Strong Market Sentiment Boost Commodities

Crude oil rallied after fewer than expected payroll contraction in the US. Investors anticipate improved economic outlook would boost energy demand. WTI crude oil price surged to a 7 week high of 72.07 before closing at 81.5, up +1.6% Friday. The benchmark contract also added +2.3% on weekly basis. Brent crude also rose +2.96% last week, narrowing the spread between WTI BRENT crude prices. We believe this was due to the unexpected stock build in Cushing Oklahoma, where the WTI crude is stored.

The US Energy Department reported on Wednesday that crude oil inventory increased +4.03 mmb, compared with market expectation of +1.9 mmb gain, to 341.6 mmb in the week ended February 26. Cushing stock, halting the downtrend, rose for the first time in 10 weeks. Although utilization rate increased +0.7%, it was more than offset by +2% rise in imports.

Gasoline inventory rose +0.77 mmb to 231.9 mmb despite decline in imports and flat production. Demand slid -2% to around 8.88M bpd. Distillate stockpile continued to draw but the magnitude was less than expected. Although demand rose +4.6% during the week, it remained +21% above 5 year average.

We regard this as a weak set of inventory data. However, the market ignored the huge increase in crude oil inventory but focused on strong ISM services data and other positive macroeconomic data. Moreover, investors might view increase in utilization rate and rise in implied petroleum consumption as signs of recovery in US oil market.

The weekly data is volatile in nature. Let's take a look at the 4 week average. Total product demand averaged at 19.3M bpd over the past 4 week, down -1.2% from the same period last year. Although the contraction has moderated, it's far from being described as encouraging. Similar situations are seen in fuel demands. 4 week average for motor gasoline and distillate were down -2.5% and -7.7% respectively from the same period last year.

In the coming week, the International Energy Agency, the US Energy Department and the OPEC will release their monthly oil reports. We expect to see modest upgrade in global oil demand given stronger macroeconomic outlook. Major growth driver remains in countries outside OECD. In previous reports, all 3 agencies viewed that OECD demand should remain subdue in 2010 and 2011. We will see if there're any upward revisions in these countries as OECD demand is crucial for sustaining oil price above 80.

From Oil N'Gold Saturday March 6th


Here’s a Great Alternative to High Price Trading Courses



Share

Crude Oil Rises for a Second Day on Increase in U.S. Manufacturing

Crude oil rose for a second day in New York after manufacturing in the U.S. increased at the fastest pace since August 2004, signaling that fuel use in the world’s biggest energy consuming country may gain.

Oil advanced the most in four weeks yesterday after the Institute for Supply Management’s factory index climbed to a higher than anticipated 58.4 in January, from December’s 54.9. European manufacturing also increased as companies raised output to meet reviving global demand, a separate report showed. Energy Department data tomorrow may show a drop in U.S. distillate fuel inventories.

“We can see that manufacturing is improving,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “We now want to see that number backed up with good fundamentals in the inventory data.”

Crude oil for March delivery gained as much as $1.01, or 1.4 percent, to $75.44 a barrel in electronic trading on the New York Mercantile Exchange. It was at $74.83 at 11:59 a.m. Singapore time. Yesterday, the contract rose 2.1 percent to settle at $74.43, the biggest one day increase since Jan. 4.

The U.S. manufacturing figure exceeded the median forecast of 55.5 from 67 economists surveyed by Bloomberg News. Readings higher than 50 signal an expansion. Manufacturing accounts for about 12 percent of the economy.

European companies raised production in January as a global economic recovery spurred exports. An index of manufacturing in the 16 nation euro region climbed to 52.4 from 51.6 in December, London based Markit Economics said yesterday. Asian shares climbed, driving the MSCI Asia Pacific Index up the most in more than two weeks.....Read the entire article.

Check out the new "Trend TV"

Share

Phil Flynn: Is This Santa For Real?

Oil prices get swept up in a Santa Claus rally as light volume a strong stock market as well as a surprise drawdown in inventory gives the illusion of strong demand. Ho, Ho, Ho! Yet we may find out that yes, Virginia, indeed this Santa rally, despite my better judgment, may be real if oil closes above $79 a barrel.

