Fundamental and Technical Analysis
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German ZEW economic sentiment survey will be released later at 5pm
(Singapore Time): German ZEW economic sentiment would give a clearer
understanding of the Eurozone growth moving forward. We saw promising
results just when EU’s QE program started. However, they started to
show weakness in recent months. If the Eurozone economy does not
pick up despite the stimulus, we may find difficulty for crude demand to pick
up from the region. Although Eurozone is not the biggest importer of
crude oil, in a time of weak demand, every bit matters.
Prices continue dropping again, however, only slightly especially
for WTI Aug’15. We are seeing more drops for Brent Aug’15 as the
spreads narrow in to below -$4. We believe this is a result of US crude
inventories easing off and would be explained further in the next segment.
Overall, the drop in crude prices was not surprising as we expect this
to be a bearish week. This bearish expectation comes from the FOMC
meeting scheduled on Thursday. We expect the USD to strengthen as a
result which would put downward pressures on prices. Even today, we
do not expect a strong German ZEW economic sentiment survey, and
thus, we could see more weakness in prices. Therefore, we will not be
surprised that WTI and Brent Aug’15 continue to remain low. However, we
believe prices should stay at $60 and $64 which are strong
psychological supports. Even if prices do break this level, we expect WTI
Aug’15 to find support at $58.96 and Brent Aug’15 at $62.38.
Spreads continue to narrow below -$4 for the first time
in weeks. Previously, the widening was led by an oversupply in US
crude inventories. However, with refinery activity picking up, spreads
continue to narrow and should stay within this range for now. Moving
forward, if inventories continue to drop, we could see spreads remain at -$3.
Although it is possible to see spreads reach -$2, this would likely be
temporary as it should be more sustainable between -$3 and -$4.
Prices spiked by more than 4% as we have expected after it
retraced to the 50% Fibonacci level
. Since prices have reached to the
$2.947 resistance, we find it unlikely that this increase could continue.
With both the US Natural Gas inventory data as well as the FOMC meeting
likely to cause prices to fall further, we find more potential for investors
to enter a short position on natural gas. For today, it is possible for
prices to continue on its positive momentum. However, towards the end of
the week, this should not be the case. We expect prices to drop to
$2.606 for Natural Gas Aug’15 towards the end of the week especially
if inventories exceed the level of 2013
. (Read Report)
Source : Phillip Futures Pte Ltd
Labels: Oil and Gas sector