Daily Comments
US oil prices end August sharply lower on economic and inventory jitters, as investors piled into gold and bonds
01.09.2010 9:36:00
Oil for October delivery ended down 3.7% at USD 71.92/bbl on the NYMEX Tuesday, with declines accelerating toward the close of the session. October Brent crude fell 2.6% to USD 74.64/bbl, shedding 4.5% in August.
NYMEX crude finished the month of August with a loss of 8.9%, its first monthly decline since May. The month started well, with prices surpassing USD 82/bbl, but soon got derailed as key reports triggered fears of a double-dip recession. Skittish investors then dumped oil, and natural gas, to migrate towards investments perceived as safer.
Oil pared some losses in afternoon trading following the release of the minutes from the US Federal Reserve's most recent policy meeting. The minutes showed that several officials thought the Fed should consider taking additional steps to provide more support if the economy weakens further. Also, Looking toward Wednesday's session, we expect to see another rise in inventories when the government releases its weekly report on stockpiles, after the American Petroleum Institute last night reported crude-oil inventories showed a build of 4.7 mn bbl. We think this number is overblown, as usual, and expect to see a build of 1.5 mn bbl in today’s EIA report. Also, we expect gasoline stocks to show a draw of 1 mn bbl, while distillates stocks are likely to increase 1.1 mn bbl.
More activity on the hurricane front has provided little or no price support. Hurricane Earl still threatens the East Coast, missing key oil regions in the Gulf of Mexico, and Tropical Storm Fiona is on its heels, expected to trace a similar path.
Oil price rose this morning in Asian trading after a Chinese report showed that manufacturing in the largest energy-consuming nation expanded at a faster pace in August, prompting optimism growth in emerging markets will strengthen fuel demand. Futures gained for the first time in three days after the Purchasing
Managers’ Index to 51.7 from 51.2, the Federation of Logistics and Purchasing said on its website today. Moving forward, we see few drivers for oil futures at this point and expect to see pressure on the USD 70 mark today unless the mid-week inventory report comes out much more bullish than anticipated.
