After tumbling Thursday, commodities remained weak in Asian session today as the sector is facing headwinds including Obama's plan to curb risk-taking at banks and China's acceleration in tightening policies. Crude oil dropped -2.2% to close at 76.08. Heating oil and gasoline settled below 2.00 for the first time in 4 weeks. The market is very much concerned about refinery rate which slipped to 78.4%, the lowest since at least 1989, last week. Gasoline inventory also surged to a 22-month high.
US President Barack Obama's proposal to curb excessive risk-taking by banks depressed the market and caused selloffs in higher-yield assets. He's seeking to limit the size of financial institutions and to ban some 'risky' activities including proprietary trading and internal hedge funds. Equities, especially financial stocks, tumbled. Commodity prices also declined as passage of the law will limit the volume of commodity trading.
China's economy grew +10.7% yoy in 4Q09, the fastest pace since 2007 in 4Q09. For all of the year, the economy grew +8.7%, exceeding the official target of +8%. However, the market was not thrilled by it. Rather, the expansion raised worries about further tightening in the world's third largest economy. In the statement accompanying the announcement of the GDP readings, phrases such as the government will maintain 'moderately loose monetary policy' and a 'proactive fiscal policy' disappeared. This spurred speculations that the Chinese government has shifted the focus in fiscal and monetary policy and will probably announced stricter tightening in March.
Released Thursday, the US Energy Department reported crude oil inventory drew -0.47 mmb to 330.6 mmb in the week ended January 21. Utilization fell to 78.4% for 81.3% but decline in demand was offset by higher reduction (-4%) in imports.
Draw in distillate stockpile more than doubled consensus forecasts as extremely cold weather last week raised heating oil consumption. Demand rose +5.8% to 3.823M bpd while production plummeted -10%. Despite the draw, distillate inventory remained +17% above normal. Gasoline stockpile rose +3.95 mmb to 227.4 mmb as driven by -1.5% drop in demand to 8.602M bpd.
Precious metals fell across the board. Gold price slid to as low as 1088 before closing at 1103.2, down -0.8%. Silver slumped -2.1% to 17.51. The metal has lost around -5% over the past 2 days. PGMs eventually correct after rallying strongly over the past few weeks. Platinum extends weakness (dropping -1.3%) in Asia today after a loss of -1.6% Thursday. Palladium recorded its daily loss for the first time in 5 days. The metal closed -1.7% lower at 453.95 Thursday. Today in Asia, palladium goes further to the south and is currently trading at 439.
