OREANDA-NEWS. September 29, 2010. WTI November crude declined 34 cents to settle at USD 76.18, while Brent crude for November delivery advanced 14 cents, or 0.2%, to settle at USD 78.71.

US crude started the day in the red, but tracked equities higher later in the session. However, stocks proved unable to provide lasting support. As oil futures closed, the Dow Jones Industrial Average posted modest gains but the S&P 500 and the Nasdaq Composite dipped into the red.

On the currency front, the dollar slumped broadly and lifted crude despite weak equities and gloomy consumer confidence data. The euro surged to a 5-month high vs. the dollar and the dollar index fell to its lowest level since February. The spike in the euro came on the back of expectations that the Fed will print money to buy assets. A weaker dollar is providing support for commodities, but there is still concern that further troubles related to Eurozone debt may put a damper on oil demand.

Oil prices slipped yesterday after US consumer confidence fell to its lowest level in seven months in September, underscoring lingering worries about the strength of the economic recovery. In a sign of stabilization in the housing market, US home prices hovered above multi-year lows without the help of the homebuyer tax credit that ended in April. A top Federal Reserve official noted yesterday that he has yet to make up his mind whether further easing in monetary policy is needed, despite a weakening US economy and some risk of deflation.
 
The market has turned its attention to last night’s API report, which claimed that crude stockpiles fell by 2.4 mn bbl, distillates dropped by 2.8 mn bbl, while gasoline inventories rose 3 mn bbl last week, six times more than expected. API data has seldom matched the inventory levels announced in the mid-week EIA report, which is due out later today at 1430 GMT, so we place little stock in these readings. We expect a smaller drawdown in crude inventories, more like an 800,000-bbl decline, and also a smaller build that expected by API, perhaps +500,000 bbl.

The market moved higher this morning on the API data, but given that US crude inventories will still remain at record highs despite today’s numbers, we think that equities and macroeconomic data will continue to be stronger drivers than inventory figures. If the EIA numbers are more bullish than expected we could see Brent flirt with the USD 80 mark today, while WTI could trade around USD 77.