Strong equity markets, the recovering dollar and the receding threat of hurricane Bertha converged to send crude oil down by around $5/bbl yesterday with Brent crude falling as low as $136.40, a key area of support.
Reports that Chinese crude imports grew by only 3.2% you also lent a soft tone to the market.
News of Iranian long-range missile testing, capable of reaching both Israel and US interests in the Middle East underpinned comments from Tehran that "The first US shot on Iran would set the United States' vital interests in the world on fire" and oil prices have recovered over $1/bbl to trade at the open around $137.90.
The Iranians appear to be pursuing a two-handed policy of continuing to hone military capability through war games and weapons testing whilst promoting a diplomatic route out of the uranium enrichment impasse. This geopolitical risk is likely to discourage the market bears from aggressively selling at this point.
Focus today will be on the EIA data to be released this afternoon with a 2mio barrel crude stock draw expected; distillates are expected to have increased by 1.9mio bbls with gasoline stocks lower by 190,000 bbls.
Today's range for Brent crude will encompass $134.50-$140.50 with a marginal bias to the upside if the stock data disappoints.
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