The US Energy Information Administration’s Monthly Energy review for the month of April confirms that the oil consumption factors are not very positive, while the supply factors are now more stable as the active rig count has been constantly declining.
The supply and demand were not in balance due to the increasing inventory numbers, and the export appears to be narrowing. The reason behind the boost in output is coupled with a decline in imports, as transportation and residential sectors displayed few signs of a sustainable improvement in consumption. Despite this, the current trend in oil prices appears to be indicating a rally that no one forecasted for the month of April this year.
There are several indicators that market players should watch out for:
One, this trend is part of a broader short term rally in the commodity markets, with metals leading the surge, specifically aluminum.
Two, the weakening US dollar index, which may not be a temporary thing, could last longer than expected.The statements of the Federal Reserve did not affect the greenback and the weakness could be the explanation for the increase in commodity prices.
However, market players should not forget about China, where the economic reports for the first quarter are pointing to essential parameters. The economy of China was off to a good start this year, even though the GDP for the first quarter inched lower by 0.1 percent at 6.7 percent from the prior quarter’s 6.8 percent.
Investment growth in fixed assets in March significantly changed from 10.2 percent during the previous months to 10.7 percent. Industrial profits significantly improved during the first quarter, and data showed 6.8 percent growth in the value added in the industrial enterprises.
With this, it can be said that the condition of the oil market and the other commodity markets are more guided by the positive sentiments in China, rather than by the fruitless meetings in Doha.