Oil prices initially soared as the US dollar weakened and copper price surged to a record high. Gains were, however, pared as Wall Street declined and housing starts data disappointed. After rising to as high as 92.1, the front-month contract for WTI crude oil fell to 90.86, down -0.57%, yesterday. Heating oil initially climbed to 2.6758, the highest level since September 2008, but profit-taking was seen and the benchmark contract ended the day at 2.6562, up +0.39%. Similarly, gasoline reversed most of the gains and settled at 2.4816, up +0.10%. The inventory report released by API after market close weighed on prices further as the survey showed that stockpiles for crude oil and fuels climbed last week. Gold rose for a third day as the euro soared.

Disappointing earnings reports and housing data pressured stock markets which in turns weighed on oil prices. DJIA and S&P 500 fell -0.11% and -1.01% respectively as Goldman Sachs reported its 3rd straight quarterly earnings decline, driven by a slowdown in trading and investment banking revenue. US housing data were mixed but investors interpreted them as negative signs. Building permits gained +18.5% m/m to 0.64M in December while housing starts fell more than expected, by -5.36%, to 0.53M during the month.

After the market close, the industry-sponsored American Petroleum Institute said that crude oil inventory jumped +3.53 mmb to 340.64 mmb in the week ended January 14. Gasoline and distillate inventories also rose +1.87 mmb and +0.94 mmb respectively during the week. The official report from the US Energy Department will be released today, a day later due to Martin Luther's day holiday on Monday.

China reported that GDP growth accelerated to +9.8% in 4Q10 from +9.6% in the prior quarter. The reading was also higher than consensus of +9.4%.China's economy expanded +10.3%, the fastest pace in 3 years, in 2010 CPI rose +4.6% y/y in December, in line with market expectations. Other readings such as urban fixed-asset investment, retail sales and industrial production also recorded robust growth. Strong expansion in China despite increases in bank reserve requirement ratios and a rate hike should trigger further tightening from the government. The set of data and President Hu Jintao's visit to the US have spurred speculations that RMB will be allowed to appreciate more. We believe commodity prices will be pressured despite strong Chinese macroeconomic data as the market worried further tightening will dampen commodity demands.

Weekly change in inventory as of 14/01/10 ChangeConsensusPrevious
Crude oil  -0.50 mmb-2.15 mmb
Gasoline  +2.50 mmb+5.08 mmb
Distillate  +1.00 mmb+2.65 mmb

Comparison between API and EIA reports:

     

  API (Jan 14)   EIA (Jan 14)  
 ActualInventoryPrevious Forecast (using API's inventory level)Inventory
Crude oil+3.53 mmb340.64 mmb+0.06 mmb +7.53 mmb341 mmb
Gasoline+1.87 mmb230.89 mmb+7.04 mmb +7.67 mmb231 mmb
Distillate+0.94 mmb167.44 mmb+1.55 mmb +2.68 mmb167 mmb
     

API collects stockpile information on a voluntary basis from operators of refineries, 76% of the time, using data in the past 4 years.

Source: Bloomberg, API, EIA