CommStock Israel Investor Insights Newsletter
Monday, March 12th , 2012
The following report has been prepared as a courtesy to clients of CommStock Trading Ltd. for general informational purposes only and is not intended to, and should not, be construed as any recommendation or advice for any specific investment decisions.
Oil Drops From One-Week High on Economic Growth Concern
Oil fell from the highest price in more than a week after exports grew more slowly than forecast in China, the world’s second-largest crude consumer, signaling an economic slowdown.
Futures in New York slid as much as 0.8 percent, erasing last week’s gain. China had its biggest trade deficit last month in at least 22 years as Europe’s sovereign debt crisis damped exports, a March 10 report by the customs bureau showed. Overseas shipments increased 18 percent, below a median estimate of 31 percent in a Bloomberg News survey. Hedge funds reduced bullish bets on oil for the first time in five weeks, according to the U.S. Commodity Futures Trading Commission.
“The data from China is a downside pressure on the oil market, said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo who predicts oil will trade in a range from $105 to $110 a barrel this week in New York. ‘‘The trade deficit is much bigger than expected.’’
Crude for April delivery declined as much as 87 cents to $106.53 a barrel in electronic trading on the New York Mercantile Exchange. It was at $106.86 at 3:20 p.m. Singapore time. The contract climbed 82 cents to $107.40 a barrel on March 9, the highest settlement since March 1. Prices are up 8 percent in 2012.
Brent oil for April settlement on the London-based ICE Futures Europe exchange lost as much as 76 cents, or 0.6 percent, to $125.22 a barrel. The European benchmark contract was at a premium of $18.62 to New York-traded West Texas Intermediate grade, compared with a record $27.88 on Oct. 14.
Fibonacci Support
Oil in New York has technical support at $103.39 a barrel, according to data compiled by Bloomberg. On the weekly chart, that is the 61.8 percent Fibonacci retracement of the drop to $32.40 in December 2008 from a record high of $147.27 in July that year. Buy orders tend to be clustered near support levels.
China’s trade deficit follows reports last week that showed the weakest January-to-February gain in factory production since 2009 and retail sales falling below estimates. China accounted for about 11 percent of global oil demand in 2010, according to BP Plc (BP/)’s annual Statistical Review of World Energy. The U.S. consumed 21 percent.
Large speculators including hedge funds cut wagers on rising oil prices as concern eased about risks tied to Iran. Net-long positions in futures and options combined fell by 7.3 percent in the week ended March 6, the CFTC said in its Commitments of Traders report March 9.
‘Window of Opportunity’
U.S. President Barack Obama said March 6 that there is a ‘‘window of opportunity” for diplomacy and sanctions to compel Iran to give up any effort to develop nuclear weapons. Catherine Ashton, the European Union’s foreign policy chief, said world powers are ready to resume talks with the Persian Gulf nation.
Iran will never bow to international military threats, state television reported President Mahmoud Ahmadinejad as saying yesterday. The country is the second-largest producer after Saudi Arabia in the Organization of Petroleum Exporting Countries, which pumps about a third of the world’s crude.
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