Crude Oil Is Under Pressure and Commodity Trading Tips

Commodity Trading TipsCrude Oil Commodity Trading saw huge gains during initial half of the week as markets took note of deal between Iran and Western members getting delayed over implementation whereas lower production anticipation from US in medium–term too supporting, Prices also got boost from signs of demand increasing in Asia region as Saudi Arabia increased its premiums for exports in the region. As per data from the government, Saudi raised the prices for all oil-grades it will sell to Asia for May month. Saudi hiked its prices for Arab Light grade for Asian customers by $0.30 a barrel compared with April. However, it should be noted that as Saudi reduced its discount compared to Oman and Dubai oil grades for Asian consumers, it negatively increased discounts being offered to European and US consumers.

In the other part of the world, US Crude inventory data came highly disappointing and acted against the commodity during middle sessions. US crude stocks as reported by DoE increased by 10.95 million barrels to a cumulative reading over 482.39 million barrels for the week ended April 3, another record level in last 8 decades. On a week on week comparison, this increase was the largest weekly rise since 2001. As overall production in the US remained stable to higher and imports too increase last week; crude stocks continue to add at a hefty rate. Additionally lack of demand on the product side due to lean

season is weighing on the commodity. Stocks at WTI delivery point Cushing gained 1.23 million barrels to its own fresh record of over 60 million barrels. Higher supply is pushing Cushing stocks higher since December whereas deep contango in the markets amidst lower demand for products too is providing further incentive to traders for adding more stockpiles at the WTI storage hub. As per the EIA data, current storage stands at 85% of its capacity and as we stated in earlier reports as well, we current state of rise, Cushing may reach optimum capacity around summer. Only ray of hope which can DELAY the storage hub reaching its full capacity is the refinery utilization rate which has been gaining strength lately Last week Crude oil refinery utilization rate inched higher by around 0.7% to over 90.1%, notwithstanding the correction in Crack spreads in the major markets in the country. During the past week, NYMEX WTI Cushing Crude Oil First Month 3:2:1 Crack Spread averaged around $25 per barrel, almost stable on a sequential comparison, though is lower from highs seen over $32 per barrel levels in late Feb 2015 . With lower demand for products in Mar-Apr Crack spreads usually are seen ranged to lower in the coming weeks. Which includes 2015 comparison with 2014 and last 5 year average As per seasonal scenario, refinery usually picks up in the spring as winter maintenance ends and also refiners prepare for the upcoming gasoline demand in summer starting May month. If we track the seasonal pattern, crude oil runs currently standing around 16 MBPD are over the levels seen in late April 2014 though is still unable to have any major impact over crude stocks as overall global and local production remain higher. Next week, if imports stabilize a bit lower, we might see lower additions in crude stocks as equated to over 10+ million barrels worth of increase this week though the same on the other side is expected to be compensated negatively by weakening activity over product demand side due to lean season currently

Onto the supply side from other half of the world, Saudi Arabia extended its supplies in the month of March with its government officials claiming that the nation enhanced its oil output to 10.3 MBPD its highest monthly production in over a decade. Additionally, officials stated that the country would continue to maintain over 10 MBPD worth of production largely continuing with a view that the nation still looks for higher market share. Its Oil minister added OPEC as a group would not cut production without cooperation from non-OPEC producers, i.e. mainly the US based Shale operators which have been one of the major powers driving excess output globally. Since mid of 2014, OPEC as a group has produced higher than its specified production quota of 30 MBPD of oil each month; with last month’s increasing weighing over 1 MBPD against specified quote. (Elsewhere, Russia continues to add on its production whereas there are reports that huge supply of Nigerian oil is expected to head European markets in the coming weeks due to weak demand from its West African light sweet crude in Asia which may add on to the supply pressure in the region. US has already stopped importing Nigerian oil for last couple of years after its own production saw incremental rise in last few years backed by oil extractions from shale deposits

Taking the aforementioned aspects; we believe as the supply situation in the international markets is one again heating up as we see from Saudi and also problems seen from Nigerian side as well, overall the commodity may continue to remain under pressure. Onto the Inventory front, coming week’s data may not be as disappointing as we have seen for week ended 3rd April if Imports normalize though overall negativity is likely to continue from Crude stocks, Cushing and Product front. We recommend selling the commodity in the coming week though only on decent pullbacks

Crude Oil Weekly Commodity Outlook:

Trend: Sideways to Up

Resistance on Upside at: 3330-3420

Support on Downside at: 3130-3060

Commodity Trading Tips

Crude Oil Mcx Apr Sell at 3260 sl 3490 Tgt 2950