Brent holds near $100

According to Reuters, aata on Wednesday showed that US manufacturing growth had slowed last month, underlining worries that the number one economy had cooled as the second quarter got underway. Manufacturing orders in China also dropped unexpectedly, casting concerns about growth in one of the world's top commodities consumers.

The data triggered a commodities sell-off on the first trading day of May, although a pledge by the US Federal Reserve to stick to its monetary stimulus plan has provided some support.

Brent, which fell more than 2% on Wednesday, edged up 11 cents to $100.06 per barrel early on Thursday morning after hitting a low of $99.51 - just shy of the prior session's trough of $98.76.

US crude was 18 cents lower at $90.85 per barrel, extending losses into a third straight session, hurt by a build-up in US crude stockpiles.

Data from the Energy Information Administration showed US crude stocks rising 6.7 million barrels to a record 395.3 million in the week to 26 April, far exceeding forecasts of a 1 million-barrel build.

"It all comes down to demand; we are oversupplied at the moment because consumption levels have just not picked up. The assumption is we should be seeing demand growing at a much stronger pace at this point of the year," Reuters quoted Houston-based Oil Outlook and Opinions president Carl Larry as saying.

"The confluence of bad economic data and these latest stock builds will continue to weigh on prices."

On Wednesday, the US Institute for Supply Management said its index of national factory activity fell to 50.7 from 51.3 in March and its employment index fell to 50.2 from 54.2.

China's official purchasing managers' index (PMI) fell to 50.6 in April from an 11-month high in March of 50.9. Analysts had expected the April PMI to be 51.0.

"When you look at these numbers it shows growth, and that is really better when you compare it to what is going on in Europe," Larry said.

"But the market is getting anxious as expectations are for these economies to be climbing a lot faster at this point in the year than they are."

Another key US economic indicator investors will be watching out for is Friday's non-farm payrolls.

"If we get a bad number here then you can probably expect to see either the Federal Reserve or the President come out to talk about growth stability in the US," Larry said.

Reuters cited the Fed saying on Wednesday that it would continue to buy $85 billion in bonds each month to keep interest rates low and spur growth. It added it would step up purchases if needed to protect the economy.

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Brent drops on weak US, China data

Brent crude futures fell $2.42 to settle at $99.95 a barrel, after dipping below $99 during the session for the first time since 23 April, Reuters reported.

Crude stocks in the United States rose by 6.7 million barrels last week to a record 395.3 million barrels, data from the Energy Information Administration showed, far exceeding forecasts of a 1 million-barrel build and pressuring US oil prices.

US oil settled down $2.43 at $91.03 a barrel. It hit a session low of $90.11, falling through its 50-day, 100-day, and 200-day moving averages.

"The market reared its head after we saw oil stocks jump to a three-decade high, and gasoline demand basically dropped to a decade low," Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut, told the news wire.

Trading volumes were high, with Brent 14% above its 30-day moving average and US crude over 20% higher.

During the session, the spread between Brent and US crude narrowed to $8.39, the lowest since June 2012. It closed just below $9 for the second straight day.

The Brent contract slid 7% in April, its biggest monthly drop in 11 months, on the back of a series of indicators suggesting the global economy remains fragile.

Growth in China's manufacturing sector unexpectedly slowed in April as new export orders fell, raising new doubts about the strength of the economy after a disappointing first quarter.

"China's manufacturing data was a big miss, and obviously when China speaks, we listen," said Richard Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.

In the United States, the pace of manufacturing growth slowed in April as the sector expanded only modestly, an industry report showed, adding to signs the economy cooled as the second quarter got underway.

Figures on US private-sector jobs growth also came in below market expectations, two days before the government's closely watched non-farm payrolls data.

"The combination of ample supply and weak fuel demand levels with disappointing economic data wiped out $4 of market rebound in a couple of days," said McGillian.

The US Federal Reserve said it will keep buying $85 billion in bonds each month to keep interest rates low and spur growth, but added it could lift or taper this pace of purchases depending on the economy's path.

The European Central Bank is widely expected to cut interest rates to a record low of 0.5% after data showed inflation in the euro zone had fallen to a three-year low and unemployment had hit a record of 12.1%.

Oil market fundamentals showed plentiful supplies, which also pressured prices.

Supply from the Organization of the Petroleum Exporting Countries is forecast to average 30.46 million barrels per day in April, up from 30.18 million bpd in March, a Reuters survey showed.

The Buzzard oilfield in the North Sea, an important contributor to the Brent crude benchmark, was on schedule to restart later on Wednesday, trade sources said, after a steam release caused the field to be shut down on Monday.

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Brent drops on weak US, China data

Brent crude futures fell $2.42 to settle at $99.95 a barrel, after dipping below $99 during the session for the first time since 23 April, Reuters reported.

Crude stocks in the United States rose by 6.7 million barrels last week to a record 395.3 million barrels, data from the Energy Information Administration showed, far exceeding forecasts of a 1 million-barrel build and pressuring US oil prices.

