The IMF and China pressure Crude Prices

This morning crude oil futures prices are trading below $87/bbl with a marginal loss of 0.20 percent in electronic platform. Most of the Asian equities are trading up on expectation of monetary stimuli in China which might be adding some positive points in oil prices also. From Economic data front, Euro-zone CPI is likely to decline in the month of Jun, which may ultimately support oil prices during European session. Likewise from US, Empire manufacturing is expected to increase. Rise in retail sales may give lower rate of increase in Business inventory level.

Overall, economic releases are likely to have positive impact on oil price trend. Other than this, civil war in Syria is a concern of crude oil supply disturbances, which may support oil to go up. Fall in Iranian crude oil monthly import by Korea has been reported today early morning. Thus, lower demand of Iran crude oil and renewed sanction on Iran oil tanker by US government may lead to a threat of closing Strait of Hormuz. Turkey has reported difficulties importing Iranian oil due to the lack of insurance available because of the global embargo on shipping, banking and trade with Iran. Turkey may be forced to source their oil elsewhere. At present a great deal of Iranian oil is stuck in storage tanks in Egypt with nowhere to and no means to transport.

IMF’s outlook on Global economic growth which is likely to reducing global growth forecast as indicated by the chief Laggard. This may create pressure on commodity market, hence on oil prices. On July 17-18 Fed Chairman Bernanke will be giving his testimony for more insight into the easing prospect, this may keep oil prices volatile for these days. Also coming up this week are the G7 meetings and statements from participants have a way of moving markets.

China’s Premier on Sunday indicated severe downside risks still persists. However, efforts to stabilize the economy are working and the government will step up efforts in the second half of the year to increase policy effectiveness and foresight, raising hopes of more aggressive investment spending by Beijing. These comments sounded positive but also placed a lot of pressure on markets and on crude oil and gas prices, if the Chinese government policies do not work as successfully or quickly as projected their consumption could continue to decline.

At this writing, natural gas (NG) prices are trading at $2.875/mmbtu with gain of near 0.10 percent in electronic trading. Today we may expect gas prices to continue the positive trend supported by its intrinsic fundamentals. As per US Energy department, natural gas storage has increased by 33 BCF in the last week. However, fall in power sector consumption by 1.5 percent, may limit the gain in gas prices.  As per US weather forecast, temperature is expected to remain high in eastern region, which may create demand for gas consumption. As per National Hurricane centre, tropical storm Ellen has been strengthen with 90 knots in Eastern Pacific region, which may create supply concern to add positive direction in on gas prices. Civil war in Syria is likely to drive gas prices higher as supply disturbances are expected on the way.