Oil Update - Markets Cautious as Oil Drops for the Second Day 29th March 2016

TORONTO - March 29, 2016 - PRLog -- Baumann Group

Oil Update - Markets Cautious as Oil Drops for the Second Day 29th March 2016

After a 3 to 4-day Easter weekend for most of Asia, markets were trading down after a dip in the US overnight.

With Oil only just seemingly on a rally it is already on its second day of declines ahead of key data which is weighing the commodity down. Last week it was suggested that US stockpiles were close to 3.2 million barrels higher than government estimates, this news along with dovish statements from the Federal Reserve have seen the US Crude start the week at $39.46, close at $39.39 and then open lower at $39.26 this morning.

Brent has not fared much better but has managed to stay above $40.00. Closing down 0.17c yesterday at $40.27, it opened lower still at $40.11 in Asian trading.

With the data from two agencies, The American Petroleum Institute and the Energy Information Administration and Ms. Yellen speaking later today it is no surprise that Crude and Brent have both taken a step back. Over supply and possible rate hikes in the US will affect the rest of the markets and we are already starting to see that. Now we could see the US equity markets becoming the next safe haven as investors look to move away from oil and its temperamental performance of late.

US Crude could fall further in European trading; however, it may have reached a plateau. The Industrial and Petroleum sectors were the ones to suffer on the S&P over the last few months and this was the cause of the fall in Corporate Profits for the last quarter of 2015. The 11.5% drop can be directly related to the commodities tumbling prices last year and can be expected to be blamed for a slow start to 2016 for the two heavyweight industry sectors.

It is right to mention that the S&P 500 and its 5-week rally has had its top called several times over its run-up. The fact that it has managed to recover the ground lost earlier in the year whilst Oil has remained so low is a testament to the other sectors and industries in the Index.

The S&P 500 should open marginally higher later today as a weaker $USD and the impending speech from the Fed and their expected continuation of policy will aid the Equity markets and see more volumes return after a short trading week, as was last week.

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