US oil settled down $2.43 at $91.03 a barrel. It hit a session low of $90.11, falling through its 50-day, 100-day, and 200-day moving averages.

"The market reared its head after we saw oil stocks jump to a three-decade high, and gasoline demand basically dropped to a decade low," Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut, told the news wire.

Trading volumes were high, with Brent 14% above its 30-day moving average and US crude over 20% higher.

During the session, the spread between Brent and US crude narrowed to $8.39, the lowest since June 2012. It closed just below $9 for the second straight day.

The Brent contract slid 7% in April, its biggest monthly drop in 11 months, on the back of a series of indicators suggesting the global economy remains fragile.

Growth in China's manufacturing sector unexpectedly slowed in April as new export orders fell, raising new doubts about the strength of the economy after a disappointing first quarter.

"China's manufacturing data was a big miss, and obviously when China speaks, we listen," said Richard Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.

In the United States, the pace of manufacturing growth slowed in April as the sector expanded only modestly, an industry report showed, adding to signs the economy cooled as the second quarter got underway.

Figures on US private-sector jobs growth also came in below market expectations, two days before the government's closely watched non-farm payrolls data.

"The combination of ample supply and weak fuel demand levels with disappointing economic data wiped out $4 of market rebound in a couple of days," said McGillian.

The US Federal Reserve said it will keep buying $85 billion in bonds each month to keep interest rates low and spur growth, but added it could lift or taper this pace of purchases depending on the economy's path.

The European Central Bank is widely expected to cut interest rates to a record low of 0.5% after data showed inflation in the euro zone had fallen to a three-year low and unemployment had hit a record of 12.1%.

Oil market fundamentals showed plentiful supplies, which also pressured prices.

Supply from the Organization of the Petroleum Exporting Countries is forecast to average 30.46 million barrels per day in April, up from 30.18 million bpd in March, a Reuters survey showed.

The Buzzard oilfield in the North Sea, an important contributor to the Brent crude benchmark, was on schedule to restart later on Wednesday, trade sources said, after a steam release caused the field to be shut down on Monday.

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Weekly Fundamentals - Brent Crude Extended Decline on Easing Iranian Tensions

ONG Focus | Insights | Written by Oil N' Gold | Sat Mar 02 13 04:19 ET

Early last week, the market attention was mainly on the hung parliament formed after the Italy election. Sentiment was also damped by Moody’s downgrade of UK’s triple A credit rating. Later in the week, investors’ risk appetite improved after Italy’s bond auctions and ECB President Draghi’s Assurance that the central bank would not exit monetary easing soon. Another focus was the US sequester, i.e. about $85 billion in spending cuts, that began on March 1. Negotiation on Friday between Obama and congressional leaders failed to reach an agreement to avoid the reductions.

Crude Oil: Brent crude plunged last week with the front-month contract reverting back to the 110 level as geopolitical tensions eased for the time being. The P5+1 negotiation about Iran’s nuclear development was held last week in Almaty. While the meeting, the first time since last June in Moscow, has not made any deal yet, it is deemed to be a more constructive one as all parties agreed to hold a new round of talks in Turkey on March 17-18 March and then more high-level talks in Kazakhstan on April 5-6. Moreover at the meeting, the Western allies agreed to offer Iran limited sanctions relief if it stops its output of 20% enriched uranium. Iran stated that it would consider the offer. Yet, Tehran’s Interim Friday Prayers Leader Hojjatoleslam Kazem Seddiqi stressed that “any proposal which denies the people their rights is dismissed by the nation and no official has the right to compromise in this regard”.

Natural Gas: The DOE/EIA reported a -171 drop of gas storage to 2 229 bcf in the week ended February 22. Stocks were -307 bcf less than the same period last year and -308 bcf above the 5-year average of 1 921 bcf. Separately, Baker Hughes reported that the number of gas rigs fell -8 units to 420 in the week ended March 1. Oil rigs increased +4 units to 1 333 and miscellaneous rigs remained unchanged and the total number of rigs fell -4 units to 1 757. Directionally oriented combined oil, gas, and miscellaneous rigs slipped -12 units to 185 units while horizontal rigs added +1 unit to 1 141 units and vertical rigs added +7 units to 431 during the week.

Precious Metals: Despite a modest rebound earlier in the week, selloff resumed with the benchmark Comex gold contract losing -0.03% on weekly basis. In the complex, the decline in PGMs prices was more severe with platinum and palladium losing -2.11% and -2.03% respectively. South African government has proposed measures to allow more institutions to provide exposure to commodity ETFs, in particular gold and platinum.

 

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Weekly Fundamentals - WTI- Brent Spread Narrowed on Divergent Movements of Two Benchmarks

ONG Focus | Insights | Written by Oil N' Gold | Sat Mar 16 13 02:38 ET

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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