An Excerpt from CRB'S Futures Market Service.
CRUDE OIL
Crude oil prices gained downside momentum as they fell below $100 a barrel down to a 1-1/4 month low. Bearish factors include (1) the larger-than-expected increase in weekly DOE crude supplies (+4.18 million bbl to a 3-month high of 338.9 million bbl versus expectations of +2.7 million bbl), (2) the surge in weekly DOE gasoline supplies to their highest level in 11 months (+3.02 million bbl to 230.1 million bbl), (3) slack demand after U.S. gasoline demand in the week ended Jan 27 fell -1.6% to 7.97 million barrels a day, the lowest in 10-1/3 years, (4) Bloomberg data that shows Jan OPEC oil production rose +183,000 bbl, or +0.6% m/m to an average 30.9 million barrels a day, the highest output in over 3 years, and (5) comments from OPEC Secretary General Abdalla El-Badri that global oil markets are “very well supplied.” Bullish factors include (1) the slump in the dollar index to a 1-3/4 month low, which boosts investment demand in commodities, and (2) strength in global manufacturing activity which may boost worldwide energy demand after the Jam ISM manufacturing index expanded at its fastest pace in 7 months, the Jan German PMI climbed to its best level in 6 months, India's Jan manufacturing activity grew at the fastest pace in 8 months and China's PMI unexpectedly expanded last month.
Fundamental Outlook—Short-Term Bearish— Crude oil corrected lower to a 1-1/4 month low on an increase in DOE crude and gasoline supplies, slack demand, and a 3-yr high in OPEC production. Oil prices remain supported though, by U.S. economic strength and geopolitical concerns with Iran’s threat to preempt a European oil embargo by cutting off supplies to Europe. Medium-term bearish factors include (1) increased OPEC and record Russian crude output, (2) global economic concerns, and (3) the resumption of Libyan production.
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