that bad? 

However, as last noted by Mrs Yellen - even though payrolls may disappoint - the average hourly wage has been increasing by nearly 0.5%. 

In this case, what is the real unemployment rate?... (I will leave that one for you to ponder)... 

April Crude Forecasts 

I think that (despite my recent postings) the Oil markets are likely to slowly churn along until the end of the year. Shale production is expected to slow down in December & the Bank's latest reports suggest that $50 will remain a benchmark before increasing to $58-$60 by September this year. 

Although, we are still in an OVER-SUPPLIED market and this does not look like slowing down. The US reached another record high at the end of March with around 471 million barrels in storage. 

Oil producers have most definitely been the most effected - feeling the full impact of falling prices & with Iran set to finalise on a decision at the end of June... are we about to see more World Supply? How will OPEC control this?  Adam Longson from Morgan Stanley thinks that no real impact of the Iran deal will be felt until 2016..

A bullish move past $60 a barrel will for sure set the tone for a bull move & we could expect to see Stocks rally further. However, there is no real instability in the USD & not really on the cards for the near future.... A tough one! 

Welcome to the Royal Rumble of Crude!

But then why will Oil rally? Will OPEC allow for a $10-$20 per barrel Oil Price?