Fundamental and Technical Analysis
Saudi Arabia looking for opportunities with India could lead to increased exports: Saudi Arabia’s aggressive approach to secure market share has led them to try and secure deals with India. Although this suggests increased exports from Saudi Arabia, depending on the use of crude, this could be short-lived. Earlier in the year, India has indicated their willingness to build up their strategic petroleum reserves (SPR). If the crude was used for this purpose, we believe that increased exports would unlikely last. On a side note, previous deals from India involve Iraqi heavy crude and thus, would think deals would primarily involve the heavier grades. Essentially, we are seeing increased Saudi Arabia exports a result of higher demand. Therefore, prices should stabilize rather than drop because this would unlikely result in worsening oversupply issues.
US natural gas inventories increased only by 111B ft3 , falling short of 3B ft3 to surpass 2013 levels: We have identified the possibility of a new low for natural gas if levels drop below 2013 inventory levels. The fact that it did not hit the mark caused prices to drop only slightly. We have been expecting lower natural gas prices making this week disappointing again. With current inventories and 2013 levels converging, we believe that the possibility of lower natural gas prices grows higher.
Prices dropped mainly due to consolidation. With prices currently displaying range-bound movements, a consolidation was due after hiking earlier in the week. For today and the rest of the week, we do not expect to see much movement and would think that prices would be affected by the US Dollar Index. A crucial FOMC meeting would be conducted next week and thus, we may see the US Dollar Index making adjustments for this. The market may feel some jitters from increased Saudi Arabia export, however, would think that this would be shortlived. Therefore, WTI and Brent Jul’15 should find support at $60 and $64 and would unlikely break these levels. For today, we expect prices to end at $60 - $61 for WTI Jul’15 and $64 - $64.96 for Brent Jul’15.
We had expected prices to at least drop to the support of $2.571 for Natural Gas Jul’15 provided inventories increased by over 114B ft3. Unfortunately, inventories were weaker than expected and so, only managed to break the immediate support of $2.84. The difference between current inventories and that of 2013 is only at 3B ft3. Thus, we reiterate further drops in prices when next week’s inventories increase past 2013 levels. For today, we believe that prices would display similar movements to crude oil. Prices should primarily be affected by the US Dollar Index. We expect next support to be at $2.791 and should close at this price level. (Read Report)
Source : Phillip Futures Pte Ltd