Despite narrow trading, crude oil manages to stay above 80 in European session. Others in the energy complex also make little change from yesterday's close. Trading is thin as the market awaits US' employment report.
Natural gas continues its journey to the south. The benchmark contract plunged -3.9% as decline in US gas storage was less than expected. The US Energy Department reported gas inventory drew -116 bcf to 1737 bcf in the week ended February 26, while analysts had anticipated a bigger drop by -130 bcf. Investors were disappointed as current level of inventory is +1.2% above 5-year average. As winter is going to end soon, gas consumption will likely drop. The above-normal gas storage may put further downward pressure on price.
In spite of high volatility, the front-month crude oil price has been trading close 80. In fact, crude oil has closed above 75 on monthly basis since October 2009 (except for January, 2010). While the front-month contract has been hovering around 18-month high and has gained +1.6% year-to-date, long-dated contracts, on the contrary, is recording losses. For instance, WTI futures for December 2015 settled at 90.23 yesterday, losing -4% year-to-date, while that for December 2018 settled at 96.01 yesterday and dropped -5.75% from December 31, 2009. The phenomenon suggests that investors are not anticipating a much stronger oil price in the long-term. The premium (the timespread) is probably due to inflation.
Correlation between gold and crude oil prices has been higher since 2001, with the exception of 2008 when crude oil plummeted severely after reaching a record higher in July. If long-dated oil futures indicate upside for crude oil is limited, we worry about gold's outlook too.
Gold edges slightly higher to 1135 in European session. For the rest of the day, the yellow metal's movement is determined by US' payroll data.
In PGMs, palladium extends its 7-day rally to as high as 467.35 (2010 high 474.5) while platinum pulls back after closing flat at 1583.6 Thursday. Palladium has outperformed platinum since 2009 and the situation is brought forward to 2010. Recent strength in palladium price has been driven by strong auto sales data in the US and China. Both countries have high proportions of gasoline vehicles which use more palladium than platinum in autocatalytic applications. On the contrary, Europe has a high proportion of diesel vehicles with most heavy trucks and buses are diesel-powered. Diesel vehicles rely heavier on platinum rather than palladium.
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