|News||Crude contracts below $78 after Asian stocks retreat|
|Analysis||Crude contracts retreated in the Asian session to trade below $78 per barrel affected by the decline and pessimism that revolved Asian equities, after Japanese industrial production fell in November and was worse than expectations.|
The majority of Asian stock indices declined today, trailing U.S stocks decline on Friday after earnings from JPMorgan; which though did report good earnings, it still reported rising loan losses, reflecting a weak performance by the U.S banking sector.
On the other hand, the spotlight is still on U.S corporate earnings; we are waiting for earnings this week from the Bank of America, CitiGroup, Goldman Sachs and Morgan Stanley, which will mirror the performance of the financial sector throughout the fourth quarter of 2009; thereby, clearly leaving an imprint on stock markets and specifically crude prices.
The Japanese economy released its final reading for industrial production for November today, coming in at 2.2% down from the previous 2.6%. This reading reflects weakness in productions levels in Japan, which is the third largest energy consumer in the world, which will negatively reflect on oil demand.
Cold weather dominating the U.S was incapable and insufficient of pressuring stockpiles to decline towards adequate levels for this time of the year, where heating oil inventories inclined last week with the slight rise in temperatures, insuring weaker demand levels in the U.S prevail, dragging along with it the largest consumption share in the world
Furthermore, ongoing weak demand on oil all around the world, in addition to rising inventory levels with fragile corporate earning results, increase expectations of crude prices stabilizing around $75 per barrel in the current period. However, if the earnings season comes better than expected it will provide oil with the needed push to ascend and breach the $80 barrier.
The dominant sentiment in the market remains finding the balance between demand that remains sluggish and supply that is high considering swelling inventories according to some. The Qatari Oil Minister, Abdulla bin Hamad, said yesterday that OPEC is likely to keep its production quota unchanged at its currently levels, where the cartel sees that prices are currently fair for both consuming and producing nations. His words negatively impacted crude as investors focused on swelling inventories and high supply declining to trade around $77 areas.
In NYMEX last Friday; future heating contracts for February delivery declined to $2.04 per gallon by 0.38 cents, while motor gasoline traded around $2.046 per gallon, whereas natural gas fell by 3.6 cents to close at $5.655 per 1000 cubic feet. Meanwhile, in London Brent future contracts fell by 35 cents to record $76.76.
We should note that the United States is celebrating Martin Luther King Day today, which increase expectations for volatile trading amid low volumes due to the absence of U.S markets; crude contracts opened today at $77.80 per barrel, recording its highest at $77.90 and lowest at $77.15 per barrel, while currently trading around $77.70 per barrel.