By Sam Nair
Crude Oil drifts higher as API reports a build in inventories
Crude Oil prices are trading sharply higher today supported by the API report and on expectations that demand for oil may have returned as refineries restart after the hurricanes.
WTI futures are trading at $48.67/bbl, almost trading higher by a percent since morning whereas domestic prices are higher by 24 points to trade at Rs.3,117/bbl.
Crude Oil inventories are expected to have gained 6.18 mmb for the week ending September 8, 2017, according to the report released by API. Gasoline stocks may have declined more than anticipated – by 7.9 mmb whereas distillate stocks may have dropped 1.80 mmb.
EIA is due to release official commercial crude storage levels at 8 pm today with analysts expecting a build in crude oil stocks of 3.23 mmb whereas gasoline and distillates are expected to have dropped in the previous week.
Irrespective of the crude oil stocks, the focus will most likely be on gasoline withdrawals as after the hurricanes, traders will be eager to watch if gasoline demand has returned to normal levels. We feel a larger than expected draw in gasoline stocks could push prices significantly higher unless crude stocks post a major build.
Producer prices strengthen in August; precious metals may move lower
Precious Metals may come under selling pressure as reports showed that producer prices may have improved in the previous month. Gold futures are trading at $1337.38, up about one-third of a percent whereas Silver is trading at $17.969/oz, up 0.45%.
Producer prices in August failed to meet up to expectations but were stronger compared to the previous month. Prices improved to 0.2% whereas core prices were higher by 0.1% compared to a decline in both in the previous month.
Precious Metals are expected to decline further as stronger data as the dollar index improves on the report but the overall trend is likely to remain bullish in the short term.
It is unlikely that economic data from the US would remain stronger in the weeks ahead as the country deals with the after effects of the hurricanes which is likely to slow down growth and possibly force the FED to abandon plans of a rate hike in December.
(Sam Nair is the Head of Commodities Research at Celebrus Commodities Limited)