European stocks outperform the US again, WTI at parity with Brent crude, silver jumps, ASX futures down 15 points

Reminder: Once again I'm reporting to you from The Legian hotel in Bali, and all readers should be reminded that they have just over two weeks left to open a new Rivkin advice, stockbroking, global dealing, foreign exchange or wholesale managed account, or a self-managed superannuation fund, to be in the draw to win Rivkin's $8,000 luxury trip giveaway - see https://www.rivkin.com.au/bali for all the details.

After spending 2014 advising commodity market investors and traders that it had no intention of cutting production, the Saudi-led OPEC cartel has managed to keep up the tough talk, with the United Arab Emirates defending OPEC's strategy of non-intervention yesterday. All of this Brent crude supply seems to be struggling to find a home, and the excess storage capacity in the US (despite continuing high levels of onshore production) has meant that the the emerging use of the US as a Brent crude delivery point might continue to erase the disparity between WTI and Brent. Looking beyond that theory, in a world where economic demand is unfortunately not the culprit in this case for levels of Brent crude supply, one can also simply say that there will be forced sellers of Brent due to the competition for storage, which has brought its price down more quickly than that of WTI - at the time of writing Brent is sitting just 50c above WTI at US$47.10, after earlier touching US$46 at the same time as WTI. In today's first chart you can see the performance of the two crude benchmarks, however I can't get them to refer to the one axis so it is not telling a great story about the journey to parity.

But once again, despite these high levels of crude oil volatility (the Feb contract for WTI touched US$44.20 and Brent US$45.15 last night), equity markets have not have not overreacted - the US was flat and Europe rallied. It is worth noting, however, that at one stage last night the US S&P 500 touched highs of 2,057, making its close of 2,023 look worse than just a flat night.

Today's second daily chart shows the US dollar spot silver price. You can see that silver really popped its head up last night and is sitting just below some medium-term selling resistance. It is possible that the gold and silver play at present is to pre-empt a bottoming of the oil price and assume that the downward pressure on consumer price indices will lift and reveal recovering levels of core inflation. I think this would take quite some time to play out; as I've stated previously, sustained levels of ~US$50 oil will slowly feed through from producer prices to consumer prices over time, so the worsening oil-related inflation situation could have some time to play out yet. But if there are few willing sellers of gold and silver at this level and enough long-term investors who are re-focusing on the fundamental theory that sustained low interest rates and years of quantitative easing will ultimately push inflation higher, then I guess there is reason for these two precious metals to hold ground or push higher. But I see little reason for short-term speculators to buy - I note that UK CPI and PPI both came in lower than expected last night.

Underneath today's Global Markets matrix I've included a shot of my partner in crime relaxing on the grounds of The Legian Seminyak, demonstrating what you or your friend might look like if you win our trip. We had glorious sunshine all day yesterday and the service of this hotel is amazing. I should note that, unlike the lucky winner, this holiday is coming out of my own back pocket. I couldn't in clear conscience take a potential opportunity for a further two members to enjoy this holiday for free! We hope to do more offers like this in the future, so I'm considering it a worthy but expensive research exercise!

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: Quiet day for data today, US advance retail sales at 12:30am tomorrow morning (Sydney time) the highlight of the calendar.


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