Last week the market got a bullish boost on a surprise draw down in oil supply when the Energy Information Agency, an arm of the Department of Energy, reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.9 million barrels from the previous week. That caught the market by surprise because we also saw a drawdown in the supply of distillates to the tune of 3.1 million barrels. Don’t try to reason that supply is way above normal or that most likely the draws are skewered due to bad weather conditions impacting imports because none of these justifications seem to matter. You just have to believe. You really will have to believe if oil closes above $79 a barrel.

Now some think the rally is for real because of the early blast of winter. Despite the worries over global warming, it is cold weather that is inspiring demand. In other words even though supplies are above the five year average, weather may be colder this winter than the five year average. The EIA on demand said that over last four weeks, total products supplied by refiners came in at an average 18.9 million barrels per day which was down by 1.1 percent compared to last year. For gasoline, over the last four weeks demand averaged 9.0 million barrels per day, up by 0.8 percent from the same period last year. Distillate fuel demand has averaged 3.7 million barrels per day over the last four weeks, down by 3.9 percent from the same period last year despite the fact that it was colder.....Read the entire article.

Just click here for your FREE trend analysis of USO


Share

Oil Gains as Dollar Strengthens, Fuel Supplies Forecast to Drop

Crude oil rose in New York as the dollar climbed and before a report that will probably show that U.S. fuel supplies declined. Oil rebounded after slipping as much as 1 percent as the U.S. currency rose against the euro for the first time in three days. An Energy Department report tomorrow will probably show that supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, declined last week, according to a Bloomberg News survey.

“Everything we have been seeing can be pegged to what’s happening in the equities and the dollar,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. Attention is now shifting to the weekly supply reports, he said.
Crude oil for December delivery rose 31 cents to $79.21 a barrel at 12:24 p.m. on the New York Mercantile Exchange after dropping as low as $78.14. Prices are up 78 percent this year.....Read the entire post.

Commodities Consolidate as Economic Outlook is Mixed

Crude oil price plunged to as low as 68.32 Friday as the US Labor Department reported disappointing employment data for September. Investors worried the pace of economic recovery will be delayed and thus took profits from long positions in oil. Although buying interest emerged afterward, WTI crude oil settled -1.2% at 69.95 during the day. On weekly basis, the benchmark contract gained +6%. After plummeting to the lower end of recent trading range of 65-75, oil price recovered in the middle of the week although the US Energy Department reported larger than expected crude builds in the week ended September 25.

Investors used the surprising draw in gasoline stockpile, lower than expected rise in distillate stockpiles and rise in fuel demand as reasons to bid up prices. However, we retain out views that crude oil price will continue move range bounded in coming weeks and occasional rise in demand does not alter the fact that fuel consumptions remain in depressed levels. Gasoline demand rose to 9.126M bpd last week, representing increases of +3.8% on weekly basis and +4.5% on annual basis. However, Exxon's CEO said that gasoline demand has already peaked in 2007 and will decline into the futures. In the US, oil product demand was 20M bpd in 2007 and should fall to about 17M bpd by 2020.....Read the entire article and charts!

Oil Drops as Stockpile Concerns Cap Gains on Economic Optimism

Crude oil fell for the first day in three in New York as concern over above-average distillate fuel stockpiles capped a rally built on speculation that demand will increase as the global economy recovers. U.S. distillate inventories, which include diesel and heating oil, rose to a four week high of 162.4 million barrels last week, the Energy Department said Aug. 26. That’s near the highest level since 1983. Separately, the United Arab Emirates’ state owned company eased cuts on crude oil supply for the first time in seven months, a sign OPEC members may be overshooting their output targets. “As we get into the autumn season we’ll focus on distillate fuels and right now inventories are at very high levels and then we have the floating storage off Europe”.....Complete article

Oil Falls From a Three Week High on Faltering Economic Recovery

Crude oil fell from a three week high after U.S. stock futures eased on weaker than expected company earnings, renewing concern the recovery from the global recession may falter. Oil has increasingly moved in tandem with the Dow Jones Industrial Average. The two are showing a correlation of 0.7 in the past month, up from 0.06 in the month to Dec. 31, according to data compiled by Bloomberg. U.S. gasoline and distillate fuel inventories climbed for a sixth week, signaling demand in the world’s largest energy user has been slow to rebound.....Complete Story

Get your favorite symbols' Trend Analysis TODAY!