WTI oil surged above US$42 and broke above the 200-day moving average for the first time in 427 sessions. Interfax were reporting that an “informed diplomatic source” confirmed that Russia and Saudi Arabia would agree to a supply freeze, which was what had previously been thought until Prince Mohamed bin Salman came out and vehemently denied it. And this “informed diplomatic source” is oddly timed, coming soon after the bizarre move by Egypt to transfer the Tiran and Sanafir islands to Saudi Arabia. It’s difficult to know what this all means, but most countries are usually put in a better mood after the transfer of long desired territories and that may make them more amenable to agreeing to fraught multilateral oil production freeze deals.
Despite the positive moves in oil, the private API survey saw US oil inventories increase by 6.3 million barrels after declining last week for the first time in two months. This saw the spot price pull back 1.3%, but it was still sitting comfortably in the US$41 handle.
The oil moves have helped rally the equity markets with the S&P 500 gaining 1% overnight. The commodity space has also been rallying alongside oil with the iron ore spot price surging 4.6% to US$59.22 and the copper price rising 2.7%. Emerging market currencies have been moving up alongside them and the Aussie and Kiwi have gained 1.2% and 0.9%, respectively.
This bodes well for the Asian session. The ASX is set to open above 5000 for the first time since 1 April and some very strong moves are expected in materials and energy space. Fortescue (FMG) is popping up on our positive momentum screen for stocks 40% above their 200-day moving average and looks set for a big day. APN, BSL and SBM also have strong momentum behind them and were coming through on the screen as well.