Crude oil price trades narrowly with a soft tone in Asia Monday. Although we have received some stronger-than-expected economic data and the global environment seems to have turned more positive, all these factors have been priced in. Investors need evidence from the energy market to show that oil demand is recovery.
However, this may not be easy in September and October. Normally, September to October is the transitional period as the peak gasoline consumption period (driving season) has just passed while heating oil consumption remains sluggish (winter has not arrived yet). Refinery utilization is going to decline in coming weeks and crude inventory should increase. We expect oil price to trade lower from current price level until fresh supportive news is received.
Gold retreats to as low as 1000.5 as profit-taking continues and the dollar recovers after plunging to 1-year low against the euro last week. IMF’s executive board approved gold sales of 403.3 metric tons and stressed that the Fund will conduct the sales in a manner that does not disrupt the international gold market.
This is not new news as the IMF has announced its plan to sell gold and the amount has been set since April 2008. However, we do not rule out the possibility that the confirmation of sales would be used by some investors as an excuse to push gold lower.
According the IMF, any gold sales on the market would be ‘phased over time’ and in accordance with the Central Bank Gold Agreement. ‘Under this agreement, which was renewed in August, the participants announced ceilings on total sales of 400 tons annually, and 2,000 tons in total during the five years starting on September 27, 2009, and noted that the Fund’s sales can be accommodated under these ceilings’.
We have a light economic calendar today with market holiday in Japan. In US session, a report will probably show that leading indicators have risen for the 5th consecutive to 0.7% in August, after a gain of 0.6% a month ago, as driven by higher stock prices, supplier deliveries and building permits.
Commitments of Traders
- Crude Oil: Net speculative long positions rose to 45557 contracts, the highest level since June 2009. Open interest has also surged to 1.197M, representing an icrease of 19K and 1.17M contracts on weekly and monthly basis respectively. We expect pullback will be seen in the coming week as traders take profits and crude oil price has reached upper bound of recent trading range
- Natural Gas: Net shorts increased to 173.9K contracts despite jumps in natural gas price. As gas facilities have approached full storage but inventory continues to rise, we worry thst gas price will fall sharply in coming weeks
- Gold: Net speculative long positions made another record high at 235.6K last week. Gold price’s retreat after rising to1025.8 due to long liquidation may lead to reduction in net long positions in the coming week
- Silver: Net speculative long positions for silver rallied above 46.5K contracts. Silver’s outperformance among precious metals may cause a more serious price correction
- Platinum: Net long positions soared to a new record level of 16.5K as driven by broad-based rally in precious metal complex. Strong auto sales data in August also revived investors’ confidence on PGMs
