Crude oil extends rally to 83.95 in European session. Weakness in USD, abnormally cold weather in the Northern hemisphere and strong demand from China are pushing energy prices higher. Oil products also advance. Heating oil surges to 2.224. The benchmark contract has rallied in the past 4 weeks as government reports showed declines in distillate inventory. Gasoline price also rises to 2.185 as the rally accelerated after an upside break of 2.11 on January 4.
Attacks in Nigeria once again spurred worries about production disruption. Chevron reported that its Makaraba-Uyonana pipe was breached on January 8. This forced the company to shut down 20B bpd of crude oil production.
Rebel groups who want a share of oil revenues have been a threat to Nigeria's oil production. Among them, the Movement for the Emancipation of the Niger Delta (MEND) is the largest group. The
MEND signed an indefinite ceasefire on October 25, 2009 and agreed to have peaceful talk with the government. However, it resumed attack in mid-December as member was dissatisfied with the progress of the negotiations.
Gold stays strong with other commodities as USD weakens. The February contract rose to as high as 1163 before pulling back to 1157.
USD's rally against the euro accelerated after breaching the cluster of 1.4218-1.448. Currently trading at 1.453, the greenback has plummeted to a 3-week low against the euro as unexpected decline in payrolls evaporated traders' hope for Fed's tightening in 1H10.
Stock markets in both Asia and Europe advance as driven by robust trade data in China. Apart from strong commodity imports, export growth from China, up +17.7%, indicated global economic recovery is taking place in a fast pace.
In Asia, the MSCI Asia Pacific Index ex Japan rose +1.2%. Benchmark indices in Australia rose +0.8% while indices for both China and Hong Kong rose +0.5%. In European morning, UK's FTSE 100 Index rises +0.6% to 5565.2, Germany's DAX adds +0.4% to 6065 while France' CAC 40 gains +0.7% to 4074.
Strong China Imports Pushed Crude Price Higher:
Crude oil price rose to as high as 83.67 after China reported strong imports in December. In 2009, robust demand in emerging countries, especially China, was the major driver for energy prices. We expect the strength to continue this year although withdrawal of stimulus measures may slow the pace modestly.
According to the Chinese Customs, crude oil imports surged +24% to 21.26M metric tons in December. On annual basis, the nation imported 203.8M tons in 2009, compared with 178.9M metric tons in the previous year.
Industrial activities in Asia has been picking up rapidly after slumping to very low levels in early 2009 as driven massive government stimulus plans. In China , the government implemented a plan worth $506B to stimulate growth, particularly in infrastructure and construction sectors. As a whole, the nation's GDP is expected to grow by more than +8%.
The market's focus is not policy tightening this year. Demand outlook for commodities will be affected if China starts tightening. However, we believe the government will only exit from the stimulus plans after a self-sustainable growth is seen in the economy. Therefore, the negative impact on commodity prices should not be too much.
Gold price rallied for the second consecutive day amid USD's correction. The February contract for the yellow metal surged to a 1-month high of 1163 as the dollar's decline for 3-low against the euro spurred gold buying. Disappointment in December employment report lowered expectations for a Fed rate hike as early as in June. Traders liquidated their long positions in USD and turned short.
Commitments of Traders:
Crude Oil: Net speculative long positions rose to 108.8Kcontracts, the highest 10 weeks, as price surged amid strong economic data and extremely cold weather. Although elevated inventory levels suggested energy fundamentals remained dismal, correction in USD indicated crude investment might still be robust in coming weeks
Natural Gas: Net speculative short positions surged to 156.6K contracts. Despite decline in gas inventory, the ample supply continued to depress price
Gold: Net speculative long positions declined 227.8K contract despite rally in price. Although net longs in gold have plummeted more than -10% from the peak in November, they remained at high levels
Silver: Net speculative long positions in silver rebounded to 395K last week. Silver price rose to a 1-month high as signs of global economic recovery spurred speculations that demand for silver in industrial activities should rise
Platinum: Net longs soared to 20.4K contracts, the highest level in 4 weeks. While strong auto data in China and OECD economies were supportive to price, launch of the first-ever platinum ETF in the US triggered investment demand
Attacks in Nigeria once again spurred worries about production disruption. Chevron reported that its Makaraba-Uyonana pipe was breached on January 8. This forced the company to shut down 20B bpd of crude oil production.
