U.S. West Texas Intermediate and international benchmark Brent crude oil futures are trading mixed on Monday on extremely light trading volume due to a U.S. bank holiday. The Chicago Mercantile Exchange, the New York Stock Exchange and the U.S. Treasury are closed today so trading could come to a standstill later in the session. The trading taking place is on the electronic board, which usually means below average volume, but not necessarily below average volatility. Sometimes a rogue trader emerges and volume spikes. Trading hours are also limited today.
Prices are retreating from early session highs after China reported automobile sales in January fell for a seventh month, raising concerns about fuel demand in the second-largest oil user.
According to a report from an industry association, China’s vehicle sales last month fell by 15.8 percent versus the same month in 2018. This continued the 2018 trend, in which China recorded the first annual drop in vehicle sales on record.
The report went on to say that so-called new energy vehicle sales in January, which include electric vehicles, registered a 140 percent increase, underscoring expectations that oil demand from cars may peak in China in the coming years.
On the supply side, traders continue to expect the OPEC-led production cuts to trim the global excess and stabilize prices. Furthermore, the markets are also getting support from the U.S. sanctions on Venezuelan oil exports. Hopes of a trade deal between the U.S. and China are also lending support for prices.
In other news, U.S. energy firms last week increased the number of oil rigs looking for new supply by three, to a total of 857, energy services firm Baker Hughes said in a weekly report last Friday. The rig count is now higher than it was a year ago.
Today’s price action strongly indicates that demand is still a major concern despite supply issues grabbing the headlines the last few weeks. What we learned today is that there is speculative demand and there is real demand. Speculative demand is tied to the U.S.-China trade deal. It’s not real yet. Today’s weaker-than-expected vehicle sales report from China is reality and that’s why prices are trading lower.
This article was originally posted on FX Empire
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