|News||Low trading volumes with Chinese and US markets out|
|Analysis||Crude contracts stabilized throughout the Asian trading session around $74 per barrel, after the EIA last Friday reported higher than expected inventory levels. In addition, the Chinese government stated that it will proceed with its plans to tighten credit conditions.|
Crude contracts followed equities to the downside last Friday; where the Dow Jones Industrial average lost nearly 100 points, therefore negatively reflecting on oil prices as they traded below $73 per barrel.
On the other hand, China raised bank reserve requirements for the second consecutive month, due to heightened fears that incentive plans that were presented threaten the formation of new bubbles. The Chinese government's attempts at controlling lending rates will negatively reflect demand from the second largest energy consumer in the world.
The EIA report that was delayed till Friday reported a rise in crude stockpiles by 2.4 million barrels, compared to the previous week’s 2.3 million barrels buildup and higher than expectations 1.4 MB; inventories totaled 331.4 million barrels. Motor gasoline inventories gained by 2.3 million barrels last week, as well as distillate fuel that include heating oil that dropping by 356 thousand barrel.
The report reflects the ongoing fragility in demand levels on crude in the US; therefore supporting current expectations regarding oil prices to remain around $75 per barrel at the time being; confirming all existing economic data.
The S&P GSCI index closed last Friday at 495.59, after receding 6.00 points; whereas the RJ/CRB commodity index dropped by 1.79 points to close at 267.92.
NYMEX trading as of 03:40 EST witnessed a drop in future heating contracts by $191.780 per gallon to record $0.110; motor gasoline is trading around $192.750 per gallon after falling $0.200; whereas natural gas contracts also receded by $0.006 to record $5.462 per 1000 cubic feet. In London, Brent future contracts dropped by $0.180 to record $72.720.
We expect lower trading levels for today, as the US celebrates President's Day; while China, Malaysia, Taiwan, North Korea, Hong Kong and Singapore celebrate the Lunar New Year. From here, crude opened today at $74.00 per barrel, recording its highest at $74.32 and lowest at $73.85, while currently trading around $73.95 per barrel.