PPI Final Demand and Commodity Market Tips

1
PPI Final Demand and Commodity Market Tips
Crude Oil prices in the electronic trading
session are trading flattish as prices take a
breather post the near 4.5 drop this week. While
Asian equities continue to trade lower amidst
disappointing economic cues from China, we
continue to maintain a negative bias on
the commodity. Wednesdays weekly inventory
report too showed that total stocks rose
to 370 million barrels, its highest level
since December last year. Meanwhile, crude
production in the US increased to 8.18 MBPD, the
highest since July 1988. Today, the US PPIM
data is due however, are not expecting any
major boost from the same. Crude's
backwardation is slowly but steadily coming down
at the NYMEX, a clear indicator that the demand
is reducing whereas India is taking the impact of
higher interest rates. We saw the contango
between the March and April contracts rising
by nearly Rs 20 yesterday. While we had
already recommended a buying in this spread on
declines, we feel some more profit potential is
possible in this spread ahead of the expiry. For
the day, our local MCX prices could take some
impact from the rupees deprecation and thus, we
might see a little bit of divergence
between the NYMEX and MCX prices for the
day. Nevertheless, we maintain a selling
bias on the commodity and recommend selling
from the higher levels. Global market
analysis A lot of events occurred overnight.
Russian tensions escalated, equities in the US
fell by more than a percent while its bonds
rallied. The ECB's president Draghis comments on
managing the deflation pulled the euro back to
trading down from its biggest gain and is now
trading at 1.3860. This morning, the Asian
markets have slumped and are trading down by more
than a percent. Coming to commodities, no major
change is expected in the trend and, it is
managing to stay at the same levels. Coming to
crude oil, WTI Oil traded ranged yesterday and
the Brent fell despite tracking the negative cues
in Ukraine. This morning, WTI is seen trading at
98.17 for the WTI oil futures contract. We hold
a bearish view on oil for the day but believe
that the losses may not be significant. In the
next week, it may extend its losses owing to the
higher crude stockpiles in the US and oil, taking
no cues from the Brent and the Russian tensions.
For the day, we hold a bearish view on oil and
expect that, due to the weakness in the equity
markets, the losses in the global market may
extend while the losses may be lower at the
domestic market due to the currency
depreciation. We suggest remaining on the
selling side in natural gas for the
day. Commodity Market Tips SELL NATURAL GAS MCX
MAR NEAR 272 SL 276.5 TGT 267 SELL MENTAH OIL MCX
APR NEAR 847 SL 585 TGT 837 Today Economic Data
Indicators
DATE TIME Region Indicator Period Survey Prior
14.03.14 1230 IN Wholesale Prices YoY Feb 4.9 5.1
14.03.14 1230 GE CPI MoM Feb F 0.5 0.5
14.03.14 1230 GE CPI YoY Feb F 1.2 1.2
14.03.14 1500 UK Construction Output SA MoM Jan --- 2.0
14.03.14 1530 UK Construction Output SA YoY Jan --- 6.3
14.03.14 1530 EC Employment QoQ 4Q -- 0.0
14.03.14 1800 EC Employment YoY 4Q --- -0.8
14.03.14 1800 US PPI Final Demand MoM Feb 0.2 0.2
14.03.14 03/18 US Univ. of Michagan Confidence Mar 81.7 81.6