Crude Just Shy of August Highs after OPEC Upgrades Demand Forecasts

The active crude futures contract rose to a seven-month high $74.75 through the European session Tuesday before tempering its advance before US liquidity joined the mix. Today’s highs draw the commodity to within stone’s throw of the one-year high set back in August.

[B]North American Commodity Update, Last Updated 10/13/2009 2:34 PM EST (GMT = EDT +4:00)
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Commodities - Energy

[B]Crude Oil (WTI) - $73.70 // $0.43 // 0.57%[/B]
The active crude futures contract rose to a seven-month high $74.75 through the European session Tuesday before tempering its advance before US liquidity joined the mix. Today’s highs draw the commodity to within stone’s throw of the one-year high set back in August. However, the conviction in this past week’s advance has been lacking considering the heights that the asset has climbed. This reserve (but bullish) pace is much like what we have seen in key currency pairs and equities; suggesting the natural resource is still taking its direction from general levels of sentiment in the financial markets. With the second quarter earnings season beginning in earnest this week; we could see corporate health and investment translate into production and growth forecasts to offer a fundamental bearing to crude demand.

Speaking of demand, the Organization of Petroleum Exporting Countries (OPEC) revised its outlook for global oil demand through 2009 and 2010. For the current year, the group increased projections by 200,000 barrels per day. The same revision of a 200,000-barrel increase was made for next year’s levels. Showing the improvement in economic growth and production, the 2010 outlook is looking at a 700,000 barrel per day premium to the current year. Much of this demand is seen coming from emerging markets which are expected to see disproportionate levels of expansion through the medium term as industrialized economies try to work down deficits and subsequently cool growth. In other news, it was said that Saudi Arabian Oil Co. (the largest oil producer in the world) will maintain supply cuts to Asian refiners for November at 10 to 15 percent below contracted volumes. Elsewhere, Iraqi Oil Minister Shahristani said in a press conference that the country is looking to lift its oil production capacity to 12 million barrels a day.

Commodities - Metals

[B]Gold and Silver Gain on Dollar’s Decline Despite Thin Markets[/B]

[B]Gold - $1063.10 // $6.00 // 0.57%[/B]
There is one thing on gold bugs’ minds, the health of the US dollar. The precious metal touched another record high of $1,068.63 just the dollar had pressed its own 14-month lows before the start of US trading. Risk appetite is at levels not seen in years (much higher than what we have seen just before the Lehman Brothers collapse considering the rally that had to develop over the past seven months to get us to these levels); but the market’s heights are looking less and less stable considering the tame forecasted returns through the medium term. Naturally, this time-tested commodity is an obvious destination for capital that is being diversified away from the safe haven dollar; but more importantly, it also has a tangible value beyond the immaterial financial assets whose stability was roiled through the financial crisis. This characteristic may actually slow a collapse in sentiment that could easily send equities into a tailspin. Another consideration is the recent spat of warnings for diversification away from the dollar. The typical substitute for the greenback is a currency basket; but gold is also making into the mix. Looking ahead, Thursday’s US CPI release will tell us whether there is any merit to the connection between gold prices and inflation. The total basket is still reporting deflating prices; but loose monetary policy could quickly change matters.
[B]
Silver - $17.82 // $0.11 // 0.62%[/B]
Congestion has dominated silver’s price action for a fifth consecutive session. Today’s range was larger than its predecessors’ were; but the increased activity did little beyond briefly setting a fresh 14-month high and subsequently returning to its modest zone. Like gold, the silver was taking its cues from risk appetite; but the reaction was far more reserved as the commodity lacks the return appeal. However, despite the relatively reserved yield interest; the London Bullion Market Association (LBMA) reported a sharp increase in trading activity. According to the group, silver trades rose 43 percent to 113 million ounces a day last month. This was the highest turnover since October of last year.

[I]-Written by John Kicklighter, CFDTrading Research
Questions/Comments about this article? Send them to <[email protected]>[/I]