Brent Oil falling on own fundamental weakness, Commodity Trading Tips

Just before the US-NYMEX session began yesterday, we changed our bearish stance on oil to bullish. We were little unsure about the price fall however, and believed that the easing of tensions in Iran might increase the supply and make oil prices lower. However, this did not occur and prices eventually rose. We could now say that the reasons for the price fall were the higher equities, especially in the Asia and Europe while the infusion of money into the Chinese central banks via a repurchase program pushed many asset classes higher and so, oil prices also rose. Meanwhile, the overall fundamentals for oil did not change, especially when we look at the crude and crude products performance. Finally, the IMF also increased its global economic growth rate from 3.60 percent to 3.70 percent, supporting an advance in oil prices. Eventually, oil prices traded higher and ended the session at $94.97 for the March delivery and the February contract at the MCX platform ended at Rs 5922. The above collective factors made the commodity trade higher by 1.88 percent at the local market while prices at the NYMEX rose by 0.40 percent. We could see a price divergence and the local oil prices advanced more than the global prices due to the rupee’s depreciation

This morning in Asia at 7:00 AM IST, the WTI March futures oil prices are seen trading at $95.24, up by 0.29 percent. We believe that the bullish effect may continue at least during the Asian and European sessions as the market would continue to take cues from yesterday’s events.

A) The effect of the IMF hiking the economic growth rate from 3.60 percent to 3.70 percent may encourage more oil consumption.

B) Crude oil and distillate stocks may continue to show a decline, especially when winter is much colder this season in the US.

C) The IEA says that global oil demand is forecast to rise by 1.3 million barrels a day this year to 92.5 million barrels, compared to a previous estimate of 91.2 million barrels a day. Looking at the above factors, we expect oil prices to remain elevated. However, today, we have to look at the equity performance and other global factors. Any minor decline in these factors may not help oil prices advance much. However, the overall trend may continue to remain higher. Another factor to watch is that since the US markets were closed due to Martin Luther Jr. Day, the weekly petroleum inventory numbers would be released tomorrow. Overall, we believe that oil prices may remain higher for the day and recommend buying from the lower levels

Commodity Trading Tips

BUY CRUDE OIL MCX FEB ON DIPS NEAR 5910 SL 5865 TGT 5965

COMMODITY MARKET EVENTS FOR DAY TRADING:

DATE TIME Region Event of the Day Period Survey Prior
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