MCX Crude oil futures recovered in tune with the global prices, as modest recovery emerged in the commodity in Asian trades. The WTI Crude futures fell to its fresh six week low yesterday, breaking under $90 per barrel levels as the anti austerity protests turned ugly in Greece and Spain and the Spanish 10-year Government bond yield jumped back over 6% on news that Catalonia wants to leave Spain. However, the stocks across Asia witnessed a reversal and fall in the US crude oil inventories ensured that the WTI futures are back above $90 per barrel levels.
The Spanish worries hit the stock markets in Europe hard yesterday and the major indices slumped around 2%. Spanish stocks plummeted by more than 3% on the Catalonia effect. The Euro tumbled to its two-week low level on these cues. Germany cleared the last legal hurdle to ratifying the euro zone's new bailout fund on Wednesday with a cabinet declaration that addresses concerns raised by the country's Constitutional Court, according to media reports. However this was already factored in the market and the Spanish worries seemed to be the sole factor driving the market forces.
However, the fundamental backdrop continued to underpin crude. Iran's president said on Wednesday his country was under constant threat of military action and called for a new world order not dominated by Western powers. The S&P 500 fell for a fifth straight trading day on Wednesday as protests in Spain and Greece over euro zone austerity measures raised fresh concerns over Europe's ability to get its debt crisis under control. The Bank of Spain said the country's gross domestic product fell at a significant rate in the third quarter, helping pressure European equities to their worst session in two months
The US Energy Information Administration reported a surprise drop in the crude-oil stockpiles. The stocks in the country fell by 2.4 million barrels in the week ended September 21. The drop was due primarily to a sharp decline in oil imports, which fell 7.6 million barrels, the lowest level since December. Four-week demand for fuel products fell to the lowest level since April 6. US gasoline inventories also unexpectedly declined 481,000 barrels, while distillate stocks, which include diesel and heating oil, dropped by 482,000 barrels to 127.75 million barrels.
Oil has been hurt in the current week amid demand worries as negative sentiments in risky assets. Start of the week witnessed a resurfacing of China-Japan political row over a long-standing island dispute. However, the Middle East worries could support the commodity in case prices drop further from hereon, this limiting its downside.
Asian stocks edged up today amid lack of major cues though movement was thin amid broad economic worries. The world's third largest coal producer Anglo American said today that it plans to cut coking coal output in response to weak prices and increased cost. In a recent update this week, the IMF noted that five years after the start of the global financial crisis, the reforms although aiming in the right direction, have yet to create a safer set of financial structures and that there are still some difficult issues left to tackle. However, the prospects of monetary stimulus from China spurred the sentiments. The People's Bank of China made a record injection of liquidity into the Chinese banking system this week, according to media reports.
US Dollar eased from its two week lows and helped bring some luster to risky assets. WTI Crude had tested lows well under $90 per barrel yesterday but witnessed a decent recovery today. The MCX Crude oil futures had tested lows of Rs 4801 before recovering. The counter trades at Rs 4831, up Rs 9 per barrel on the day. The open interest is up by 1.40% indicating some fresh buying after the battering in last three sessions.
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