Rebel groups who want a share of oil revenues have been a threat to Nigeria's oil production. Among them, the Movement for the Emancipation of the Niger Delta (MEND) is the largest group. The
MEND signed an indefinite ceasefire on October 25, 2009 and agreed to have peaceful talk with the government. However, it resumed attack in mid-December as member was dissatisfied with the progress of the negotiations.
Gold stays strong with other commodities as USD weakens. The February contract rose to as high as 1163 before pulling back to 1157.
USD's rally against the euro accelerated after breaching the cluster of 1.4218-1.448. Currently trading at 1.453, the greenback has plummeted to a 3-week low against the euro as unexpected decline in payrolls evaporated traders' hope for Fed's tightening in 1H10.
Stock markets in both Asia and Europe advance as driven by robust trade data in China. Apart from strong commodity imports, export growth from China, up +17.7%, indicated global economic recovery is taking place in a fast pace.
In Asia, the MSCI Asia Pacific Index ex Japan rose +1.2%. Benchmark indices in Australia rose +0.8% while indices for both China and Hong Kong rose +0.5%. In European morning, UK's FTSE 100 Index rises +0.6% to 5565.2, Germany's DAX adds +0.4% to 6065 while France' CAC 40 gains +0.7% to 4074.
Strong China Imports Pushed Crude Price Higher:
Crude oil price rose to as high as 83.67 after China reported strong imports in December. In 2009, robust demand in emerging countries, especially China, was the major driver for energy prices. We expect the strength to continue this year although withdrawal of stimulus measures may slow the pace modestly.
According to the Chinese Customs, crude oil imports surged +24% to 21.26M metric tons in December. On annual basis, the nation imported 203.8M tons in 2009, compared with 178.9M metric tons in the previous year.
Industrial activities in Asia has been picking up rapidly after slumping to very low levels in early 2009 as driven massive government stimulus plans. In China , the government implemented a plan worth $506B to stimulate growth, particularly in infrastructure and construction sectors. As a whole, the nation's GDP is expected to grow by more than +8%.
The market's focus is not policy tightening this year. Demand outlook for commodities will be affected if China starts tightening. However, we believe the government will only exit from the stimulus plans after a self-sustainable growth is seen in the economy. Therefore, the negative impact on commodity prices should not be too much.
Gold price rallied for the second consecutive day amid USD's correction. The February contract for the yellow metal surged to a 1-month high of 1163 as the dollar's decline for 3-low against the euro spurred gold buying. Disappointment in December employment report lowered expectations for a Fed rate hike as early as in June. Traders liquidated their long positions in USD and turned short.
Commitments of Traders:
Crude Oil: Net speculative long positions rose to 108.8Kcontracts, the highest 10 weeks, as price surged amid strong economic data and extremely cold weather. Although elevated inventory levels suggested energy fundamentals remained dismal, correction in USD indicated crude investment might still be robust in coming weeks
Natural Gas: Net speculative short positions surged to 156.6K contracts. Despite decline in gas inventory, the ample supply continued to depress price
Gold: Net speculative long positions declined 227.8K contract despite rally in price. Although net longs in gold have plummeted more than -10% from the peak in November, they remained at high levels
Silver: Net speculative long positions in silver rebounded to 395K last week. Silver price rose to a 1-month high as signs of global economic recovery spurred speculations that demand for silver in industrial activities should rise
Platinum: Net longs soared to 20.4K contracts, the highest level in 4 weeks. While strong auto data in China and OECD economies were supportive to price, launch of the first-ever platinum ETF in the US triggered investment demand
