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Fundamental and Technical Analysis
OPEC Aug’15 report released yesterday; OPEC combined production increases by 0.1m barrels/day: An increase in OPEC production is certainly not ideal for the oversupplied market at this point in time. With the impending increase in Iranian crude, it would seem that OPEC is not going to adjust in preparation for that. The only consolation is that the increase comes from a varied source, indicating that this is not due to one country defaulting and ramping up production. Projections from OPEC also show that both world oil demand and supply should be improving.
US crude inventories scheduled to release tonight at 10.30pm (Singapore Time): With prices facing heavy downward pressures, we look towards inventories in hopes that we could see some support. Inventories have been dropping by 4m barrels over the past 2 weeks and if this trend continues, we could see prices increasing slightly. Spreads between WTI and Brent should also narrow if this was the case, giving WTI more upward support. US crude production is another issue on the longer run. With US crude production easing off, we are expecting this to support the market and ease the global oversupply issue.
Prices are approaching 2015 lows; more so for WTI as yesterday’s low reached $42.69. Brent, compared to WTI, displayed a lot more support as prices only fell by 2.5%. This fall from yesterday should come from the weakening Chinese Yuan which affects the demand for one of the world’s biggest importer of oil. The Chinese Yuan continues to weaken for the second day which could suggest further weakening of oil prices. It seems really dire for oil prices at the moment with the weak Yuan fuelling oil bears. On top of this, OPEC Aug’15 report which shows a slightly increasing production is adding to this bearishness. Despite being more bullish on oil, today’s factors look like prices are headed for $42 for WTI. Immediate support for both WTI and Brent Sep’15 should be at $42.81 and $48.24. Judging from the bearishness today, this could break and find support at lower levels of $42 for WTI and $45 Brent.
Spreads widened to above -$6 as Brent found a lot more support than WTI. The market seems to be aiming for weaker inventories this week as spreads widened. However, judging from refinery capacity, we should still be seeing drops in crude inventories.
Prices stayed strong above $2.8. This is expected as seasonal demand is expected to be coming in. This should give natural gas prices more of a bullish biased as this should lead to prices moving above $2.961. This should happen in the event inventories remain weak and stays below 2013 inventory levels. (Read Report)
Source : Phillip Futures Pte Ltd