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Tuesday, March 19, 2013

OPEC's Forecast on China's Demand Growth in Focus

ONG Focus | Insights | Written by Oil N' Gold | Tue Mar 12 13 06:13 ET

Crude oil price retreated in European session. As the market awaits the OPEC’s monthly oil report, we expect the cartel would acknowledge that US’ imports of OPEC’s oil have continued to decline and a key reason to the situation is the rise in US production. Although OPEC remains contributing over 35% of the US crude imports, the amount has been on the fall steadily since the second half of 2008. In terms of volume, Saudi Arabia and Venezuela take up almost 60% of US’ imports from the OPEC while Angola and Nigeria have shown sharp declines. The implication on Brent crude is that, with the US a less popular destination for exports, producers would need to compete with other (such as Dubai crude) for shipment to other countries, such as those in Asia.

The market would probably be concerned about the new forecasts of global oil demand which are traditionally the most bearish one among the 3 major oil agencies (OPEC, IEA and EIA). The focus is whether there would be a downgrade on China’s demand outlook. If there’s such a case, we would expect the OPEC to consider production cut in coming months.

In the near-term, gold’s outlook should remain damped with ETF holdings weakening further and speculative positions of CFTC futures declining last week. The SPDR Gold Trust reported that holdings have dropped to 39.76M oz, the lowest level in October 2011, as of Monday. Speculative long positions of gold futures fell to 107.58K contracts in the week ended March 5, down -28.3% since the beginning of the year. Meanwhile, retail demand has been soft since the beginning of the year with the US Mint reporting gold coin sales of 25K oz so in March.

On the dataflow, final estimate of Germany’s CPI stayed at +0.6% m/m in February. UK’s industrial production fell -2.9% y/y in January after a downwardly revised -2.1% a month ago. Manufacturing production slipped -3.0% y/y, following a -1.6% drop in December. Trade deficit narrowed to 8.2B pound in January from 8.9B pound in the prior month.

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Monday, March 18, 2013

Doubts about Troika and China's Measures to Control Property Market Dominated Headlines

ONG Focus | Insights | Written by Oil N' Gold | Mon Mar 04 13 23:57 ET

Headlines in 2 Germany newspapers unveiled doubts about the Troika among ECB policymakers. The immediate aftermath of the Italian election was the decline of the Sentix index. Meanwhile, the market focus was China’s property tax measures. This, together with the drop in non-manufacturing PMI in the world’s second largest economy, caused the CSI300 to plunge more than -4%. Wall Street climbed higher on late trading with the DJIA and the S&P 500 indices gaining +0.27% and +0.46% respectively.

Die Welt reported that some ECB members were worried about the central bank’s participation in the Eurozone rescue efforts as these might create a conflict of interest and compromise its independence. The newspaper cited that “the level of discomfort has reached such a level that there are considerations among some important members of the ECB to leave the troika entirely”. Yet, ECB board member Joerg Asmussen commented that the ECB would not leave the troika and stressed that the members “don’t see any threat to our independence while we are participating in the troika". Asmussen stated that “the ECB participation in the troika is key. We have great knowledge about Europe, its institutions, its economy and we especially provide expertise on macroeconomic and especially financial sector issues. We will not withdraw from the troika”.

In China, the non-manufacturing PMI slipped to 52.1 in February from 54 in January. Yet, the key issue leading to the selloff of Chinese stocks was concerns over government’s measures to control property price rises. These measures include an increase in income tax on homeowners who made profit from a property sale. If one buys a second home in cities where property prices increase rapidly, he/she has to pay higher interest and down payments home.

The RBA left the cash rate unchanged at 3% in March. Policymakers stated that further easing might be required as inflationary conditions remained benign. On the dataflow, the Eurozone retail sales probably added +0.3% m/m in January, following a -0.8% decline a month ago. The final data for services PMI might have stayed unchanged in 47.3 in February. In the US, the ISM non-manufacturing index might have slipped -0.2 point to 55 in February.

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