China Sparks Raw Materials Rally
Crude Oil – Oil futures are little changed ahead of the weekly inventory report, which is expected to show a rise of 1.8 million barrels of Crude Oil, while gasoline and distillate inventories have forecasted drawdowns of 1.7 and 1.5 million barrels, respectively. News that China’s economy grew at a brisk pace of 10.6 percent, and that the world’s second largest petroleum consumer is expected to increase diesel imports by 50 percent in May, could support prices even in the event that the inventory report is perceived as bearish. Reports that Mexican ports have re-opened after bad weather forced closures may be seen as negative for prices. Yesterday’s sharp rally validated a bullish pennant continuation pattern on the daily chart, signaling a positive near-term bias. Momentum continues to climb this morning, despite the sluggish price action, further bolstering positive technicals. Support comes in at 112.37, 110.94 and 110.09, while resistance can be found at 114.65, 115.50 and 116.93.
Copper – Copper futures have jumped almost three percent in early trading on the stellar Chinese GDP figure. The sharp growth rate, combined with a large reduction in inventories over the past four months, has more than offset housing and manufacturing weakness in the U.S. In addition to China, other emerging nations such as India, South Korea and Russia have invested heavily in new infrastructure, fueling price growth. Even with today’s rally, the May Copper chart remains congested. Closes above prior highs of 4.04 would signal a technical breakout and might force shorts to cover. Momentum is outpacing both price and RSI, suggesting the market may be ready to test contract highs. Support comes in at 3.83, 3.79 and 3.75, while resistance can be found at 3.91, 3.95 and 3.99. The May contract has already rallied through the first two resistance areas this morning.
Rob Kurzatkowski, Commodity Analyst
