Commodities: Morgan Stanley reiterates attractive stance on Energy sector

LONDON (ShareCast) - The decision over the weekend by the People´s Bank of China (HKSE: 3988-OL.HK - news) to cut its reserve requirement ratio for large financial institutional by 100 basis points, twice the usual amount, stoked demand for equities, but failed to ignite buying in industrial metals. Three-month copper futures ended the session with losses of 1.2% at $5,999 pr metric tonneon the LME.

In related news, on Tueday morning Rio Tinto (Xetra: 855018 - news) announced its intention to meet its full-year production guidance for iron ore, which analysts believe will continue to put pressure on that segment of the market.

Three-month zinc futures ended trading 1.4% lower at $2,195 per metric tonne in London trading. Aluminium futures fared even worse, surrendering 5.3%.

Front month West Texas crude futures advanced by 16 cents to the day at $56.38 per barrel on the NYMEX.

In a research report dated 17 April Morgan Stanley (Xetra: 885836 - news) highlighted the 50%-plus drop in the US oil rig count form its peak. Despite productivity gains that should see production from the four largest so-called tight-oil basins fall at an average rate of 60,000 barrels a day per month from May onwards.

Those estimates underpin the broker´s forecast of a rebalancing in the market, Morgan Stanley argued. For that reason its analysts reiterated their constructive stance on the Energy sector.

"We reiterate our attractive stance on all segments of the Energy sector," the analysts wrote in a research note e-mailed to clients.

Market commentary also cited tensions in the Middle East after US Navy vessels were deployed to Yemen as a factor supporting prices.

To take note of as well, Reuters cited data from oil services firm Genscape, revealing a 900,000 barrel drop in oil inventories stored at Cushing,Oklahoma, a key factor determining pricing for the West Texas crude benchmark, as another factor.

Front month gold futures fell $6.70 to end the day at $1,193.70 per ounce on COMEX as the US dollar strengthened on the back of worries about a possible Greek debt default.

Prices in the agricultural space were generally higher, with wheat futures on the Chicago Board of Trade (CBoT) ending the day higher by 0.9% to $4.9875 per bushel.

Soybean futures advanced 0.9% to $9.78 per bushel on the CBoT.