China’s Central Bank Finance Ministry as well as the Ministry of Human Resource and Security teamed up by expressing their intentions to stabilize the yuan by a broad move stimulus policy of buying local stocks, pooling of pension funds and easing of China’s property bubble. All in all a two trillion yuan (or roughly 313+ billion in USD) assets purchased.
Add in the U.S. second quarter GDP of 3.7% and jobless claims 271k vs. 275k and we find commodity traders turning bullish. The U.S. economy seems to be recovering or at least the latest round of data is suggesting a recovery is at hand.
We can easily see the effects of the China stimulus and U.S. recovery play out in the oil space. Crude oil (USO, quote) which fell as low as $37.75 this week has turned around the last two sessions to above $44.60. If crude closes near these levels this will be crude oil’s biggest weekly move since last April.
Bottom Line: Many commodity traders are calling the $37.75 the bottom for crude oil. Although I do not believe crude oil and the oil space as whole to be out of the woods yet I do see the Monday’s low as a near-term bottom.