Oil inter-market: Recovery gains traction on aggressive USD selling

The US oil benchmark, WTI, regained poise and rebounded sharply from fresh two-month troughs reached a day before, driven by a renewed risk-on wave as the Asian and European equities joined the global rally, having tracked the Wall Street at all-time highs. Fundamentally, a threat to oil supplies amid an interruption in Iraqi crude loadings at Basra, also kept the sentiment buoyed around the black gold.

However, today’s recovery mode gained further traction during the European hours, largely on the back of fresh selling seen in the US dollar against its major peers, gauged by the DXY. The DXY was heavily sold-off into returning demand for risk/higher-yielding assets, dropping as low as 96.08, before recovering to 96.20 levels, still down -0.36% on the day.

Further, higher US S&P 500 futures to the tune of +0.50% around 2,141 levels, also reflects the persistent risk-on moods and hence, points to an upbeat start to the US stocks. Hence, extension of the risk-on conditions is likely to provide fresh legs to the ongoing recovery in oil. Meanwhile, the CBOE Volatility Index (VIX) drops -4.43% to near five-week lows of 12.75, which suggests risk-on trades prevalent in full swing.

Focus now shifts towards the weekly crude supplies report to be published by the API and EIA today and tomorrow respectively. While the Chinese trade and GDP data will also have a significant impact on the black gold. China is the world’s second largest consumer of oil.