When ever retail and spec trader is short crude, it will bottom abruptly with little media warning. That's why smart money focuses on the message of the market rather than headline chatter of easy explanations below.
Chart: Crude Oil (WTI) and Crude Oil Diffusion Index (DI)
Headline: Japan is key support for battered oil price: Campbell
May 25 (Reuters) - Oil bulls battered by a recent slump in crude prices can take heart in at least one fact: Japanese utilities are still buying sweet crude heavily, propping up Asian oil prices even as Western benchmarks stumble. Japanese utilities have been forced to crank up their use of oil and natural gas to generate power, as a moratorium on the restart of nuclear power plants drags on. Amid the recent correction in oil prices, key Asian markers have mostly held their ground against Dated Brent, suggesting a sudden weakening of Asian oil demand cannot be blamed for the selloff. Indeed, the economics of arbitrage flows of crude oil from the Atlantic basin to markets east of the Suez canal may well constitute a major support for benchmark oil prices. All the more reason for oil traders to be keeping one eye on the developments in the Japanese power sector. Take the Brent-Dubai exchange of futures for swaps (EFS) price. It has hardly budged in recent weeks and remains stubbornly below $4 a barrel. Contrast that with the same period last year when the Libyan civil war and a spate of North Sea production problems left European refiners badly short of light sweet crude. A more stark picture comes when looking at more specialized grades. Take Indonesia's Minas crude , which is often used for direct burning in power plants, and also plays a key role as a regional benchmark.Source: reuters.com
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