Syria Conflict Supports Crude Oil Prices

Yesterday the American Petroleum Institute reported a fall of crude oil stocks by more than 2mn barrels. Oil prices have taken positive cues as stocks declined after two weeks of piling. The API report is a leading indicator for the EIA data due later this week, and has not be accurate in the more recent term, overall traders take little action based on this report.

Increases in PMI and in the UK and US along with a strong reversal in China growth, is having a positive effect on the black gold. With more positive market sentiment, future recovery and demand are helping energy commodities. This morning crude as added 40cent to trade at 88.89.

New tensions in Syria and the possible use of chemical weapons have added to geopolitical tensions, as Turkey has asked NATO to supply the Patriot Missile system to protect its common border. NATO has agreed to temporarily deploy the system which will be manned by NATO troops. President Obama turned up the rhetoric, saying that if chemical weapons are used on the public that the US would intervene. This tension is helping to support prices.

Eco data is light today but, PMI Numbers from euro area and German are likely to show a sluggish picture of economy. This may see some correction during European hours on oil prices on concern of lower demand. Likewise, from US private employment number report from ADP is due, which may show lower growth. US factory orders may remain stagnant as business inventory and wholesale inventory has piled up. Most importantly, investors must be cautious ahead of actual inventory report due from US Energy department.

US crude oil production hit nearly 6.5mn barrels per day in September, the highest volume since January 1998, as per the US Energy Information Administration report.

Natural gas prices are trading in above $3.536, almost flat. Markets can expect prices to remain under pressure as the Midwest weather channel has reported about normal weather condition. Other than this, major companies are going ahead to increase natural gas production, indicating higher supply. The coming weekly storage report may show a drawdown of inventory by more than 60BCF