Brent Crude Oil rose above $118 a barrel & West Texas Intermediate or WTI Crude Oil rose to the highest level in over a week on renewed investor appetite for riskier assets. The US dollar weakened against the Euro after the world’s major industrial nations pledged to avoid devaluing their exchange rates & that also helped boost Crude Oil Prices. Brent crude for March settlement, which expires tomorrow, advanced 43 cents to $118.56 a barrel on the London-based ICE Futures Europe exchange. Market analysts said investor concerns were focused more on Iran than on North Korea’s third nuclear test. The Organization of Petroleum Exporting Countries – OPEC has raised forecasts for Crude Oil demand growth from emerging economies & the quantity it will need to supply this year on higher fuel demand. OPEC will have to provide an average of 29.8 million barrels per day in 2013, or 100,000 each day more than it estimated a month ago. OPEC expects most of the Crude Oil demand to be originating from China. Crude Oil output in January was 500,000 barrels a day larger than this, at 30.3 million, higher than the collective target of 30 million that the group’s 12 members reaffirmed at their most recent meeting in December, according to OPEC’s monthly market report published today. Forecast for world Crude Oil demand growth in 2013 has been revised up on sure signs of recovery in the global economy and colder weather at the start of this year, OPEC’s Vienna-based secretariat said. There is also some speculation that Europe has withstood the worst of its debt turmoil. Global oil demand will increase by 800,000 barrels a day, or 0.9%, to 89.7 million a day, OPEC said. That marks an increase of 80,000 barrels a day from last month’s report. China will account for 400,000 barrels a day of this year’s growth. The organization kept its estimates for production from outside the group in 2013 unchanged. Non-OPEC producers, such as the U.S., Canada and Brazil, will boost supplies by 900,000 barrels a day to 53.9 million. An EIA, the Energy Department’s statistical arm, report tomorrow is expected to show that the U.S. Crude Oil inventory probably rose 2.35 million barrels last week. MCX Crude Oil in India is trading up at Rs. 5271 & can rise further to Rs. 5302 to 5370 also.
Crude Oil Prices driven by Speculation:
More than North Korea’s third nuclear test today, it was Iran’s nuclear program that preoccupied crude oil dealers. Iran is converting some of its higher-grade enriched uranium into reactor fuel, the Islamic republic’s foreign ministry spokesman said. Israeli Prime Minister Benjamin Netanyahu said on Monday the new centrifuges Iran was installing for its uranium enrichment program could cut by a third the time needed to create a nuclear bomb. Tehran says the nuclear program is for peaceful energy purposes. The OPEC Reference Basket rose by more than 2.5% in January to settle at $109.28/b, the highest monthly average since September of the previous year. The increase in the Basket was supported by restored optimism about the state of the world economy, after strong data from major economies boosted the outlook for crude oil demand and lifted global crude oil prices. OPEC Secretary-General Abdalla El-Badri said at a conference in London on Jan. 28 that there is no need for OPEC to restrain production if major economies appear to be struggling and that he does not anticipate any collapse in prices this year. Crude Oil prices were further supported by rising world stock markets, fresh speculative money coming into the Commodity Markets, a weaker US dollar & healthy refined product markets. There is added enthusiasm about the increased flow of the US Mid-continent crude to the US Gulf Coast (USGC) which was achieved by the start up of the Seaway pipeline expansion.China’s crude oil demand in 2013 is estimated to rise by around 5% on a year-on-year annual average basis, up from 4% growth in 2012. Preliminary data shows China’s crude oil demand started this year on a strong note. China’s January crude oil imports averaged 6 million barrels a day, up by 420k on a YoY basis and 350k on a MoM basis. China’s Crude Oil demand in January rose by over 7% & this strong start follows the robust 9% crude oil demand growth rate that marked the final quarter of 2012.
Boost for Gold Prices as Higher Crude Oil Prices trigger Inflation:
Gold Prices have today hit another fresh five-week low after some intensified technical selling pressure early this week. News of North Korea’s nuclear test today could flare up on a later stage but has not yet provided the much expected boost for Gold and Silver Prices. Moody’s ratings agency has lowered its economic growth expectations for the eight major economies of the world. Moody’s said the growth rate of the group would be a collective 1.4% in 2013, down 0.2% from its forecast for the same group in Nov. NYMEX Copper open interest was 174,186 lots as of Monday, up 19% since 146,548 at the end of last year. Base Metals have generally gained from the start of this year & prices will continue northbound journey as global economic recovery is expected to continue. This will invariably lead to Inflation in the raw commodity Sector. Adding fuel to fire will be the higher Crude Oil Prices which have already jumped considerably from the previous year end levels. Inflation would pick up steady momentum on a full fledged breakout of the Currency Wars where nations compete against each other to reach the bottom in Currency devaluations to improve export prospects. All said & done – the outlook for Gold and Silver Prices seems very bright – at much higher levels than ever before as people rush to Precious Metals which are a natural hedge against Inflation & also safeguard value against currency debasement. Stay Invested in Gold and Silver.