Today Manufacturing Activities May Have Major Effect on Crude

Crude oil prices finished on a weaker note on Friday evening tracking the cues that the US FED might consider tapering in the forthcoming monetary policy meeting. There were no major oil related cues towards the end of the week with the WTI oil for most active January expiry finished 0.9% lower at $96.60 per barrel. In the Indian markets, oil prices at MCX for December finished 0.75% lower at Rs 6035 per barrel level. For the week as a whole, crude oil prices saw a ranged performance with prices trading in a near $3 per barrel range between $96.50 on the lower side and $98.90 per barrel on the higher side. At the end of the week, oil at WTI was lower by over a percent though losses in Indian markets were missing due to the Rupee factor.

In the major developments in the international markets, global oil prices took note of the sharper movement into the weekly inventory front last week, though the overall effect was short-lived. Inventory report for the week ended 6th Dec from the US Department of Energy showed; crude oil inventories fell by more than 10 million barrels way higher than expectations though product related stocks saw continued expansion. Refiners are continuously increasing output on anticipation of better demand period particularly when the US hits its peak winter demand in January and February month. As also update earlier, once the winter demand starts seeping-in we would slowly start seeing the fall in the on distillate inventory front in the US and which is likely to push oil price higher from current levels over a short to medium term time frame. That phase has not been hit by the US markets yet.

In other important cues for the commodity, this week we would enter into the expiry phase both local and international markets. As of the latest quote, difference in pricing between the December and January expiry crude at MCX has been average around Rs 55-60 over the last three weeks. We advice, medium-term long position holders to slowly start rolling over their positions from Dec to Jan on declines towards Rs 52-55 as we fell the difference between could hit Rs 60-65 in the next week. With the US peak demand out of winter still a little bit away, we don’t expect any major movement in the spread in the short period of time.

In other related cues for the OPEC markets during the weekend, talks between Libyan government and rebel group once again failed wherein the latter refused to hand over control of three oil ports to the government. Brent crude prices for January expiry was trading higher by 0.5% to $109.30 per barrel level after falling nearly 2.5% last week. Overall we feel this news could keep Brent oil prices buoyed in at-least Intra-day trade today.

In the global markets updates today morning, Asian markets dropped in the range of 0.50% to 1.0% today after Chinese manufacturing number unexpectedly declined. Euro currency is trading marginally higher and the US dollar index is back down to 80.00. Market is likely to remain guarded today ahead of two days FOMC meeting scheduled tomorrow in the US. Investors across the globe are with an anticipation that the US may taper off its quantitative easing programme. Coming to economic data, we have loads of data from Germany, euro zone and the US; primarily the manufacturing activities may have major effect on metals and energy. In the recent past the economic data globally are coming better than expected figure so any further improvement in these data may have fresh impact on the market.

From oil, the WTI January futures oil contract is marginally lower during early trade while there are no major unforeseen events expected today. For the day we recommend selling and buying of WTI oil futures and a similar strategy in MCX. We feel, lower Chinese PMI number could press prices lower till afternoon session thereon the European and US cues are expected to take prices higher, thus recommend a sell and later buy strategy today.

COMMODITY INTRADAY TIPS

SELL GOLD MCX FEB NEAR 29300 SL 29450 TGT 29150

SELL NATURAL GAS MCX DEC BELOW 264 SL 268 TGT 260

TODAY COMMODITY MARKET ECONOMIC EVENTS:

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