Crude oil rallied +5.8% to settle at 70.61 Wednesday as gasoline stockpile surprisingly drew last week. Although the inventory data were mixed with crude inventory rising more than forecasts while distillate gaining modestly and gasoline drawing, the market rose higher.WTI time-spread’s strengthening signals more draw at Cushing is underway. Others in the energy complex also surged with gasoline jumping +6% to 1.73 and heating oil adding +5.6% to 1.8.
Crude oil inventory increased +2.8 mmb to 338.4 mmb in the week ended September 25 with most of the builds coming from the Gulf Coast and the West Coast (+4.1 mmb in total). The builds was partly offset by the draw in the Midwest where the Cushing stock declined -1.5 mmb. As expected, refinery runs dropped and should continue to head lower in coming weeks during the ‘transitional period’ between peak driving season and winter heating season.
Gasoline stockpile drew -1.66 mmb to 211.5 mmb as gasoline demand rose strongly by +3.8% on weekly basis to 8.73M bpd. Distillate stockpile increased +0.32 mmb to 171.1 mmb. Despite the build, it’s the smallest increase recorded in the past 3 months. Demand rose +3.2% on weekly basis to 3.41M bpd. However, it remained well below the consumption recorded last year while the 4-week average still stayed below historical average.
The benchmark contract for oil pulls back to around 70 in Asian session today as stock markets retreat. The MSCI Asia Pacific Index loses -1.1%. In Japan, the Nikkei 225 Stock Average drops -1.6% to 9967 after BOJ’s Tankan survey. Although headline business condition DIs improved in the third quarter, the report showed that capex will drop -10.8% in the year to March 2010, compared with a decline of -9.4% previously projected.
We will have a series of data to be released today. In the Eurozone, the unemployment rate probably rose to 9.6% in August from 9.5% in the prior month. Although the PMI in August suggested that companies’ intention to employ has improved, it takes time to feed into the real economy. In the US, personal income is expected to have edged +0.1% higher while personal spending rising +1.1% in August, making a third consecutive decline in saving rates. The core PCE index should have gained another +0.1% during the month. ISM manufacturing should have risen to 54 in September from 52.9 a month ago. Employment data including Challenger job cuts and the weekly initial jobless claims will also be released today.
Gold price surged +1.5% to close at 1009.3 amid USD’s weakness. Others in the precious metal complex also jumped. Silver rallied +3% to 16.66 and platinum gained +1.9% to 1302.9. According to IMF, USD’s share in global currency reserves fell to 62.8% in 2Q09 from 65% in the previous quarter. Euro’s share, on the other hand, rose to 27.5% from 25.9%. This is evidence showing USD’s status as the dominant reserve currency is threatened. Gold will be a beneficiary should central bankers continue to diversify away from the dollar.
