Divergence was seen in WTI and Brent crude yesterday. The former initially rallied to a 2-week high to 93.47 before ending the day at 92.54, up +0.52%. This was driven by a report showing a decline in Iranian exports in March. Yet, the bullish was capped as the OPEC reduced its oil demand forecasts. Narrowing in spread between WTI and Brent crudes induced aggressive selling of the spread. Gold jumped to a 2-week high of 1597.6 before ending the day at 1591.7, up +0.87%, as the ECB signaled more room for easing amid moderation of inflation.
OPEC’s monthly report for March suggested that global oil demand would reach 89.7M bpd in 2013, up 0.8M bpd from last year. While this forecast is largely unchanged from previous estimate, the carter warned that there are a number of potential downward risks in this forecast. For instance, the euro’s instability could lead to even deeper recession in some Mediterranean countries” and “the potential impact of a full budget cut in the US could drag down the world economy, consequently reducing oil demand”. Meanwhile, demand for OPEC’s oil would fall to 29.7M bpd in 2013, down from 30.1M bpd a year ago, mainly driven by increase in US oil output. Demand from China is expected to stay unchanged at 10.1M bpd in 2013.
As investors await the Eurozone’s CPI data in February, ECB policymaker Jens Weidmann stated that “inflation pressure is easing”. He also warned that “the crisis is not over despite the recent calm on financial markets”, signaling further easing cannot be ruled out. Last week, IMF director Lagarde stated that "monetary policy should remain accommodative, and we believe that there is still some limited room for the ECB to cut rates further".
On the dataflow, UK’s industrial production surprisingly slipped -2.9% y/y in January, following a downwardly revised -2.1% drop a month ago. Manufacturing production plunged -3.0% y/y in January, compared with consensus of a -1.5% drop and December’s -1.6% slide. Concerning oil inventory, the industry-sponsored API estimated that crude inventory slipped -1.4 mmb in the week ended March 8. For fuels, gasoline and distillate stockpiles dropped -3.1 mmb and -2.2 mmb respectively. The official report from DOE/EIA probably shows that crude inventory added +2.3 mmb while gasoline and distillate dropped -1.5 mmb and -2 mmb respectively.
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