Over the weekend we received disappointing PMI result from the Caixin China Manufacturing PMI, printing a 47.8 compare to expectations of 48.3.
The miss only fuels concerns of a China (FXI, quote) slowdown setting up commodities to sell off across the board.
The move could clearly be seen in crude oil (USO, quote) before recovery in the overnight session in Asia. During the U.S. session crude oil as found support despite continue pressure from the U.S. Dollar. The U.S. continues to hover around a 97 handle.
Add in a new renewal support for the Iran nuclear agreement that lessens sanctions has reportedly gain additional support from Gulf Arab monarchies. This could add additional pressure on Congress to approval the Iran nuclear agreement. Iran has clearly indicated once the deal is approved it will in very short order add supply to the global market.
And let’s not forget as summer comes to a close it singles the period of time in which refiners begin slowdown/shutdown for maintenance. A seasonal build is typical during the August-October maintenance cycle.
Bottom Line: Even with a strong dollar crude oil bulls have the edge and will begin to looking at take advantage of situation.