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Fundamental and Technical Analysis
US Nonfarm Payrolls, releasing on Friday, 8.30pm (Singapore Time), could shake the USD strength: US Nonfarm Payroll figures tend to greatly affect the USD strength which would then influence crude prices. This effect comes from a stronger USD making crude prices relatively more expensive. Bullishness from Federal Reserve last week suggests optimistic nonfarm payroll figures and thus, could suggest a strengthening USD this week. This would then mean that oil price could face some downward pressures towards the end of the week.
Updates on Eurozone industrial growth will be depicted by German Factory Orders and Industrial Production which will be released on Thursday and Friday at 2pm (Singapore Time) respectively: One of the key regions for crude demand lies with the Eurozone. Should we see strong German Factory Orders and Industrial Production, this could mean higher crude demand from the region. Although the main issue now is about oversupply, higher crude demand would be crucial for higher prices in the longer term and could help sustain higher prices.
Prices continue its fall, however, by less than 5% which is lower than previous weeks. We are seeing WTI and Brent finding support at $46.92 and $52.54. We did not expect this bearish trend to be strong enough to break the immediate support we identified last week. Nonetheless, prices still held firm at the next support and we continue to believe that lower supports should be tested thoroughly before broken.
The Week Ahead:
The bearish momentum seems to be dying out. Apart from possible strengthening of the USD, we hardly find much reason for prices to move down further. Taking a conservative approach, we believe that prices should not break past support of $45.35 and $50.34 for WTI and Brent Sep’15 this week. We still believe in higher prices despite the recent bearishness and ultimately, we would emphasize that a new low for both WTI and Brent should not be achieved. Prices should move upwards after this bearish momentum wears out.
Prices fell by 2% despite weaker than expected inventories. Although current inventories have recently crossed the 2013 levels, we would think that with inventories weakening, we should have seen prices move upwards. Although this could have been a cause of the Aug’15 contract expiry, we find this unlikely to happen again.
The Week Ahead: We believe that if inventories end up lower than expected, we could see prices to move upwards toward $2.961. Even in the unlikely event that prices do fall, we expect the support of $2.687 to hold strongly. (Read Report)
Source : Phillip Futures Pte Ltd