Commodities strengthened further despite China's announcement on RRR hike last Friday. Escalated protests in the Middle East and North Africa raised demand for safe-haven assets, leading gold to gain for a 6th day. Currently trading at 1395, the benchmark Comex contract has risen to the highest level in 7 weeks after finding a near-term bottom at 1309.1. Crude oil surged amid worries over oil shipment disruption with the front-month WTI contract rising to 87.29 and the more actively-traded April contract rising more than +1% to 91.38. The Chinese government raised retail gasoline and diesel prices in lig
ht of surging crude oil prices.
Tensions in the MENA region have shown no signs of easing. In Libya, the 8th biggest producer among the OPEC-11 and holder of the largest crude oil reserve in Africa, security forces attacked demonstrators and killed more than 200 people. Libyan leader Muammar Qaddafi's son Saif al-Islam Qaddafi warned that a civil war would risk the country's oil wealth. Protests also turned to violence in Bahrain, Yemen and Djibouti.
The NDRC announced last week that it's raising domestic ex-refinery and retail prices by RMB 350/ton for gasoline(+5%), diesel(+5%) and jet fuel (+6%), effective February 20. While this is the 13th time that the government revised prices since the new pricing mechanism began in December 2008, this is the first hike this year and in February. The hike is rather unexpected as the government has been endeavoring to curb inflation. That said, the move signaled the government's commitment to adopt the new mechanism and should be able to restore investors' confidence on companies engaging in refinery business.
Concerning the dataflow, the US market is closed on President's
Day holiday so the focus will be on the Conference Board consumer survey on Thursday and durables goods orders on Thursday. In the Eurozone, flash PMIs are expected to have improved in the 17-nation region as well as in Germany. The minutes of the February BOE meeting may show more members favoring a rate hike.
Commitments of Traders:
With the exception of crude oil, traders were generally bearish towards the energy complex in the week ended February 15. Net length for crude oil futures climbed modestly by +6 to 165 514 contracts. For heating oil futures and gasoline futures, net length plunged -1 589 to 35 933 contracts and -5 585 to 63 736 contracts during the week. Net short for natural gas futures jumped +21 582 to 246 836 contracts as winter demand is about to be over.
Traders had mixed views towards the precious metal complex. Net length for gold futures gained +5 751 to 172 884 contracts while that for silver futures soared +3 874 to 40 937 contracts. Profit-taking was seen in PGMs after price rallies over the past few weeks. Net length for platinum futures dropped -1 239 to 28 884 contracts while that for palladium futures slipped -111 to 15 220 contracts.