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Baht/$ 34.23/25 (Bid/Ask)
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GOLD |
13,350
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West Texas Intermediate prices were volatile last week, trading within the range of $114 to $120 a barrel and closing the week at $115.46 as storm fears about the outweighed the dollar's appreciation. Hurricanes have become the main focus of the energy market with tropical storm Gustav strengthening into the first hurricane to threaten the oilfields in the Gulf of Mexico since hurricanes Katrina and Rita in 2005. The storm is expected to make landfall by early this week in Louisiana or Texas, home of more than three million barrels per day of refining capacity.
The US government sent out a message to cool down the market last Thursday by promising the release of crude oil from the Strategic Petroleum Reserve if Gustav seriously disrupted domestic supplies. In addition to Hanna forming in the Atlantic Ocean last Thursday, three more tropical storms are expected to develop later this week.
Prevailing tensions between Russia and the US infused the energy market with more bullish sentiment after Russia recognised two rebel regions of Georgia _ South Ossetia and Abkhazia _ as independent states last Tuesday.
A further upside risk for crude prices is the market concern that Opec will decide at its meeting on Sept 9 to keep its production policy unchanged.
The US dollar rose last week to a six-month peak against the euro on better-than-expected US economic data, such as GDP and consumer confidence, and the weakening German GDP that contracted by 0.5% in the second quarter. This discouraged fund movements into the energy commodity market to hedge against inflation. The dollar could rally further this week if the European Central Bank and the Bank of England decide to cut interest rates to support the growth of the European economy at their Thursday meetings. This could have downside potential for crude prices.
The gasoline market showed a significant improvement last week, driven by an incremental demand from Indonesia and news of refinery outage in Asia. Indonesian demand is expected to be strong during Ramadan in September and likely to offset a demand slowdown in Vietnam.
The cut in Vietnam's domestic gasoline prices by 5.6% last Wednesday appears to have little impact on its import requirements given the country's relatively high stocks.
Lending support to gasoline prices in the upcoming week are a recent refinery outage in India and run cuts in North Asia as excess supplies in the region are reduced. Furthermore, unusual arbitrages from Asia to Africa are anticipated to increase as strong demand in the Middle East reduces export cargoes to Africa.
The diesel market climbed out of the trough as regional supply concerns began to ease last week.
The oversupply in Asia should be relieved after several refineries in the region started cutting their refinery utilisation. Upcoming maintenance in Taiwan will also reduce diesel exports in September. More diesel cargoes from North Asia are expected to make their way to Australia and New Zealand where ultra-low-sulphur diesel is to be introduced from the beginning of next year.
Arbitrage barrels are also believed to be fixed from Asia to Africa and Northwest Europe in September. Lastly, winter stockpiling in the northern hemisphere will begin soon. All these factors should combine to return bullish sentiment to the Asian diesel market in the short term.
Prepared by Thai Oil Plc
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