By Walter de Wet
Crude oil is finding good support above $76/bbl. With the back-end of the forward curve steady as longer-term supply issues amid the BP oil spill in the Gulf of Mexico persist, nearby crude oil prices are higher. Time spreads continue to tighten, implying improved oil market fundamentals.

In the US, the S&P and the Dow are trading back above their 200-day MA. We believe this bodes well for risk appetite and should continue to support commodity prices. It is worth noting that from a macro perspective data prints have generally been positive — even in Europe. Euro zone industrial production surprised on the upside yesterday. China's exports on Friday were positive.

This morning, China's leading economic indicator jumped the most in 14 months in April (leading indicators lead an economy by around six months.) Yesterday saw US industrial production come in higher than expected at 1.2%m/m. Combined with increased risk appetite; we believe the good economic data bodes well for oil prices in coming days.

However, inventory data remains generally bearish with another big build-up of 1.69m barrels of crude seen in the US last week. Inventory at Cushing is also higher and now stands at 37,610K barrels. This is not far off the all-time high of 37,945K barrels reached in May.

However, on a day-forward-cover basis we continue to see a steady improvement in the numbers and believe this will remain the case (refer to Commodities Daily dated 16 Jun’10). In our view, crude oil will trend higher in H2:10.

Front-month WTI crude oil support is at $76.40 and $75.20. Resistance is at $78.50 and $79.36.

Courtesy: Standard Bank

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