Crude Oil: WTI and Brent crude moved in different direction last week with the former for April delivery adding +1.60% while the latter slipped -1.29% during the week. This has further narrowed the WTI-Brent spread to $16.7/bbl, the lowest level since mid-January, and the 1Q13 average to $19/bbl. The WTI crude contract was supported by the EIA report that Cushing inventory slipped-1.53 mmb to 49.32 mmb, a level not seen since December last year. Brent crude time-spread also slumped during the week as a result of 2 incidents. First, a crude oil loading program for April in the North Sea is expected to raise supply by +150K bpd to the highest levels since June 2012. Output is also expected to stabilize in the Buzzard field while the Elgin field would also resume operation. Second, the South Korean government is proposing to cancel tax rebate on imported crude from the EU from April 1. This would likely reduce demand for North Sea crude by Korean refineries.
In China, the report from National People’s Congress suggested that the government forecast the economy to grow +7.5% this year with M2 money supply and fixed asset investment rising +135 and +18% respectively. Despite concerns over measures to curb property prices, oil demand would remain well-supported by resilient manufacturing activities. Meanwhile, the NRDC has planned to increase the transparency and responsiveness of domestic fuel prices adjustment so as to reflect changes in international oil benchmarks more instantly. There have been proposals to remove the 4% crude price change threshold and the observation period of 22 working days. The last time the NDRC adjusted fuel prices was February when gasoline and distillate prices were raised by +3.2% and +3.4% respectively. Over the past 12 months, it has raised fuel prices 4 times and cut them 4 times.
Natural Gas: The DOE/EIA reported a -145 drop of gas storage to 1 938 bcf in the week ended March 8. Stocks were -440 bcf less than the same period last year and -198 bcf above the 5-year average of 1 814 bcf. Separately, Baker Hughes reported that the number of gas rigs added +24 units to 431 in the week ended March 15. Oil rigs stayed unchanged at 1 341 while miscellaneous rigs remained unchanged and the total number of rigs gained +24 units to 1 776. Directionally oriented combined oil, gas, and miscellaneous rigs added +14 units to 209 units while horizontal rigs climbed +1 unit to 1 131 units and vertical rigs added +9 units to 436 during the week.
Precious Metals: gold price gained last week but remained capped below 1600 at close. Although macroeconomic fundamentals should be able to drive prices higher, near-term catalysts lack in the near-term. In China, deputy Governor of the PBOC, Yi Gang, stated that the government would limit its gold holdings to 2% of total reserve amid concerns that additional buying would drive up prices and hurt consumer demand. That said, China would remain a key gold importer as its domestic production is not sufficient to meet domestic jewelry demand.
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