Crude oil price remains strong in European morning as International Energy Agency raised its demand forecasts on the energy market. Moreover, surge in China's net import for crude oil to the highest in 14 months also stimulated buying.
IEA upgraded its estimates on global oil demand, the first time in 10 months, by 0.12 mmb to 83.3 mmb in 2009 as driven by consumption in the US and China. However, the agency stated that the upward revisions do not import economic recovery by may reflect moderation in previous sharp decline. On annual basis, the demand still represents -2.9% decline from 2008.
Concerning production, IEA said that OPEC crude oil production in May should have increased again, probably tempted by strong rally in recent months. Non-OPEC output in May should have dropped by 0.37 mmb during the month, offsetting the increase in OPEC productions. Non-OPEC supply in 2009 is also revised up by 0.17 mmb on stronger growth at new Russian fields, more robust North Sea production and higher crude output in Columbia.
China, the worlds'second largest oil consumer, recorded net crude imports of 3.9M bpd (16.62M metric tons) in May. This was the highest level in 14 months and definitely increased investors'confidence. China's diesel market has shown signs of tightening and may import over 50% of its crude oil needed this year. Overall trade figures looked good as exports stabilizing while imports growth remaining strong.
Other data released in China were also robust, suggesting the government's RMD 4 trillion stimulus package has been effective. Urban fixed asset investments surged +32.9% yoy in first 5 months in 2009, compared with market expectation of +31% and +30.5% in the first 4 months.
Stock markets in Asia also boosted by the strong economic data in China with the MSCI Asia Pacific Index adding 0.4% as led by commodity stocks. Rio Tinto, the world's 3rd largest mining company, surged more than 5% in its Australian bourse as 19% of its sales were come from China. Signs of recovery in China imply better prospects for the company. China Petroleum & Chemical Corp, China's largest refiner, also climbed 3.2% in Hong Kong.
Gold price continues to trade sideways at 950-960. On the investment demand front, we have observed the phenomenon that Investors'gold exposure has been shifted to paper holdings from physical holdings. Bullion holdings in SPDR have remained unchanged at 1132.15 metric tons since last week. Gold held in ETF Securities only increased modestly. On the other hand, speculative net long positions in gold futures have surged rapidly in recent weeks. The speculative net long position of 187340 for the week ended Jun 2 was comparable to the highest levels on February 2008, when gold price was pushed to record highs. Concerning non-investment demand, last month's surge in gold price has affected India's jewelry sales which stayed flat in May on monthly basis. In April, demand rose 25-30% at the start of the Indian wedding season.