Oil market outlook
- Monday, October 5, 2009, 6:37
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Oil market outlook
Crude prices rebounded to nearly $70 a barrel last week, buoyed by unexpected drawdown in US gasoline inventories and renewed tension over Iran’s nuclear programme. However, the strength in the dollar and slump in US equity markets helped limit crude pricing gains. West Texas Intermediate closed the week at $69.95 a barrel, up nearly $4 from a week earlier.
US gasoline stocks for the week ended Sept 25 unexpectedly fell by 1.6 million barrels to 211.5 million against a forecast gain of 1 million, as gasoline demand increased. The positive inventory data encouraged strong buying for US gasoline futures, sending crude prices higher by as much as $4 a barrel last Wednesday. However, crude stocks continued to build up another 2.8 million barrels to 338.4 million due to lower demand from refineries, and distillate stocks increased by a 300,000 barrels to exceed the five-year high of 171 million.
Escalating tensions over Iran’s nuclear programme also sent bullish sentiment to the market after Iran test-fired long-range missiles last Monday, four days before the meeting with the six major powers in Geneva. The market was worried that crude production and shipments might be affected if negotiations between Iran and the West were unsuccessful. However, talks on Thursday showed signs of improvement as Iran agreed to allow UN inspectors to visit its new nuclear plant within the next two weeks. Iran is Opec’s second largest oil producer at 3.8 million barrels per day.
Crude prices last week were under pressure from weak US economic data. Consumer confidence in September fell to 53.1 from 54.5 in August on fears over the slump in the labour market. A surprise fall in the ISM manufacturing index to 52.6 also pointed to a slow economic recovery. In addition, motor vehicle sales in September tumbled 34% as the “Cash for Clunkers” programme expired the month before. Moreover, unemployment in September climbed to a 26-year high of 9.8% as expected, but payrolls dropped 263,000, far more than the forecast for 180,000. Disappointing economic reports, though, raised worries about the pace of recovery, encouraging investors to switch from riskier assets to the safe-haven greenback. The dollar last week strengthened against the euro to $1.45, while the Dow Jones index fell sharply to close below 9,500 points.
This week, the market will be monitoring the annual meetings of the World Bank and the IMF in Istanbul, and US economic reports that include the ISM services index, consumer credit, chain store sales, and wholesale and international trade. Moreover, monthly oil market reports from Energy Information Agency and International Energy Agency are due this week. Thaioil expects that better economic and demand outlooks will support crude prices to fluctuate within the range of $67 and $72.
Tracking gains in global crude values, gasoline prices in Singapore surged more than $3 a barrel to close the week at around $73. Despite weaker regional demand, Asian gasoline prices received support from the bullish US gasoline market after government data showed a surprise drawdown in inventories last week. Regional supplies have been increasing as India and China continued to keep exports steady this month, and the refinery in Vietnam resumed operation last week. Looking forward, the market is expected to be weighed down by soft demand but refinery run cuts and maintenance in North Asia will help stem losses.
Diesel prices in Singapore settled round $73 a barrel, up more than $2 from a week earlier on higher crude prices and a demand resurgence. Vietnam lifted diesel imports as its refinery was not expected to operate fully after it restarted last week. In addition, Iran planned to import diesel for the next few months for winter stockpiling. However, the overall market remained poor as inventories were still high. The outlook for diesel prices points to a boost from refinery maintenance and improved demand during the winter season.
For questions or comments, please contact: torsang@thaioil.co.th
* Published: 5/10/2009 at 12:00 AM
* Newspaper section: Business
http://www.bangkokpost.com/business/economics/25083/oil-market-outlook
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