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Looking forward, weighing both upside and downside risks that can contribute to momentum, Barclays expects increased weights for the former.

08 Dec 2012

Commodity Online
Overall, the crude oil markets continue to be well balanced at present. While this week’s price action represents a step away from the narrow range, Barclays does not expect directional momentum to have taken effect, as there is still lack of a genuine catalyst.

Looking forward, weighing both upside and downside risks that can contribute to momentum, Barclays expects increased weights for the former.

Crude oil markets edged lower over the week, weighed down by weakening macro-economic sentiment. The prompt Brent contract lost more than $3/bbl since the start of the week, breaking out from its narrow range around the $111/bbl mark.

In terms of fundamental data releases, in the US, the latest weekly EIA data showed a larger-than-expected jump in gasoline stocks as East Coast refineries returned to normal operations in the aftermath of Hurricane Sandy, boosting run rates. The impact was most pronounced on the RBOB gasoline contact, which settled sharply lower over the week.

Among the rest of the OECD, the latest demand numbers for Japan are in line with Barclays' expectations, in that the y/y growth rates have started to normalise following the exceptional rates recorded earlier in the year.

Total Japanese oil product demand in October was pegged at 3.97 mb/d, with growth rates flat (primarily due to crude used for power generation reaching the upper limits, already achieving a high base in terms of capacity utilisation).

“We expect Japanese oil demand growth to average 290 thousand b/d in 2012 (with the October-to-date currently close to this level). Following which, going into next year we expect it to decline marginally by 30 thousand b/d in 2013, as base effects come into play.” the Bank said in a report.


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