Fundamental and Technical Analysis
Iranian nuclear negotiations are going to give headwind for crude prices this week: Deadline for a nuclear deal to lift Iranian crude sanctions will be on the 30th June. This deal remains crucial for the current situation as it could cause another round of oversupply issues. We believe the only matter left to decide is the speed at which Iranian crude would flow into the market. We would expect a deal shorter than 2yrs to be devastating for prices as this would mean that an excess of 0.8m barrels/day (comparing 2011 and 2014) of Iranian crude would flow into the market at a pace faster than demand could correct for.
Various countries’ preliminary manufacturing PMI will be released on Tuesday: Japan and China will begin this month’s release at 9.35am and 9.45am. Both Japan and China easily form the biggest importers of crude in Asia and a strong manufacturing PMI would suggest more demand for crude. Although lately data has been weak, growth in these regions should support crude prices. Next comes the Eurozone with Germany releasing at 3.30pm, followed by EU at 4pm. Initial effects of the Eurozone QE program has helped the European economy substantially, however, most of those effects have worn off. It is possible that we could see weaker manufacturing PMI from this region. Last but not least, US figures will be released at 9.45pm. Growth in the US has slumped in the Q1 2015 and would be worrying if this continues into Q2.
Last week’s movements were mainly sideways as expected. WTI, especially, remained very sticky at $60. This was likely due to the easing of US inventory oversupply and thus, caused the narrowing of the WTI-Brent spread. Other than that, the FOMC did not cause much movement to the USD strength and therefore, not adjusting prices by much.
The Week Ahead:
Bearishness is going to plague the market this week with the deadline for the Iranian nuclear negotiations just around the corner. Therefore, find difficulty in seeing prices moving upwards this week and expect the market to take a conservative stance until July. Although we may see some weakness to crude prices, we expect WTI and Brent Aug’15 to find support at $57.49 and $60 till 30 Jun’15.
Inventories failed to surpass 2013 inventories last week. Although this caused prices to drop, it did not fall far off from where we had expect in the event when inventories show strength.
The Week Ahead:
Prices gapped downwards on open today to below $2.8. This should be a result of the Jul’15 expiry drawing near. Although we may see prices recover early in the week, we reiterate our bearish stance and expect the possibility for prices to move down to $2.606 when inventories increase past 2013 levels. (Read Report)
Source : Phillip Futures Pte Ltd