Oil could be a factor
Stock traders have been eyeing oil prices, which have been sliding recently. West Texas Intermediate futures have been trading below $50 per barrel, a key technical area and a psychological level important for shale drillers.
API reported a surprise 900,000 increase in crude inventories in the last week. WTI futures fell slightly, to just below $49.50 per barrel.
But there was a shocking increase in gasoline inventories of 4.4 million barrels, suggesting that gasoline demand remains weak. “I’d say it remains lackluster but refiners are cranking out high volumes of supply,” said John Kilduff of Again Capital.
“If we get confirmation of these numbers, we’ll have another leg lower,” Kilduff said. “This could be another catalyst, particularly if gasoline leads the way down. It’s the commodity in the complex that you look to see either supporting them or undermining them.”
Platts says analysts expect a drop in crude stocks of 1 million barrels when the Energy Information Administration report is released and a decline in gasoline supply of 1.1 million barrels. Distillates, which include diesel, are expected to fall 1.8 million barrels.
Stock traders have been nervously eyeing crude, but it has not held back the stock market this week.
“For global growth, even if the U.S. slows down, what oil prices are telling you is that emerging market growth may be slowing down,” said Memani. “That would be really bad news since that was the driver of the entire trade from the second quarter of 2016.”
But he said he expects that oil is in a trading range as long as emerging market growth does not slow down meaningfully.
“I don’t think it’s correcting,” he said. “We’ll be fretting about it without panicking.”
