The choppy trading remains the dominant sentiment in the market and investors are still worried over the outlook for global growth, nevertheless, crude held the gains in Asia today for the third consecutive session on eased jitters over the demand outlook.
Crude oil contracts for October settlement are currently hovering around $85.30 a barrel after recording the low of $84.04 and the high of $86.03 a barrel. The contract extended yesterday's gains alongside equities.
The outlook for demand improved with the strengthening sentiment and optimism that is holding the gains with the start of the week. Asian stocks today moved higher after improved manufacturing performance from China and also trailing the optimism that sparked yesterday on expected support to slowing growth.
The MSCI Asia Pacific Index rallied 1.9% and European stocks are trading in the green with the start of the session on expectations the Federal Reserve will take more measures to bolster the faltering recovery when they hold the annual symposium in Jackson Hole this weekend.
Crude is supported by the prevailing gains for equities and commodities on the expectations for Feds support and that is supporting the gains. The fears over crude demand are easing with the expected support for the recovery.
We can still see the developments in Libya having their effect on crude, yet the bearish pressure is starting to ease as investors realize that the progress in ending the conflict does not entail quick rebound to production after the massive destruction and prevailing political chaos.
Eyes are also on the API report today and the EIA tomorrow which will increase the volatility for crude, especially after the reported contraction in European manufacturing and the abysmal slump in confidence.
The API report today is expected to show 1.5 million barrels buildup in crude inventories opposed to the expected drop to be reported by EIA on Wednesday. More volatility is expected till the end of the day with the sentiment and Jackson Hole expectations for the end of the week.