Chinese Industrial Production Help Crude Backup

Crude oil prices traded in a ranged manner for the larger part of trade on Monday, though they also saw a moderate decline towards the end of trade as traders largely refrained from taking large long-short positions due to the lack of any major economic or other financial cues. A strong increase of over 5% in prices during the past week also prompted traders to take some profits ahead of the important weekly inventory report on Wednesday. According to Bloomberg data, the trading volumes were more than half below the 100 day average for the most active January contract which lost 0.3% yesterday, finishing at $97.32 per barrel. At the MCX, we saw a higher fall led by the change in the rupee, which appreciated around 1% against the dollar yesterday.

In important cues for the commodity in the coming sessions, the US Department of Energy is expected to announce its weekly inventory data, which is anticipated to see a continued slide for crude stocks. However, we feel that the quantum of fall would be vastly lower than what was seen last week. According to a market survey, crude stockpiles are likely to show a decline of around 3 million barrels for the week ended 6th December. On the product inventories front, gasoline and distillate inventories are expected to see a fall and rise by nearly 2 million barrels respectively. The refinery utilization rate, which surged nearly 3% last week, is seen increasing by a further 0.5% this week.

We feel that, other than the extended slide in crude stocks, we should be closely watching for the distillate and the refinery utilization data while there is a possibility of a better number for distillates as the winter season demand seeps-in. On the other hand, the sharply lower gasoline prices in the US might have prompted for an extended increase in demand for the commodity, which is the most used fuel in the country, especially by the retail segment. Post the closure of the MCX (IST), the industry-backed American Petroleum Institute (API) will release a separate report for crude stocks which is also to be watched closely as this report is likely to set the tone for the more important DoE report tomorrow evening (IST).

Additional moderate positivity also came in led by the TransCanada pipeline news wherein company said it start injecting oil into the southern portion of the Keystone pipeline on December 7. The company will likely to inject 3 million barrels in the coming weeks, it added.

In other global market cues, the US market posted a marginally positive close overnight while the Asian market is in the red this morning. The Asian markets are probably expecting the industrial production of China to remain below 10% on a yearly basis. Meanwhile, the euro has strongly appreciated against its major counterparts. At present, the euro is seen trading at $1.3760 against the US dollar. The US dollar index is trading at 80. We believe that markets may remain mostly steady, except for the fact that the Chinese industrial production data due at 11 AM IST may cause highly mercurial movements in metals prices. Later on today, the UK industrial production and manufacturing data are expected late in the afternoon at 3PM IST. We believe that these data may create more volatility in commodity prices in Intra-day.

From the economic data front, we have the US wholesale inventories, which may be better for the economy. Looking at the economic data, the market may remain mostly steady today while investors would be keenly watching the upcoming FOMC meeting in the US that is scheduled on 17th and 18th of December.

For Crude, as also stated above, investors would keenly watch the tomorrow’s DOE petroleum data, which could provide a fresh direction to prices. Overall for the commodity, oil prices have been trading in a range for the past five sessions may remain steady while we could see huge price swings ahead of data. We are maintaining a ranged view in the commodity for today’s session though a modest positive bias in Intra-day could stay ahead of the weekly report.

COMMODITY INTRADAY TRADING TIPS

BUY NATURAL GAS MCX DEC ABOVE 260 SL 258.50 TGT 262

BUY CRUDE OIL MCX DEC ABOVE 5987 SL 5967 TGT 6003-6022

ECONOMIC INDICATORS:

DATE TIME Region Event of the Day Period Survey Prior
10.12.2013 10:30 IN Consumer Conf. Index Nov 44 41.2
10.12.2013 11:00 CH Industrial Production YoY Nov 10.10% 10.30%
10.12.2013 11:00 CH Retail Sales YoY Nov 13.20% 13.30%
10.12.2013 15:00 UK Ind. Production MoM Oct 0.40% 0.90%
10.12.2013 15:00 UK Manuf. Production MoM Oct 0.30% 1.20%
10.12.2013 15:00 UK Trade Balance Oct -£2600 -£3268
10.12.2013 18:00 US NFIB Small Buss Optim. Nov 91.6
10.12.2013 12/15 CH New Yuan Loans Nov 580.08 506.1B
10.12.2013 12/16 IN Exports YoY Nov 13.50%

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