MCX Crude Futures Cushioned On Rupee's Collapse

Crude..........

MCX Crude oil futures were yet again cushioned from a massive sell off in world oil markets. The WTI crude fell from its four month high yesterday on worries about dreaded asset purchase tapering from the US Fed. Weak economic numbers from China and a rise in US crude oil inventories also aided to the downbeat sentiments. Oil dropped towards $96 per barrel in Asia, its one week low and currently trades at $96.98, down $1.48 per ounce on the day.

Global stocks collapsed today. In a keenly awaited event yesterday, the US Federal Reserve Chairman Ben Bernanke stated that the central bank might start to scale back its asset purchases later this year if the economy continues to strengthen, as the central bank expects. The Fed, which kept monetary policy on hold after a two-day meeting, signaled further optimism about the economy, forecasting that the unemployment rate could fall to 6.5% by 2014, one year sooner than the central bank had previously estimated.

This took a heavy toll on the stock markets around the world. DOW fell by 200 points and equities in Asia are down by around 2-3%. The US dollar is rallying, paring some of its latest losses and testing its two-week high around 1.3200 against the Euro today. Commodities fell in general with crude oil and copper taking a heavy drubbing in particular.

Further adding to the gloom in oil, China's manufacturing PMI (purchasing managers' index) dropped to a nine-month low in June as output and new orders both fell. Flash China Manufacturing PMI at 48.3 (49.2 in May) was at a nine-month low; the flash China Manufacturing Output Index at 48.8 (50.7 in May) was at an eight-month low.

Oil futures were also pressured by data from the US Energy Information Administration, which said crude oil inventories in the U.S. rose 300,000 barrels to 394.1 million barrels. US crude-oil stockpiles are lingering near record levels for much of this year, due to surging domestic production and weak demand. The current level is the highest for this week of the year since the EIA began tracking weekly stockpiles in August 1982.

However, the local crude oil futures did not fall as much to the extremely weak undertone in Indian Rupee. The local currency fell towards 60 per US dollar mark- dropping nearly 1.5% on the day as a reaction to the US Fed statement. A hectic activity in local bond markets, which continued to see heavy outflow from overseas investors also spoiled sentiments for the Rupee. MCX crude slipped initially due to the global sell off but recovered from a low of Rs 5764 per barrel. The counter quotes at Rs 5807 - unchanged on the day with a massive 18% increase in the open interest.
Source by Commodity Insights