The GERM Report

-German shooting may be adding some psychological support

-Tailwinds early Thursday were coming from the glut in gasoline

Brent crude oil prices were carrying the momentum forward in early Thursday trading despite negative pressure from earnings reports from the likes of Maersk. Further signs of a glut, meanwhile, did little to spoil the rally. A mass shooting in Germany may be adding some psychological support to the price of oil early in the session.

Brent was up 0.63% from the previous close to hit $59.49 per barrel as of 8 a.m. EST. The lift came despite the API’s report of a 4.2 million barrel build in US inventories. US federal data are released at 11:00 a.m. ET and are expected to show a gain of some 2.5 million bbls. Phil Flynn with The Price Futures group in Chicago said in his daily newsletter that early-morning gains were supported by a drop in gasoline and distillate supplies.

John Kemp at Reuters added that the “Brent’s six-month calendar spread has strengthened to $1.10 backwardation as traders anticipate a severe but short-lived downturn in consumption owing to coronavirus.”

After a suspect with alleged far-right leanings left nine people dead, German Federal President Frank-Walter Steinmeier said Thursday he was appalled by violence in the central city of Hanau. “I stand on the side of all people who are threatened by racist hatred,” he said in a statement.

The rise of nationalist, and sometimes xenophobic, tendencies can be linked to the fracturing of the liberal order as those feeling left behind by the global system scapegoat those outside their tribe. Those outsiders, the logic goes, are exploiting multilateral networks. The mass shooting could therefore be linked in part to those trends, as an underperforming German economy amplifies domestic strains. In the United States, jobless claims increased for the second-straight week.

Meanwhile, the market volatility from the coronavirus continues, with Asian markets sinking into the red on reports of new infections in South Korea and two deaths linked to the virus in Japan. A build in fuels inventories offshore in Asia and a rise in exports out of China has spooked investors. In a market report for Thursday, Royal Dutch Shell said it saw strong, but temporary, pressures from the coronavirus on gas and other liquids.

“While we see weak market conditions today due to record new supply coming in, two successive mild winters and the coronavirus situation, we expect equilibrium to return, driven by a combination of continued demand growth and reduction in new supply coming on-stream until the mid-2020s,” Maarten Wetselaar, the integrated gas and new energies director at Shell, said in a statement.

Elsewhere, shipping giant Maersk said it was already feeling the market strains before the coronavirus started to impact the maritime sector. The company reported a net loss for the fourth quarter of $72 million, compared to a $46 million profit from the same period in 2018.

“The outlook ahead is for low economic growth and low demand growth for seaborne goods,” the company’s chairman and CEO said in a joint statement.

Those sentiments should be delivering headwinds to commodities. Apart for gasoline builds, the gains in crude oil prices may be indicative of a rush to cash in should the EIA confirm the API build when it releases its data later on Thursday.

Meanwhile, the White House downplayed the potential for an economic blow from the coronavirus, but acknowledged that Trump’s penchant for hardball in trade negotiations with China had somewhat of a dampening effect on investments in particular. The White House on Thursday receives its annual economic report, so expect a spin factor to influence markets throughout the day.