OPEC meeting turned out as a nonevent as expected; market’s fears were proven unfounded: The gist of the OPEC meeting was that the production limit set on the organization was deemed a success and would continue at 30m barrels/day. Iran attempts to prepare OPEC for their production increase which should come when nuclear sanctions are lifted. The deadline for an agreement for this deal is on the 30 Jun’15 and the main issue would likely be about the pace at which Iranian crude would flood the market. Most of the issues discussed have already been anticipated. It seems the most surprising outcome of the event turned out to be how individual countries shared the same consensus. It is common for some opposing voices to surface during the period of OPEC meeting. However, this time, OPEC countries seemed to be unusually compliant with the overall view.
Last week’s US natural gas inventories increased more than expected, just short of 19B ft3 to exceed 2013 inventory levels: A huge increase in last week’s natural gas inventories was seen causing prices to hover near to the previous low. However, as expected, without inventories exceeding the 2013 inventory mark, prices would unlikely be moving down further. Nevertheless, the deficit between current and 2013 levels is narrowing, suggesting that a new low could be seen soon.
Prices dropped heavily just before the OPEC meeting in fears that OPEC would change the production limit drastically. Prices rebounded shortly as these fears were proven unfounded as they found support at $56.64 and $61.78 for WTI and Brent Jul’15. Although we are seeing big movements in crude prices for the past month, we believe that this is still within the same range as the fundamentals have hardly changed. With the OPEC meeting out of the way, we believe that prices should start to stabilize again. Moving forward, we continue to look towards China’s growth for more demand. With several Chinese economic figures to be released later this week, those would likely depict prices. However, for today, we expect prices to recover slightly towards $59 and $63.37 for WTI Jul’15 and Brent Jul’15. This should be a result of oil bulls returning to the market as they pick prices at a discount.
After prices tested previous low of $2.541, it moved up after natural gas inventories failed to break 2013 inventory levels. We continue to believe that prices during this period should remain low and a new low would be attained if inventories exceed an increase of 114B ft3 this week. Prices could inch upwards $2.773 at the start of the week, however, we expect prices to eventually spike downwards if this week’s US natural gas inventories turn out strong. (Read Report)
Source : Phillip Futures Pte Ltd