Waiting on the Oil Glut

Crude prices rose $2 on Tuesday despite a US report detailing the oversupply in the oil market. The Canadian dollar was the beneficiary and led the market while the Swiss franc lagged. Elsewhere , the US dollar disappointment continued despite an upbeat JOLTS report.  Also of interest is a speech by RBA'S Stevens at 02:50 GMT.  Monday's Premium GBP is +30 pips in the green ahead of Wednesday's UK industrial production and the key speech from Carney. Friday's Premium EURUSD long is +150 pips in the green.

Chatter about the oil market has died off and OPEC failed to deliver any surprises. WTI prices have now been locked in a $58-$62 range for six weeks. Rest assured that it's not the end of the big moves in crude.

The same-kind of sideways dynamic followed the big move in USD/JPY. Once the market got complacent, the leg took place. In the meantime, we keep a close eye on the range and the news.

On the later front, the US Energy Information Administration spelled out the bearish fundamental picture. The EIA said oil output has been more resilient to lower prices than expected. They lowered 2016 prices forecasts, boosted 2015 US output forecasts by 2.6% and forecast rising US output in H2 2016.

Eventually, those dynamics will lead to renewed selling in oil (and CAD). Technically, however, oil continues to reject the lower end of its recent range and the most-recent low was higher than the late-May low. On the seasonal front, June is the best month for oil so sellers may need some patience.

Late on Tuesday, weekly API inventories also showed a 6.7m barrel drawdown in US supplies; much larger than 1.3m forecast for the EIA stockpile data. That sent crude prices another 60-cents higher.

In the broader market, Ashraf highlighted the dominant dynamics of the Bund-Treasury spread and that's where the focus remains. The US dollar was lackluster in NY trading, giving back earlier gains even as JOLTS job openings surged to 5376K from 5030K.

Up later, the focus in on Japan at 2350 GMT with April machine tool orders and PPI. At 0100 GMT, the BOJ's Sato speaks.