What's Driving Crude These Days?

Bold Quantitative Easing actions by global central banks have yet to convince consumers to start spending again. The concerns about China and Europe overshadowed supportive data from U.S. Energy Information Administration’s (EIA), which showed an unexpected fall in U.S. Crude Oil stocks last week. U.S. Crude Oil inventory fell 482,000 barrels last week, against forecasts that stockpiles would be up 1.5 million. Brent Crude Oil’s $107.67 low was the lowest price since September 20. WTI Crude Oil Futures slumped $3.75 to settle at $88.14 a barrel, below its 100-day moving average of $89.99. It dropped to $87.70 in post-settlement trading, its lowest since prices fell to $87.23 on August 3.

European data showed that the service sector in the Euro zone has declined even further, diminishing chances that the region will see growth before next year. The service sector data came on the heels of manufacturing numbers earlier in the week, which showed factory activity in the euro zone fell to its lowest since early 2009. Even China’s normally robust services sector weakened to a two-year low in September, as the impact of the slowdown in the export-focused nation’s biggest customers hit home.

Besides growth concerns, investors are also fretting about the deepening Euro zone crisis. Greece is struggling to strike a deal with its lenders on disputed austerity cuts, while Spain is expected to be the next nation to request a bailout. Fuel Demand is expected to get hit on escalating economic unrest.

Crude Oil Technical’s Point To Near-Term Weakness
The markets have reacted primarily to what appears to be a steady stream of weak economic data out of China and the Euro zone as well. Technically a close below $90 for Crude Oil opens up the gates for a dip towards the $80.20 to $79.30 range. Crude Oil will regain upside strength on a closing above $90 again. Fundamental downside clarity in Crude Oil remains hazy due to the Middle East turmoil, including Turkey’s military hitting targets inside Syria in response to a mortar bomb fired from Syrian territory. In Tehran, Iranian police clashed with demonstrators and arrested money changers in Tehran in disturbances over the collapse of the Iranian currency, which has lost 40% of its value against the U.S. dollar in a week. Crude Oil prices may also find support at dips as markets see a spillover from major of the equities markets which are up. Chinese markets remain closed for the week on a national week long holiday.

Crude, Other Markets May Be Uncertain For Next Five Weeks
Over the next five weeks, Crude Oil markets will be driven to wild swings by speculation over the outcome of the US Presidential election and geo-political concerns. Crude Oil prices might remain weaker due to window dressing activities by the US before the presidential election and also dominated by uncertainties and concerns over Spain and further concerns on whether the Chinese economy is stabilizing or sliding. U.S. Markets ended modestly higher as better-than-expected U.S. labor and service-sector data fueled optimism. The pace of growth in the vast U.S. services sector, which dominates the country’s economy, picked up in September, while private employers added more jobs last month than expected, industry reports showed. The data came ahead of the first of three presidential debates Wednesday night in Denver and the governments closely watched monthly payrolls report on Friday. Spain’s Prime Minister, Mariano Rajoy, on Tuesday quashed speculation the country could apply for a bailout as soon as this weekend, but expectations are high that Spain will eventually request aid. A formal request could come around an Oct. 18 European Union summit, although Prime Minister Mariano Rajoy also has political incentives to delay a request until Oct. 21 regional elections.

Geo-political concerns include the still simmering dispute in the Middle East over a nuclear program in Iran that triggered tough sanctions from the United States and the European Union and plunged the Iranian rial to a record low this week. In additions, Turkey’s military hit targets inside Syria after mortar bomb fired from Syrian territory killed five Turkish civilians, marking the most serious cross-border escalation of the 18-month uprising in Syria.

Crude Traders Await Further Cues From ECB And U.S. Jobs
Crude Oil may get bargain buying support on sharp dips backed by supply concerns and expected Inflation rise after mega money printing actions taken by major central banks in the last months. Crude Oil markets also appear to win some stability today from equity markets, where Japanese stocks inched up and the broader market indicator held steady. U.S. Labor department numbers on Friday are expected to show a slight improvement from the previous month. Employers are expected to have added 113,000 jobs to their payrolls, an increase from 96,000 in August, with the unemployment rate edging up by a tenth of a percentage point to 8.2%, according to a Reuters survey. Policymakers at the ECB may hold interest rates steady at today’s policy meeting to allow time for new details on the health of the Euro zone economy and for Spain to ask for aid.

Gold And Silver Remain Steady, Base Metals Weaken
Signs of a slowdown in China weighed on Base Metal prices, with Copper down after four days of swings. China accounted for 40% of refined Copper demand last year. Base Metals are lower, with the selling triggered by an overnight release from China showing that service activity fell to 53.7 in September from 56.3 in the previous month, a rather sharp fall considering the stable tone of the month-to-month changes in Chinese statistics. Although the index is still above the critical 50 mark, activity is nevertheless growing at its slowest pace in over a year.

Gold edged up, defying a drop in Crude Oil Prices and a firmer U.S. Dollar, as the encouraging U.S. data bolstered bullion’s investment appeal as an inflation hedge. A strengthening Indian Rupee could help jump-start Gold Demand in India, the world’s largest Gold consuming nation. India’s Gold Demand has been softer for much of the year after a tumble in the INR made Gold more expensive for Indian investors and traders. The INR has been stronger against the US dollar so far for the past two weeks. Although the US Dollar is expected to weaken more sharply against most currencies, including the Indian Rupee, Gold prices in INR would remain yet very high on a year on year basis. Also as the International price for Gold would rise further on the weakening U.S. Dollar, it will keep MCX Gold Prices high, though much weaker as compared to Comex Gold Futures. The most-traded Gold for December delivery on the Multi Commodity Exchange -- MCX was 0.40%lower at 31,196 Rupees per 10 grams, at the time of writing. Silver for December delivery on the MCX was seen steady at 62,300 Rupees per Kg.