Afternoon Market Overview

China has launched their first Yuan denominated crude oil futures contract on the Shanghai International Energy Exchange. Overall volume for the first session was above expectations as two large international trading companies dipped their feet into the water. It is way too soon to conclude anything from one session’s trading.

China is anxious to establish a benchmark in Asia as they are now the number one importer of crude oil in the world as well.

In addition, they want to establish their currency on the top of the list with the major currencies of the world. This is an ambitious objective for China and one that is not going to happen quickly as market players will have to be truly convinced that it is an open market and level playing field from all ends. This is a topic we will be watching and reporting on very closely over the coming months.

This week the EIA & API inventory data will be released on their regular schedule. The API report will be issued late this afternoon with the EIA inventory report scheduled for release on Wednesday at 10:30 AM. Crude oil stocks likely increased as refiner demand for crude oil decreased while refined product inventories are projected to be lower in this week’s report. We are expecting a build in US crude oil inventories, a draw in distillate fuel stocks and a draw in gasoline inventories as refinery runs likely decreased.

We are expecting total combined crude and refined product inventories to decline in this week’s report.