COM: Crude oil weak on falling equities demand concerns
Crude Oil prices continue to display weakness on the back of falling global equities markets, tightening lending norms in China, Japan’s debt rating in jeopardy & strengthening US Dollar. Markets still remain concerned over the demand scenario in the US, the world’s largest energy consumer.
In the last week oil prices dropped despite a decline in inventories as data indicates that refineries operated at 78.4% of capacity last week. In the week prior to that, gasoline inventories climbed to the highest level since March 2008 and fuel consumption in the past four weeks is down 1.8% from a year earlier. The energy market still remains oversupplied and prices may remain under pressure.
There is a major concern as China is expected to continue to tighten its monetary policy over the next six months. The move by China to limit credit and raise reserve requirements for banks could lead to downside pressure as China is the world’s second-largest energy consumer.
Oil prices could continue to trade with a negative bias as demand concerns will add pressure on prices. Falling equities markets have also taken a toll on crude prices as well. Further, the dollar could trade with a positive bias as risk aversion in the financial markets would reduce demand for higher-yielding and riskier investment assets.
Demand concerns in the case of crude oil could lead to downside pressure on prices. Inventory data to be released tonight along with FOMC statement would be key short-term drivers for crude prices. Both petrol & distillate stocks (including heating oil) were expected to have risen 1.4m barrels in this week’s data, according to a preliminary poll of analysts by Reuters.
Today, we could witness volatile move in crude oil prices with support for NYMEX January Crude Oil is seen at $73.80/$73.00 level & resistance at $75.40/$76.20 levels.
Natural gas price have been trading sideways for past few trading sessions as milder temperatures have returned to US North-East. Natural Gas prices have major support at Rs. 245 & resistance at Rs.270 levels.
