COM: Equity markets remain a key driver for crude oil
By Walter de Wet
WTI front-month prices continue to test $77/bbl and are holding up well despite dollar strength. After the large liquidation of speculative positions on NYMEX, we believe there is room for new long positions to be added. This should support the price. As with gold, we still favor oil in euro.
The DOE inventory report today is likely to show more of the same — rising crude and gasoline inventories and a decline in distillate inventories. With crude oil already rising almost $7 in 10 days, a decline in crude oil may be larger should the inventory report disappoint on the downside than upside potential should the inventory report be better-than-expected. The market expects a rise of 1.7m barrels in crude and 1.5m barrels in gasoline inventory. Distillates are expected to decline by 1.5million barrels.
For crude oil, equity markets remain an important driver. While equities in Europe are trading higher, the futures market is pushing lower for US equities today. A negative performance in equities could cap crude rallies.
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We see support for crude oil front-month prices at $77.63 and $75.95, resistance at $77.92 and $78.50. Thermal coal prices are still moving down as demands from Europe remain weak. API2 for delivery in Q2:10 has closed at $76.25 yesterday — down $2.55.
However, while API coal prices are moving lower, coal Newcastle prices are still better supported. The NEWC Index for coal for delivery in Q2:10 closed at $91.15 yesterday. This shows good demand in Asia and should provide a floor to Richards Bay coal.
