US Distillate Inventory Continue to Rise, Keeping Pressure on Crude Oil

WTI Crude oil slipped during US trade yesterday as stronger fall in crude stockpiles was eclipsed by a similarly higher rise in product inventories front in the US. While prices traded in a very tight range for larger part of trade we had expected a mixed to moderately positive data wherein we were anticipating a positive surprise particularly on the Distillate inventories front. However, the data came otherwise and prices slipped heavily in late trade, against our intraday view of modestly bullish to cautious trade. At the end of trade, NYMEX oil was lower by 1.4% to $92.30 per barrel whereas in the MCX markets, we saw prices falling down by 1.2% to Rs 5785 per barrel.

Crude Oil, prices in the US slumped for the sixth session in the last seven after the stocks for gasoline and distillate increased nearly twice as much as markets had been anticipating, as per a Bloomberg survey showed. The US Department of Energy said, gasoline inventories jumped up 6.24 million barrels for the week ended Jan 3 whereas the distillate supplies which are more closely watched due to the anticipated winter demand in the US advanced by 5.83 million barrels. As product stocks rose, overall demand for these products as against the markets supply was lower by nearly 4% last week, hitting its lowest level in around seven months, the report showed. During the global markets related cues today morning, broader markets are calm while Asian equities have firmed up a little. The US dollar index is trading at seven weeks high, standing tall above the 81 mark whereas the Euro currency has tumbled down and trading at $1.3580. From the economic data front we have trade balance number from UK while confidence numbers (economic/industrial/consumer) from euro-zone is also expected. Likewise, from Germany we have industrial production number which is expected to improve. Another important cue that is planned out today is ECB’s interest rate decision and from the US we have only conventional jobless claims number. Overall, we believe markets would be less volatile today while tomorrow we may witness huge movement in most of the asset classes as we have locally IIP number in the morning and the Nonfarm payrolls data from the US.

Looking down to Crude oil, WTI for most active February expiry at the Comex electronic trading platform is hovering near the $92.65, modestly higher as equated to yesterday’s closing. As also said above, the inventory status which showed a massive decline in last week and for larger part of December does not clearly portray any demand perspective in the US rather it could be a mere inventory management. For the day we expect oil prices to remain lower while our technical study also suggests selling as key support is already breached. Traders can look for initiating shorts for Intraday on higher levels

Commodity Tips

SELL LEAD MCX JAN NEAR 132 SL 133 TGT 131

BUY CRUDE OIL MCX JAN ABOVE 5776 SL 5757 TGT 5792-5811

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