WTI crude oil plunged to as low as 77.81 in NY session as consumer confidence disappointingly fell to 47.7 and USD rebounded against major currencies. The benchmark contract pared losses later the day and closed +1.11% higher at 79.95 as API report showing huge draws in oil stockpiles. Others in the energy complex also recovered after the sharp falls on Monday. Heating oil climbed +1.1% to 2.055 and RBOB gasoline added +1.8% to 2.0705.

We had a light economic calendar yesterday but the indications from the data were rather mixed. S&P/Case-Shiller Composite -20 home price index rose +1% mom in August, compared with the +1.2% gain in the previous month. The signaled the growth trend has softened. However, the annual contraction of -11.3% was moderated from the -13.3% decline in July. Overall, the reading is still positive as monthly increases in prices were seen in 16 out of 20 cities covered in the index and 19 of the cities showed moderated in annual price declines.

The Conference Board consumer confidence index dropped to 47.7 in October from 53.4 a month ago as driven by worries over the job market. The labor market differential fell to -46.2% from 43.4%, the lowest level since May 1983, suggesting further increase in unemployment rate.

We are not surprised by the mixed signals sent by macro-economic data as it usually happens as the economy emerges from the trough. However, it leads oil bulls to think deeply if the current market environment justifies current oil prices.

The industry-sponsored API reported -3.53 mmb decline in crude oil inventory in the week ended October 23 as imports declined while refinery runs were flat from the previous month. Both gasoline and distillate stockpile also dropped, though less than anticipated, as driven by low refinery runs rather than rises in demand.

The US Energy Department's report probably shows that crude oil stockpile rose +1.8 mmb while that for gasoline and distillate drew -0.8 mmb and -1.1 mmb respectively.

Comex gold plummeted for the 4th day yesterday and the benchmark contract slid -0.7% to close 1035.4. USD's rebound amid correction in stock markets weighed on gold. The dollar rose +0.5% and +0.6% against the euro and New Zealand dollar.

Although the Russian government announced that it has postponed the sales of 20-50 metric tons of gold thie year due to information leakage, the news offered little support to gold.

US Oil Inventory

Weekly change in inventory as of 23/10/09ChangeMarket ExpectationPrevious
Crude oil +1.50 mmb+1.31 mmb
Gasoline  -1.50 mmb-2.21 mmb
Distillate  -1.50 mmb-0.78 mmb

Comparison between API and EIA reports:

API (Oct 23)

EIA (Oct 23)

Forecast (using API's inventory level)Inventory
Crude oil-3.53 mmb339.5 mmb+3.85 mmb
+0.43 mmb340 mmb
Gasoline-0.26 mmb209.6 mmb-0.56 mmb
+2.66 mmb210 mmb
Distillate-0.67 mmb166.3 mmb-1.00 mmb
-3.59 mmb166 mmb