Crude oil prices plummet on supply

Wednesday, October 01, 2014

Front month WTI futures plummeted 3.6% on Tuesday as contracts registered their biggest one day loss in 22 months as prices slid back towards a seventeen month low. The US benchmark has seen substantial price volatility in recent weeks with yesterday’s move lower erasing all of the previous week’s gains. Front month Brent prices fell to a 27 month low, dropping below $95/bbl for the first time since June 2012 as fundamentals took centre stage once more. Brent futures erased 2.5% yesterday, extending the precipitous decline that had seen the benchmark lose over 17.5% since hitting $115/bbl in June. A combination of ample supply from OPEC members and the expectations that US crude stocks would increase this week will likely keep pressure on the oil market today. Data released by OPEC showed members increased output in September as Libyan crude flows rebounded despite previous comments from the organisation that they would cut output in the face of falling Brent prices.

Asian equities carried over the slightly bearish mood from the US session as Japanese benchmark indices extended Monday’s declines. Global markets have struggled in recent weeks as the prospects of a US interest rate rise, geopolitical tensions and slowing Chinese growth have seen risk averse investors retreat to the bond market and the US dollar. As investors sought out save havens the yen briefly moved above 110.00 against the dollar during overnight trading as it hit its highest level since August 2008 towards 110.09. After breaking out of the sideways consolidation that had dominated trading activity for most of the year the yen has lost almost 7.0% against the dollar since the beginning of August and remains on track to weaken against the greenback for the fourth consecutive session today.

The rouble fell to a record low against the dollar yesterday bringing the year-to-date slide in the currency to just over 21% as expectations that Russia would consider capital controls prompted investors to sell off the rouble in favour of the USD. After reaching a record level of 39.8520 yesterday, weakening for a fourth straight session, activity early on this morning has seen a slight pullback towards 39.6030 in a corrective move after the impulsive rally. With policymakers now discussing the limitation of cross-border flows of capital the rouble could experience further weakness against the dollar which displayed strong performance throughout Q3 and has started October on a firm footing.

WTI prices sell-off on expected build in EIA crude stocks

CL1 Comdty Generic 1St CL Fut 2014 10 01 07 57 36

JPY trades above 110.00 against the dollar

JPY Curncy Japanese Yen Spot 2014 10 01 07 53 57

RUB hits record low against USD

USDRUB Curncy Russian Ruble SPO 2014 10 01 07 35 15 

Events for today

CN Market Holiday 

0200

CN

Sep

Manufacturing PMI

0030

JP

Sep

Manufacturing PMI

0855

DE

Sep

Markit Manufacturing PMI

0900

EZ

Sep

Markit Manufacturing PMI

0930

UK

Sep

Markit/CIPS Manufacturing

1315

US

Sep

ADP National Employment

1445

US

Sep

Markit Manufacturing PMI

1500

US

Sep

ISM Manufacturing

1500

US

Aug

Construction Spending

1530

US

w/e

EIA Energy Stocks

All times UK Local Time

 

Topics: USD, Crude oil, Brent, WTI, RUB
More from: Kash Kamal