Non-Farm Payrolls will effect on Crude Oil

Crude oil prices recorded a weak trading session both at the international and domestic market space, whereas oil prices for the most active December expiry at the NYMEX fall by 1.4% to close firmly below the psychological $100 per barrel mark. At the MCX, oil prices for the active November contract slipped 0.9% to Rs 6177 per barrel, with our losses somewhat lower compared to the WTI with the help of the rupee’s depreciation.

On one side, oil continued to trade on a weaker note for the larger part of yesterday’s trading session however, losses increased during the evening trade after the government reported that oil stocks for the week ended 11th October rose higher than expected. The weakness over the inventory report was further appended with the decline in the existing home sales number in the US. Existing home sales in the US slid in September after making a near four-year high during the previous month due to continuously higher prices and an increase in the mortgage rates. Sales fell 1.9% to 5.29 million, the NAR said yesterday, and stood lower than expectations.

In oil-specific news, crude inventories jumped 4 million barrels for the week ended October 11 to 374.5 million, its highest level since July 2013. This was higher than market expectations of a nearly 3 million barrel increase, whereas further negativity was added to by the rise in stocks at Cushing, Oklahoma. In other product segment inventories, gasoline and distillate stocks fell by 2.6 and 1.8 million barrels respectively. However, the same failed to support against the broader decline in oil prices.

It should be noted that, while the WTI fell due to its own weakness, Brent for the December expiry came down by just 0.3% to $109.65 per barrel and eventually lead to an expansion in the spread between the two contracts to the highest level since April this year. As of closing time yesterday, London-based Brent managed to widen its premium to the NYMEX to over $10 per barrel.

In the global market cues early today, Asian markets are trading marginally lower post the slightly weaker closing in the US overnight. The US dollar index on the other side trades modestly in the green which should pull the rupee down at the early trading session. This might disturb the commodities trading pattern at the local market. We do not have any data today from the euro – zone and Germany, while slight weakness in the Euro in the form of profit booking, May further keep the rupee lower against the US dollar. Commodities may also be affected. We believe broader markets could remain steady to slightly weak ahead of the key economic data releases from the US. We have the non-farm payrolls numbers for the month of September, which are expected to come in better for the economy according to the secondary market survey. However, we believe that the data may not be so positive and may provide volatility in the market.

Overall we believe, oil prices could continue to trade on a subdued note on Tuesday as prices taken negativism out of the moderate rise in US Dollar and yesterday’s increase in weekly crude stockpiles. Today, the major driver for prices could be the Non-farm payrolls data wherein a wide variation from expectations could come out to be a make or break case for equities and commodities, including oil. Broadly, we maintain our downside bias into the commodity and recommend selling on pull-backs at-least till the evening session.

TODAY STOCK MARKET TIPS

SELL CRUDE OIL MCX NOV BELOW 6160 SL 6183 TGT 6145-6126

SELL NATURAL GAS MCX OCT BELOW 225 SL 229.5 TGT 221

ECONOMIC INDICATORS:

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