DOE Distilled Fuel Oil Inventory Data-Commodity Tips

Crude oil prices for most active March expiry at NYMEX finished on a highly positive note, rising by 1.8% yesterday to $97.40 per barrel mark. In the Indian markets, we saw crude for February expiry settling 0.75% up near Rs 6130 per barrel as our prices got adjusted with the Rupee appreciation.

When looking at other major global benchmarks for oil, as on one side WTI added weight, Brent gained at a lesser rate and led to further reduction in the spread between the two commodities. Brent on Tuesday gained by near 0.7% to $107.4 per barrel with the underperformance continuing over ease of supply pressure in parts of Middle east and African region. Brent premium to the WTI reduced to $10 per barrel as against near $12 per barrel in the previous week. On the other side, better demand prospects for the WTI pushed its backwardation between two most trading contract March and April increasing to near 40 cents from 15 cents nearly 10 sessions before.

Overall WTI markets moved higher on anticipation of better inventory report from the US. While we also had been maintaining a similar view, such strong performance in a single session was surprising. As per a Bloomberg survey, the DoE report may today show both gasoline and crude stocks inching higher for the week ended January 24th; though we yesterday wrote rise in them would be eclipsed by the higher drop in distillate stocks. Bloomberg data show distillate stocks falling by around 2.5 million barrels while we though there is a chance for a higher than anticipated fall and that could drive prices higher.

Nevertheless, the late night data from the industry funded American Petroleum Institute (API) has come negative for prices and against our own view. As per Bloomberg news, API report showed crude inventories rose by 4.75 million barrels last week while gasoline stocks too inched higher moderately. The distillate stocks though fell by lower number of 1.79 million barrels which is also having a marginal negative impact on crude prices early morning today.

In other major global cues this morning, Asian markets are trading marginally higher tracking overnight US markets which closed on a positive note with an average gains of 0.50% supported by higher consumer confidence number. This is likely to help our local unit to appreciate a tad but rising USD index (80.65) might limit the gains. USD performance would have to be watched carefully amidst the ongoing FOMC meeting which ends tonight in the US. Today, Fed will announce its asset purchase programme status and likely that it may hold at $75 billion. However, investors across the globe are little cautious about any surprises as at one side the US employment condition has improved while some of the other economic activities are still at a blend.

We do not have any major economic releases from Euro area except a few in the form of Germany consumer confidence number and euro-zone money supply. However, we believe these data may not have much impact on the market. Investors’ across the globe may be waiting for the FOMC’s decision at 12:30 PM (IST) so because of which either markets may remain sluggish or highly volatile during the day so we may witness an uneasy trading day today.

For the black liquid, it is trading with marginal loss of 0.2% near $97.20 today morning as it tracks the API inventory number which has come a bit unfavorable. We have a cautiously positive view in the commodity in Intra-day, though would be closely watching the DoE inventory report tonight before building onto a fresh directional view. Locally the Rupee factor is likely to lead to higher under performance as it has already appreciated over half a percent in the opening trade

Commodity Tips

BUY CRUDE OIL MCX FEB ON DIPS NEAR 6085-6075 SL 6035 TGT 6135

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