ECB & BOE Monetary Policy Will Beep Crude Oil

Crude oil prices for most active January expiry at the NYMEX finished on a strong positive note with the gains in yesterday’s session seen over 1.2% to $97.20 per barrel. Crude price jumped over 2% on Tuesday and extended their gains further yesterday backed by better than expected inventory data from the API while later followed by a similar number from the US DoE.

During the evening session (IST), the US department of energy showed crude stocks fell by 5.59 million barrels last week backed by strong surge in output from refiners. While this drop was higher than markets estimates, overall it was in-line with the strong data from the stocks side as reported by the API a day before. US Refiners enhanced their operational levels to take out the most of the crack spreads available at the current levels wherein on one side refiners are getting low prices crude from the local markets and selling high priced products both locally and elsewhere. As of the last week’s data, US refinery utilization rate inched higher to 92.4% higher by 3% and marking its highest levels since September 2012. Product inventories like gasoline and distillate increased by 1.83 million barrels and 2.65 million barrels last week, both more than broad markets estimates and depicting that actual demand in the US remains subdued.

Separately the OPEC which had its meeting yesterday said it agreed to maintain its production targets for the year 2014. OPEC said global demand is not likely to weaken in a big way so as to push for supply cuts in the coming year. It maintained its production quota at 30 million barrels a day at least until June even as Libya, Iran and Iraq plan to boost exports in coming months.

In other important global markets cues, major western equity indices finished on a weaker note yesterday wherein we are witnessing a similar performance in the Asian equities. Amongst the local cues, poll surveys showed the BJP is ahead in the state elections against the Congress which is leading to broader expectations that a change of guard can be seen even at the centre in the forthcoming parliamentary election in 2014. This has provided a boost to the SGX Nifty and also to likely to support the Rupee against the Dollar today.

For the day, we have the ECB and BoE monetary policy meeting today wherein we might not see any further changes in rates by the ECB however its comments in the post meet press conference would be important. We would like to see banks comments, on how it plans to track down the deflationary fears which are slowly emerging in the Euro area. In the economic data from the US, we have the revised GDP estimates for Q3 and the factory order data both of which are likely to stay at the blend.

Coming back to crude, we have a ranged view in Crude with moderate bearish bias. As also mentioned above, yesterday’s DoE inventory data suggests that refiners are utilizing the spread between crude and other product stocks and thus we saw a huge fall in main inventory. Though demand continues to be subdued in the US and thus makes a case for lower prices for the commodity. In India, the modest appreciation in the Rupee to further helps our view. Selling on pull-backs is advised for the commodity for today

COMMODITY INTRADAY TRADING TIPS

SELL CRUDE OIL MCX DEC BELOW 6010 SL 6032 TGT 5975

BUY MENTHA OIL MCX DEC ABOVE 871 SL 863 TGT 877

ECONOMIC INDICATORS:

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