PPI Final Demand and Commodity Market Tips

Crude Oil prices in the electronic trading session are trading flattish as prices take a breather post the near 4.5% drop this week. While Asian equities continue to trade lower amidst disappointing economic cues from China, we continue to maintain a negative bias on the commodity. Wednesday’s weekly inventory report too showed that total stocks rose to 370 million barrels, its highest level since December last year. Meanwhile, crude production in the US increased to 8.18 MBPD, the highest since July 1988.

Today, the US PPIM data is due however, are not expecting any major boost from the same. Crude’s backwardation is slowly but steadily coming down at the NYMEX, a clear indicator that the demand is reducing whereas India is taking the impact of higher interest rates. We saw the contango between the March and April contracts rising by nearly Rs 20 yesterday. While we had already recommended a buying in this spread on declines, we feel some more profit potential is possible in this spread ahead of the expiry. For the day, our local MCX prices could take some impact from the rupee’s deprecation and thus, we might see a little bit of divergence between the NYMEX and MCX prices for the day. Nevertheless, we maintain a selling bias on the commodity and recommend selling from the higher levels.

Global market analysis: A lot of events occurred overnight. Russian tensions escalated, equities in the US fell by more than a percent while its bonds rallied. The ECB’s president Draghi’s comments on managing the deflation pulled the euro back to trading down from its biggest gain and is now trading at $1.3860. This morning, the Asian markets have slumped and are trading down by more than a percent. Coming to commodities, no major change is expected in the trend and, it is managing to stay at the same levels. Coming to crude oil, WTI Oil traded ranged yesterday and the Brent fell despite tracking the negative cues in Ukraine. This morning, WTI is seen trading at $98.17 for the WTI oil futures contract.

We hold a bearish view on oil for the day but believe that the losses may not be significant. In the next week, it may extend its losses owing to the higher crude stockpiles in the US and oil, taking no cues from the Brent and the Russian tensions. For the day, we hold a bearish view on oil and expect that, due to the weakness in the equity markets, the losses in the global market may extend while the losses may be lower at the domestic market due to the currency depreciation. We suggest remaining on the selling side in natural gas for the day.

Commodity Market Tips

SELL NATURAL GAS MCX MAR NEAR 272 SL 276.5 TGT 267

SELL MENTAH OIL MCX APR NEAR 847 SL 585 TGT 837

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