Crude Near 5-Month Low On Mixed Fed Signals

Despite the slight recovery seen on Wednesday, crude remains near the lowest in five months around the $93.00 level, as the mixed signals sent by the US Federal Reserve officials weighed on sentiment and crude stockpiles are expected to rise.

Atlanta Federal Reserve President Dennis Lockhart said the strong jobs report would not change the equation when Fed policymakers gather next month to decide whether to reduce the pace of their monthly $85 billion bond purchases.

But, Minneapolis Fed President Narayana Kocherlakota said with weak inflation, “there is no reason to be afraid of monetary stimulus”. However, treasury Secretary Jack Lew was optimistic over growth stressing that the world cannot rely on the US to support the global economy.

Thereby the comments from Fed governor Ben Bernanke later today will be watched for further hints on the direction of monetary policy. An early tapering of the US stimulus would reduce the dollar supply in the market pushing it higher, which would push oil prices lower.

- WTI crude oil futures for December is trading around $93.17 a barrel after rising $0.13

- Brent futures for December settlement is trading around $106.16 a barrel after rising $0.35

Investors were also disappointed by the lack of concrete details on policy reforms announced at China’s Third Plenum meeting. Leaders pledged to let markets play a decisive role in the economy over the next decade without giving any further details.

Meanwhile, expectations of an increase in US crude stockpiles are adding to the downside pressures on oil prices. Crude inventories probably increased for an eighth week by 800,000 barrels last week before a report from the Energy Information Administration tomorrow.

The American Petroleum Institute will release its report on US crude stocks later today, a day later due to the Veterans Day holiday on Monday.

While markets await the next round of talks between Iran and the West on November 20, OPEC showed in its monthly report yesterday, that despite the cut in Saudi Arabia’s oil production, output remains higher than next year's global requirement for its crude.

- Natural gas is trading at $3.646 per cubic feet after rising 0.83%

- Gasoline is trading at $2.5916 per cubic feet after rising 0.20%

- Heating oil (diesel) is trading at $2.854 a gallon after rising 0.03%