There was very little news out to influence the fundamental direction of markets in the overnight session heading into the US open. That could change as the US CPI data will be released shortly. Inflationary data such as this has had heightened relevance, as the FOMC weighs when it will raise interest rates. In keeping with the monetary policy theme, we will hear directly from Chairwoman Yellen this afternoon at 1 PM CST. It would seem likely that her comments would have less impact coming so closely on the heels of Wednesday's FOMC minutes report, though those minutes were an account of a now 3 week old meeting. Any indications of alternate leanings either stated or inferred from Ms. Yellen today could create some price discovery havoc going into the long US holiday weekend.
As is the norm when considering a three day weekend, particularly in the energy sector, the fear factor can become a driving force as traders position themselves for any possible geo-political escalations. The Islamic States recent surge in Iraq and the Saudi shelling of Yemen are certainly real scenarios that could see some increase in activity over the weekend, potentially driving prices in crude and refined products modestly higher in a protective and/or speculative bid. However, the market appears to have become a bit numb to these particular skirmishes, likely removing any real fundamental fear bid from today's price action.
The inventory data of the past week, for crude products and natural gas, has continued the now three week trend of featuring either draw downs or less than expected build in reserves. The price discovery has reflected this somewhat, though it is starting to feel that this shifting inventory landscape may be priced in as natural gas is lower and WTI crude remains hinged rather snuggly to the 60 dollar price fulcrum (trading a few dollars higher and a few dollars lower as the price discovery looks for a breakout that isn’t there). The weather could start having a modest seasonal impact on the natural gas contract though this is, in perfectly efficient futures markets, supposed to be priced in.
As market participants begin to clear out early as is always the case when traders look to stretch a 3 day holiday into 4 days, the liquidity will most likely have a large effect on the price action. With less support and resistance volume, there will invariably be some large players looking to take advantage as we approach the afternoon hours.
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