WTI intermarket: oil bears are relentless and deflationary prices could be here to stay

WTI has once again dropped to fresh lows and this time it has broken a critical area being the 13th Nov lows at $42.09.

WTI scored a fresh low of $41.83 and there has not been a movement in the dollar but the U.S. government data revealed a second weekly decline in a row for crude inventories. This came along with a rise in domestic production. 

Gold trades flat on the day amid a lack of catalysts

The U.S. Energy Information Administration had domestic crude supplies falling by 2.5 million barrels for the week ended June 16 and weekly domestic production climbed by 20,000 barrels to 9.35 million barrels a day. However, there could be some relief in the move with the Iran’s oil minister, Bijan Zanganeh, indicating recently that OPEC was considering deeper production cuts; this offered a bid to oil before the data and as such, this sentiment could be revived in due course. 

DXY to feel the deflationary pressures?

The problem for the Bulls, though, is that despite such views that the continuing production cuts led by OPEC and Russia will lift prices, rising production from the U.S., Libya, and Nigeria, as well as stubbornly high stockpiles worldwide are continuing to undermine such efforts.  This could be very damaging for Central Bankers who have been committed to their inflation targets in an environment of already super low rates. The dollar is thus unable to catch a bid on this on an Intermarket basis, DXY remains under water for the day -0.09% at 97.67 and yields are now also heading below the surface, with 10-years currently down -0.08% at 2.1547%. The Fed speakers have been mixed on inflation of late although have all still been in favour of further rate hikes before the year is out. A sustained offer in oil will make the Fed's challenges in the time ahead a great deal more difficult and the recovery in the dollar may be more subdued than what we have seen of late; Currently, the DXY is down -4.43% YTD.