Crude Oil: Better Us Inventory Data To Provide Support

WTI Crude oil prices for February Expiry finished on a modestly weaker note with prices settling at $93.96 per barrel mark and lower by 0.2% for the day. In the Indian markets, we saw a further weaker trade wherein prices at MCX closed down by 0.7% to Rs 5780 per barrel with higher losses probably on anticipation of appreciation in the Rupee on Friday. Prices fell after the decent rise in last two trading session and as traders assessed the negative cues on supply side from the OPEC and also from the US.

On a major update, the OPEC in a recent report said supplies from the group fell down to its lowest level since May 2011. Output slid by 20,000 barrels a day to 29.44 million in December amid declines in Iraq and Saudi Arabia. It was lower than the average of 29.6 MBPD anticipated by the agency in 2014 and below the 30 million ceiling it kept in December. As per other markets updates, producers led by the US, Canada and Brazil earlier said the OPEC would need to reduce its output by 300,000 barrels a day in 2014 as these countries enhance oil supplies globally. Already we are seeing the Brent being an underperformer to WTI over last couple of session. The active March contract Brent fell nearly half a percent to close near the $105.75 mark yesterday while the spread between WTI and Brent March contract now lower to $11.50 per barrel mark.

In other global markets cues, Asian equity markets are trading mostly lower in the range of 0.25%-1.00% tracking mixed to mostly negative cues out of the US equity indices overnight. In the currency space, the Dollar index shed moderate gains from this week’s high near 81.10 mark to the current rate around 80.93. Most of the emerging market currencies this morning are on marginally appreciating wherein Rupee at MCX futures contract has gained by 10 paisa to 61.50 against the USD. From the Economic data perspective we have some readings from EU region though might not have much impact on markets. In the Evening session, we have the crucial Housing starts and Building permits number which are likely to cool off a bit after the strong uptick in the previous reading. The Industrial production number MoM is also seen rising but at a slower rate.

Looking at Crude, prices are trading little changed at the WTI as of early trade on Friday. We feel better US inventory data is expected to provide support to prices though gains might be capped amidst extended supply side pressure from the country and also Libya lately. Brent on the other side continues to be under pressure as also updated above. While we are maintaining a ranged view into the commodity, we continue to hold a bullish bias mainly based on the US specific updates during the earlier half of the week. Traders are advised to initiate longs on pull-backs for small profits in Intra-day.