US CPI Shell Vibrate Crude

Crude oil prices for the most active January expiry at the NYMEX managed moderate gains on Tuesday, a day which lacked any major economic cues as the markets took positive cues from the comments made by the Fed Chairman, who said that interest rates in the country would continue to remain lower for the medium to long-term. At the end of the day, January WTI oil prices stood at $93.90 per barrel, higher by 0.2% whereas MCX crude oil prices for the December expiry gained 0.5% to Rs 5900 per barrel, with more gains backed by the movement in the rupee.

Amongst other cues providing moderate support to the WTI crude prices in the early morning session today, the late night weekly API inventory data played a part. According to Bloomberg, the privately funded agency statement said that crude stocks gained by 512,000 barrels while gasoline inventories rose by a marginal 84,000 barrels. It added that the distillates stockpiles slipped 4.9 million barrels, way higher than forecast as traders start to store the commodity ahead of the winter season demand.

In the evening session today (IST), the more important government backed data would be released. According to Bloomberg estimates, we are seeing crude stocks rise by fewer 0.5 million barrels, which is a change in stance against the 1 million barrels worth of additions predicted earlier by the survey. Overall, we feel that the broader inventory report is likely to follow a movement similar to that seen in the API. There is a chance for additions in both crude and gasoline stocks, though it is, to some extent negated by the fall in distillate inventories. This is against Bloomberg’s survey report of a 300,000 barrels rise in distillate stocks till yesterday. Another inherent data to be watched critically for the oil prices would be the movement in Cushing inventories. Over the last couple of weeks we have been seeing continuous rise in Cushing stocks and expect the same thing to be extended in the current report as well. Rising stocks at Cushing is likely to weight any positive movement in prices. We also expect the refinery utilization rate to continue expansion.

In other global cues major equity indices in Asia are trading on a mixed note on Wednesday following the broad weakness in the US and European equity gauges yesterday. In the currency space, the Dollar index closed nearly unchanged yesterday, though it lost 0.2% this morning, aiding a smart positive push into the euro and the pound. On the other hand, this is providing a small positive boost to the Asian emerging market currencies, including the rupee. In the non-agri commodities, most of them managed to inch higher from the their lows of the day yesterday, tracking comments by the US Fed officials, which hinted that interest rates might continue to remain low, whether or not the bank starts tapering.

Today, we have a large number of economic readings, mainly the PPI data from Germany in the afternoon session, which is likely to disappoint. From the US, we have the CPI, retail Sales existing home sales and the business inventories reading, most of which are expected to be subdued as, barring business inventories, all the data are for the month of October because the US government shutdown impacted the normal pattern. Overall, we are maintaining our broader weak bias in the commodities space for the day.

For Crude we recommend selling on the higher levels during the day. As also mentioned earlier, we have the DoE inventory data which could create some volatility in crude, though the overall trend still remains on the lower side. The modest appreciation in the rupee is also likely to continue to support our downside view on MCX non-agri commodities due to the rupee-dollar parity. In the international arena, we also have a meeting between the Iran and other western government officials towards the settlement of their issues over former’s nuclear program. We are not expecting any major impact on WTI price movement due to the same today.

COMMODITY INTRADAY TIPS

BUY GOLD MCX DEC NEAR 30380-30400 SL 30300 TGT 30500-30550

BUY CRUDE OIL MCX DEC NEAR 5925 SL 5890 TGT 5960-5980

ECONOMIC INDICATORS:

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