Crude Inventory Should Weigh Oil Prices

Crude oil prices at the NYMEX finished on a highly weaker note on Wednesday, whereas trading was closed yesterday due to the Thanksgiving Day holiday in the US. The Indian markets lacked any major trading direction and participation amidst the holiday at its benchmark. At the local front, MCX crude for the most active December expiry traded in a small Rs 30 range for the whole of the session before finishing almost unchanged at Rs 5780 per barrel. Trading volumes were lower by nearly 50% as against the average of over 62,000 contracts over the last three trading sessions.

Early during the week on Wednesday, the US Department of Energy published its weekly inventory report for the week ended 22nd November wherein the agency said crude stocks rose by 2.95 million barrels over 391 million, marking its highest level since June 2013. The rise in crude inventory was way higher than the average markets anticipation of a rise by 750,000 barrels. Additionally, stocks at Cushing, the delivery point for WTI rose to 40.6 million barrels though the product-related inventories remained on a mixed note.

Other oil markets updates which were hampering the trading direction in the WTI oil were the fresh cues regarding the OPEC, which is expected to boost oil output in December ahead of the peak winter demand. The OPEC is likely to increase crude exports through mid-December by nearly 3% as global refineries come back post the seasonal maintenance period, tanker tracker Oil Movements said. As per the agency, OPEC is expected to increase shipments by 700,000 barrels a day to 24.05 million barrels in the four weeks to December 14, the England-based Oil Movements said in a report yesterday and as Bloomberg reported. That is higher from 23.35 million in the period through November 16. The figures exclude Angola and Ecuador.

Increasing supply on a global scale put moderate pressure on the global markets benchmark, the ICE Brent which for the January settlement was modestly lower yesterday by 0.4% to 110.85 per barrel. This also reduced the spread between the two major oil contracts, i.e. the Brent and the WTI to near $18.50 per barrel compared to the $19 per barrel a day before.

Amongst the global markets cues early morning today, MSCI ex-Japan Asia pacific index is trading steady to slightly weaker this morning while most currencies in the region are trading almost flat. At the local market, the rupee opened marginally stronger by 7 paisa and, the December USD/INR futures are trading at 62.72. Asian currencies are trading steady as the US markets were shut yesterday due to Thanksgiving holiday. As the day progresses, we believe that the markets may remain sideways as there are no more major cues expected from Asia. However, the Australian dollar and the yen’s weakness against the dollar could be a concern. Later during the day, we have the UK consumer confidence number, which might improve slightly from its prior negative number. Furthermore, we have Germany’s retail sales data which might improve a bit and the euro-zone’s unemployment rate. The euro-zone’s economic data may improve slightly post the CPI showing a neat turn around in last month’s figure yesterday. Domestically, we have India’s fiscal deficit and GDP data, which are expected to improve from the previous figure and finally, we do not have any data from the US today. So, from an economic point of view, the global markets would be only watching the euro-zone’s data in today’s trading session. We are also likely to witness an early closing in the US today.

With today being Friday, we feel there could be some volatility particularly in the evening session of trade. However, overall in Crude we continue to hold our bearish stance in the commodity and recommend traders to sell on pull-backs for small profits today.

COMMODITY INTRADAY TRADING TIPS

SELL CRUDE OIL MCX DEC NEAR 5775 SL 5815 TGT 5725

ECONOMIC INDICATORS:

DATE TIME Region Event of the Day Period Survey Prior
29.11.2013 15:00 UK Net Consumer Credit Oct 0.7B 0.9B
29.11.2013 15:30 EC Unemployment Rate Oct 12.2% 12.2%
29.11.2013 15:30 EC CPI Estimate YoY Nov 0.8% 0.7%
29.11.2013 15:30 EC CPI Core YoY Nov A 0.9%
29.11.2013 16:00 IN Fiscal Deficit INR Core Oct 7437
29.11.2013 17:30 IN GDP YoY 3Q 4.5% 4.4%

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