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Fundamental and Technical Analysis
US crude inventories scheduled to be released at 10.30pm tonight (Singapore Time): Inventories are becoming highly unpredictable, with some weeks showing an increase, but others huge drops. US refining capacity should continue to remain strong, thus, suggesting that crude inventories should be dropping. However, with the unpredictable nature of inventories this time around, we remain cautious that further increases could be seen. This would again put more bearishness to crude prices and exacerbate this price rout. On the bright side, we should be seeing drops to US crude production. This should help support the market in the longer run.
With Saudi Arabia ramping up refining capacity, we eye crack spreads in order to gauge the situation between crude and refined products: Increasing Saudi Arabia refining capacity seems to put some worries on lower demand of crude oil. This is contrary to how crack spreads are reacting as it seems to hold steady. The crack spread is an attempt to measure the premium refined petroleum products has over crude oil. Considering that the 321 crack spreads are maintaining high at about $23, the market does not seem worried at all. However, moving forward, we would need to eye these crack spreads to see if there will be oversupply of refined products which could in turn affect crude demand.
Crude Oil: Prices recovered slightly after the drop yesterday. Bearish momentum continues as the USD gains strength. Unlike the drops we saw in the middle of July, the supports that we are seeing tend to be a lot stronger. This continues to suggest that prices are testing supports thoroughly. Although we have always expected prices to move higher, the current price drops has not exactly moved in our expectations. Nonetheless, we continue to call for the final support at $42 and $45 for WTI and Brent. Breaking this support level would be of great significance as prices would have then reached new lows of 2015 and this price rout. We may even change our bullish long term stance to a more bearish one should this happen. For today, we look towards US crude inventories to see how prices would move. If US crude inventories were to drop, we may see support for prices. However, on the contrary, prices could drop again if inventories increase.
Natural Gas: Prices move upwards in anticipations of lower natural gas inventories as expected. Seasonal demand should be kicking in and thus, would expect higher prices. With inventories only releasing tomorrow, we do not expect prices to move up further. For today, prices should find resistance at $2.832 as it waits for tomorrow’s inventory release. On the flip side, however, should inventories turn out higher than expected, Natural Gas Sep’15 could find support back at $2.753. (Read Report)
Source : Phillip Futures Pte Ltd