Crude oil hit by weak equity markets

Weaker equity markets, with the Nikkei and Shanghai Composite shedding 0.62% 3.62% respectively, coupled with a 1,019K barrel build in US DOE crude oil inventories yesterday, weighed on crude oil prices this morning.

Although the build on DOE inventories was less than market consensus for a 1,500K increase, the combination of higher DOE gasoline stockpiles and higher API stockpiles raises concern of faltering US crude oil demand (refer to Focus). Front-month WTI crude slipped from $77.90/bbl to $76.80/bbl in electronic trade ahead of the European session this morning.

With US markets closed, the US dollar and European equity markets could guide front-month WTI crude today.

ICE Brent crude slipped from $78.31/bbl to $77.55/bbl this morning. Despite rising crude oil inventories in the US, API data showed US crude oil imports increased 666K barrels last week. In the near term, the Atlantic Basin spread, which is a measure of US implied crude oil import demand, contracted from -$0.48/bbl yesterday, to -0.70/bbl this morning.

Thermal coal contracts steadied yesterday despite a 2.4% contraction in the Baltic Dry index. API2(CIF ARA) for December 2009 delivery gained $0.10/mt, to $77.40/mt; API4(FOB) for December delivery gained $0.20/mt, to $67.60/mt. A technical correction saw carbon contracts climb higher yesterday. ICE EUA for December delivery gained EUR0.30/ mtCO2, to EUR12.88/mtCO2. UN-backed CER gained EUR0.15/mtCO2, to EUR11.98/mtO2.