Tag Archives: crude oil

Brent hovers near 10-week high, Fed meeting in focus

18 Jun

Brent crude futures were barely changed around USD 105, holding not far off their strongest level in 10 weeks, as investors remained cautious ahead of a US Federal Reserve meeting.

The Fed, whose two-day policy meeting starts on Tuesday, is under pressure to roll back some of the USD 85 billion in monthly bond purchases after advances in the US economy. Its three quantitative-easing schemes have buoyed prices of commodities.

At 0446 GMT, Brent was up 5 cents at USD 105.52 a barrel. It rose to 106.67 on Monday, the highest since April 4, on mounting tensions in the Middle East. US oil added 5 cents to USD 97.82 after hitting a nine-month high near USD 99 a barrel in the previous session.

“What I’m expecting is some indication of a slow, measured tapering of the bond-purchase programme by the Fed. It will cause some impact to markets at the start but I’m looking for minimal slippage at least for oil prices,” said Carl Larry, president of Houston-based Oil Outlooks and Opinions.

“In general any decision to taper would signal confidence in the ongoing recovery of the US economy, that is potentially an upside for markets depending on how investors take it.”

Global financial markets have been on edge since Fed Chairman Ben Bernanke suggested the central bank would be looking to taper its stimulus if the economy showed signs of improvement.

The oil market is also keeping an eye on a standoff over the civil war in Syria as world leaders lined up to pressure Russian President Vladimir Putin into toning down his support for Syrian President Bashar al-Assad on the second day of a G8 summit.

Although Syria is not key to global oil supply, investors are worried the civil war there could affect other countries in the Middle East and plunge the whole region into conflict

Any run-up on geopolitical risk would soon bump into a fundamental situation of ample supply and uncertain demand.

Stung by recent victories for Assad’s forces and their support from Hezbollah guerrillas, the United States said last week it would step up military aid to the rebels, including automatic weapons, light mortars and rocket-propelled grenades.

“The market has certainly built in a risk premium into prices, and this should keep it supported despite fundamentals suggesting that there is more than enough oil out there to buffer a disruption to any kind of supply from the region,” said Larry of Oil Outlooks and Opinions.

“But until we see some clear consensus between the likes of Russia and the US we shouldn’t expect to see an end in sight in Syria and that keeps the risk of the conflict spilling over and drawing in other regional entities much higher.”

US commercial crude oil stocks are expected to fall due to lower imports, according to a preliminary Reuters poll done on Monday.

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Supply disruptions in Copper, Platinum, Crude Oil and Grains possible: Barclays

1 Jun

Though the year so far has seen positive momentum when it comes to supply side of various commodities, Barclays does not expect the same to be the case as we move forward into the second half of the year. This applies to commodities like copper, platinum, crude oil and grains. Approaching the commodities one at a time would give us a better picture.

Copper

Monthly production data of copper from Chile, amongst the world’s biggest producers of copper, says that April saw the commodity declining in production by 1.2% y/y and 9% m/m. This is the first decline registered this year subsequent to an output growth of 7% y/y in Q1.

Platinum

There is an upcoming worker wage negotiation in South Africa with the political party of AMCU attending the talks for the first time. If the talks get protracted or a labour action stems from the same, supply disruptions may get to be the norm.

Crude oil

The Sudanese exports have been resuming slowly even as Yemen’s Marib pipeline has been repaired. But it may not be time for rejoicing as both developments are reversible. Yemen’s pipeline could be attacked yet again by the militants (“the frequency of pipeline attacks in Yemen have not faded and risk remains for a relapse”); nature of relationship between North and South Sudan being volatile, the crude oil flows may not be as reliable.

Besides the domestic conflicts and geopolitical factors are not favorable in Iraq, Libya and Nigeria.

Grains

Rain and wet weather have been playing dampeners as delays surface in US spring plantings of corn and soybeans.

 

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Bullion, base metals under pressure, sell on rally: Emkay

23 May

In an interview to CNBC-TV18, Ashok Mittal, CEO of Emkay Commodities shared outlook on commodities market.

Below is a verbatim transcript of the interview:

Q: How are you mapping commodities on a day like this when we have some poor Chinese data and generally the trend has been weakish?

A: The overall trend on the commodities market – whether it is bullion or base metals or energy products – remains quite under pressure.

On base metals, Chinese data is not very supportive and hence the outlook on the entire base metal pack, especially copper, looks little negative. We think that the prices will remain under pressure on the international markets as well as on the Indian market.

The only difference, which is applicable to all commodities whether bullions or base metals etc is the depreciation of rupee. While the international markets remain under pressure and we expect the prices to remain lower for most of the commodities – the fall in India on Indian rupee terms might be comparatively lesser because of the depreciation of the rupee. Whether it is gold, silver or base metals, the advise for investors is that they should look to sell on uptick.

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Q: Give us a word on what is happening with crude as well that is beginning to blink?

A: In crude, for a long-term perspective we had been saying that we expect the range to be between USD 80 per barrel to USD 100 per barrel. Inventory levels, which came yesterday, are quite good for gasoline as well as crude oil. The expectation in terms of demand increasing is comparatively much lesser.

We expect that crude prices will remain under pressure. In short-term, we expect them to go closer to USD 91-92 per barrel and we expect it should not go above USD 97 per barrel.

On Indian market, we are suggesting to sell crude somewhere around Rs 5,300-5,320 keeping USD 1 per barrel stop loss. We expect USD 2-3 per barrel downside. That means we might see levels of around Rs 5,200 per barrel or lower.

Another very interesting analysis that we have seen on the difference between Brent crude oil and Nymex crude oil is that gas, which used to be around USD 18-20 per barrel has shrunk to around USD 8 per barrel or so. So, we expect that while there will be a lot of pressure on the overall crude oil prices, Nymex crude oil will remain more under pressure because of the factor that the supply is more on that side whereas the Brent will remain not that much under pressure. So the gap between these two will increase further to USD 12-13 per barrel. So this will be a good trade for traders to do. They can buy Brent crude oil and sell Nymex crude oil.

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