Initial Jobless Claims and Commodity Tips

Crude oil prices finished on a highly weaker note yesterday, extending its losses for almost all of the week. Oil prices declined on anticipation of a subdued inventory report from the US, whereas later developments and comments from the US government about the release of some Strategic Petroleum Reserves also added weight to the commodity. At close, WTI crude for the April expiry at the NYMEX was near $98 per barrel, lower by around 2% for the day. In the Indian markets, the MCX crude too saw a huge fall, with the commodity finished down by around 2.5%, firmly below 6000. The higher fall locally was led by anticipation of appreciation in the rupee on Friday; post the release of better data locally.

While the NYMEX oil fell due to its inherent weakness, Brent also extended its losses, though it was a better performer against its US based peer. At close, Brent oil for the April expiry at ICE was lower by 0.5% to $108 per barrel. The international benchmark managed to increase its premium against the WTI to $10 a barrel.

Against the major commodity related cues, the US EIA in its weekly inventory report said crude stocks jumped by 6.2 million barrels for the week ended March 7, nearly three time market expectations. Total crude stocks hit near 370 million barrels, its highest levels since December last year. While some positivity came in the form of a huge fall in gasoline inventories, which declined by over 5 million barrels, the closely watched distillate stockpiles fell lower than expected. Refinery utilization too declined by 1.4% and affected the broader movement in the commodity. However, it should be noted that we have already talked about a fall in refinery runs, as this is usually the lean demand period and US based refineries carry out seasonal maintenance.

The other aspect which added fuel to the selling pressure was reports that the US Energy Department would release 5 million barrels of oil from its Strategic Petroleum Reserve (SPR) on a test basis. While the markets are speculating that this could be a process against any unexpected concerns arising in Eurasia, the US government officials denied the same and described the release as a “test sale” to evaluate how the reserve system works to release and sell the oil.

In the early morning trade, the commodity has opened moderately positive and is currently adding near 0.35% to $98.30 per barrel. While the markets would finally see some important data today, the data from China on Industrial production would be watched closely. We also have some important numbers from the US due this evening. Overall though, the inherent fundamentals for the commodity continue to be weak and we are maintaining our bearish bias on the commodity. We recommend initiating fresh selling on pull-backs. We are likely to see a moderately positive opening in MCX crude, mainly due to gains in the NYMEX in early trade today

Global market analysis: Crude oil fell huge post the weekly petroleum inventory number, which showed a rise in stockpiles. Another factor that is likely to pull oil prices further lower is the US’ announcing a test sale of oil from the strategic petroleum reserves (SPR). We reiterate two scenarios here, either the US is running the test to use its own oil or the sanction on Ukraine could be a trigger. Nonetheless, oil continues to be bearish and this morning, it is trading at $98.31. We continue to hold a bearish view on the same. However, equities trading moderately higher might arrest the fall. We look to selling the commodity on pullbacks. Natural gas fell greatly last night and is now trading at $4.470 and looks like it may fall further in the near-term and so, we recommend selling on every rise.

From the economic data front, we have China’s industrial production number, a key data to watch how the Asian and European markets would react. We also have the US retail sales, jobless claims and the business inventories number.

Commodity Tips

SELL CRUDE OIL MCX MAR ON RISE NEAR 6045 SL 6120 TGT 5960

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