Israel Syria attack: Why current surge in Crude Oil could be short lived

Last Updated : 06 May 2013 at 06:15 IST

Israel has attacked Syria on Friday last week as well as Sunday this week in an apparent bid to stop the Iran-made Fateh-110 precision missiles from getting into the hands of Lebanon’s Hezbollah. While Israeli officials on condition of anonymity have confirmed the attack, no political leader in Israel would do the same.

Israel had launched a similar attack in January as well; at that time to block the SA 17 anti-aircraft missiles from falling into the hands of Hezbollah. 

This attack was met with sound and fury, but the consequences were muted. The scenario could not be different this time as well as Assad may want the words to be louder than actions this time too as his position is severely compromised and his regime is deeply mired in the civil war against rebels who seek to oust him.

The Financial Times reports: 

Speaking to CNN, Faisal al Mekdad, Syria’s deputy foreign minister, described the attack as a “declaration of war” and said it would retaliate in its own time and way. Syria had the right “to defend its people by all available means”, said Omran al Zoubi, information minister, adding that the attacks were a “flagrant violation of international law” and made the Middle East “more dangerous”.

No wonder, crude oil prices have climbed on the Globex platform of NYMEX.

As of 05.53 AM IST, WTI crude oil for delivery on June 13 was seen trading at $96.88 registering a gain of $1.27 or 1.33%. Brent crude oil on the same platform for the same date was spotted trading at $105.35 a barrel, providing for a gain of $1.22 or 1.17% as of 05.56 AM.

The futures began to climb on Friday when the US jobs data said hiring by firms in US picked up in April more than anticipated and unemployment rates dwindled.

So, will there be a war?

The same Financial Times report adds: “analysts said that, while escalation was possible, neither side had much interest in launching a full-scale war against the other. A broader conflict with Israel would open a dangerous new front for the Assad regime at a time when it is already stretched by a two-year-old armed rebellion”

Chances are miniscule that Syrian rebels would join Assad in a fight against a foreign enemy that is Israel:

“We call on the Syrian people to hold steadfast onto the revolution, and to reject the regime’s consistent aggression against the interests of the country and its people. We ask the Syrian people to continue working towards our goal of ridding the country of the destruction and chaos created by the Assad ruling family, who has consistently allowed its interests to take precedent over national interests,” statement released by Syrian Coalition Media Office , the media wing of Syrian rebels said, subseqent to the attacks. 

While Middle East ideologically has become more dangerous and the scenarios there much more uncertain, on a functional level, the status quo would be maintained as an otherwise-scenario would be chaotic to the core. In times of uncertainty chaos is at best avoided and nobody knows this better than Israel helping them take a calculated risk.

The current fillip to the crude oil futures could thus be short lived. The futures would be much more sensitive to data from Eurozone and Europe in the days ahead at least in the medium term. 

As published here: http://www.commodityonline.com/news/israel-syria-attack-why-current-surge-in-crude-oil-could-be-short-lived-54277-3-54278.html 

Tocom Rubber chasing Crude Oil rally; India market damp on weak auto sales

Last Updated : 13 February 2013 at 14:00 IST

With high interest rates prevailing and vehicles getting costlier, India's dream for wheels have come to a screeching halt with wide ranging ramifications for tyre demand and natural rubber futures. India's passenger car sales for the month of January has come down by 12.44 per cent over the month, even as commercial vehicle sales dropped by 9.51 per cent. This is in the context of natural rubber futures on Japan's Tokyo Commodity Exchange or TOCOM climbing for a second day as it chased a crude oil rally.

“Customers are still concerned about cost of ownership of passenger cars and the projections for commercial vehicles are also not good because of such reasons as the dip in freight movement by various industries,” Vishnu Mathur, Director-General, SIAM, told Business Line.

“The most significant negative development in the truck market has been the saddling of transport centres with huge inventory of over 2.5 lakh heavy trucks that are awaiting resale and the dip in resale rates for various categories by 30-40 per cent,” said Surjit Arora, auto analyst at Prabhudas Lilladher.

Needless to say, the truck industry is under crisis and it has implications for tyre demand.

“Sales are dull...” said the purchasing manager of a prominent tyre company in India who spoke on condition of anonymity. He said that demand for tyre from existing vehicles on the road will not be able to offset the said demand destruction created by weak sales in new vehicles.

“Ultimately it is a question of GDP growth. A slowdown is visible in each and every sector.” he said.

India's GDP growth may record a figure anywhere between 5% and 6% this financial year.

Tyre companies, meanwhile has reduced their purchase of natural rubber, said a supplier of natural rubber to tyre companies. He did not mention exact volumes.

“The production of tyre companies have been affected.” he said, “ and they have scaled down on buying.”

Uptrend in TOCOM

Meanwhile, natural rubber futures on Japan's Tokyo Commodity Exchange or TOCOM climbed for a second day as it chased a crude oil rally. Synthetic rubber, derived from crude oil and an alternative to natural rubber, has also become expensive to source as futures in crude oil, especially the WTI crude oil futures may be well on its way to touch the $100 mark.

This in turn has made demand for natural rubber to go up advancing futures.

“Rubber chased a rally in oil amid speculation the global economic recovery will boost demand for industrial commodities,” Kazuhiko Saito, an analyst at broker Fujitomi Co. in Tokyo, said to Bloomberg.

On the TOCOM natural rubber for delivery on July 2013 was seen trading at 331.6 yen, a loss of 0.17 yen as of 2.30 PM JST. In the forenoon session the futures had touched 333.6 yen a kilogram ($3,574 a metric ton).

Meanwhile, on India's NMCE, natural rubber futures for delivery on March was seen trading at Rs.15880, a gain of Rs.5 from the intra-day opening of Rs.15875.

“Over all trend for natural rubber in NMCE March contract is looking bearish. It may witness some short covering in near term and traders are advised to follow sell on rise strategy. Support is seen at 15550 level while 16300 is the resistance in near term.” said Milan Shah, Research Analyst with Commodity Online. 

As published here: http://www.commodityonline.com/news/tocom-rubber-chasing-crude-oil-rally;-india-market-damp-on-weak-auto-sales-52788-3-52789.html

How Sandy aftermath can fuel a Crude Oil rally

Last Updated : 01 November 2012 at 12:30 IST

Sandy came, Sandy saw and Sandy destructed.

And refineries across the North East Coast in US was shut down. With these refineries shut, crude oil inventories ruled high, invariably bringing in pressure on prices.

Now the refineries have started functioning. This means inventories of crude oil too shall be depressed in the coming days. Still, the crude oil prices are ruling low. Why? Sandy not only destructed the infrastructure in US but also demand for crude oil. As infrastructure facilities like roads and bridges are devastated, no vehicles would run other than two-wheelers. This should take the steam off the crude oil prices, analysts say.

But the truth just begins here.

Sandy may have wreaked havoc and destroyed demand. But it can also create demand. Once the reconstruction efforts gain momentum, power demand would start looking up and what better way to garner power other than running diesel power generators round the clock.

The power-supply infrastructure in cities devastated by Sandy may take weeks to get restored if not months. Until then diesel generators would run the show.

And when reconstruction gets into full throttle mode, that would only enhance fuel demand as hoards of people and loads of steel and bricks and mortar and what-not will have to be transported.

So think twice before going short on crude oil: we have a rally to catch!

As published in: http://www.commodityonline.com/news/how-sandy-aftermath-can-fuel-a-crude-oil-rally-51140-3-51141.html