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2009-08-08

Crude Oil Supply And Demand A Sign Of Economic Recovery

I had read a report from US is about both ICE Brent crude and WTI forward curves have become flatter since 21 July. 2-year contango on the WTI and Brent curves have contracted 14.3% and 24% respectively. Base on the report they believe this indicates a tightening in global crude oil supply/demand balances — albeit with still a large supply overhang in the US. They have estimate fair-value for front-month
  1. WTI crude oil at USD70/bbl to USD73/bbl in Q3:09/Q4:10.
  2. Crude oil prices around the USD71/bbl level may reflect current macroeconomic factors: a weak US dollar, and improving industrial crude oil demand.
Summery of the report:-
In China, the second-largest crude oil consumer, manufacturing sector activity continues to expand, with the country’s CLSA Manufacturing PMI rising 1.93% m/m in July, to 52.8 (above the threshold 50 level).

The Japanese Leading index has climbed 3.7% m/m — signaling improved economic conditions, which bodes well for crude oil demand. US API distillate fuel inventories contracted 1,043K barrels last week, the first decline in 11 weeks, which could signal improving US industrial crude oil demand.

US API crude oil inventories have also realized a net 20,320K barrel cumulative contraction since 17 April — also signalling better demand conditions. However, API gasoline and DOE crude oil inventories have seen a cumulative 2,044K and 6,822K barrel increase in the past two weeks — adding to the large US supply overhang. This could limit upside potential for crude oil prices — therefore do not forecast prices above USD75/bbl going into Q4:09.

Base on the sign of the crude oil supply and demand, world economic is in recovery and likely the crisis is over so now is a good time to invest into good quality share to earn some profit along the economic recovery highway.

2 comments:

Elvis2020 August 8, 2009 at 2:45 PM  

Yupp, read and studied similar reports 2 months back. That's why i was not positive about the economy as a whole. But, a week ago convict me that the very worse is finally over. Now, the scenario is, when the economy is on the recovery, any country will have to build up their economy fast. Reason being, oil is a very finite commodity, soon it's going to be a very expensive source of energy. With maturity development,it is easy to switch to broadband tele-business without using much of this precious commodity. What i am trying to say is, oil is going to be depleted, use it for development of else, that country is going to be backward. Cheers...buy KNM, Ramunia, Saag...you wont regret it!!!

Elvis2020 August 8, 2009 at 2:49 PM  

Najib is doing a very bad job as PM. He's too obsese with his 1Malaysia. Is he trying to please only the elite members of society? Well, if he is, sorry boss, dont expect to win the next general election. He better try to solve the unemployment, retraining of skill workers to knowledge based workers, economy growth, infrastructure developement etc. Pleaselah Najib, you are in comfort zone for too long

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My investment with RM5,000 initial capital have been growing since 2005.I found the stock market appears confusing and complicated, but it is most definitely based on logic "supply and demand". However, the laws of supply and demand as observed in the markets do not behave as one would expect. To be an effective trader, there is a great need to understand how supply and demand can be interpreted under different market conditions and how to take advantage of this Off Market Transactions in KLSE.

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