On Wednesday, the front-month contract on Brent posted significant losses despite the fact that the EIA weekly report on US oil inventories was rather bullish as it showed an unexpected fall in distillates stocks. However, Brent price fell well by more than 3 percent and in late afternoon was seen even below 108 USD per barrel (USD/bbl) level.
In the months to come, the oil price will be primarily influenced by the situation in Europe, where it is still unclear how the debt crisis will be tackled. So far, this has overshadowed the effect of this latest wave of quantitative easing in the U.S. (as well as the effect of the dovish policy of the ECB and the Bank of Japan), with the two previous rounds of QE having boosted oil prices significantly. The situation in the Middle East (Iran) and recently the problems in Libya continue to pose a risk, with a possibly positive impact on oil prices, which is likely to be partly averted by an IEA intervention, if required. Nevertheless, in the short term, we believe that oil prices are more likely to fall, because, from the purely demand-supply view, the oil market appears to be relatively well-balanced now, and the deceleration of the global economy should tend to put pressure on oil prices to fall (through a slower improvement in demand).
Today in early trading, the gold price re-approaches seven-month high and at the time of writing is hovering at 1789 USD per troy ounce level (USD/toz). Recent appreciation of Indian rupee boosts imports of the metal into the country ahead of the festival season, Reuters said. Let us recall that the price of the metal hit an all-time high in rupee terms (mainly due to the weak rupee) in mid September and has therefore curbed Indian demand in past couple of weeks.