Fundamental and Technical Analysis
ECB preparing the market for further QE and interest rate cuts; the US Dollar Index spiked in reaction to this, moving past 96: With the recent slowdown with Eurozone's growth, ECB's Mario Draghi is signaling the willingness to boost its stimulus program. This would include cutting of already negative interest rates and expanding their bond-buying program. This will be discussed further in the coming Dec meeting. Similar to the US, ECB identified slowed growth with emerging markets, which fueled the need to further stimulate the market. This has brought the US Dollar Index back to 96 which were only seen since the start of the month, bringing renewed bearishness to USD-denoted commodity prices.
US natural gas inventories increased by 81B ft3; although falling short of estimates, inches very close to 2012 inventory levels: US natural gas inventories remains robust as it inches towards 2012 inventory levels. We cannot help but emphasize this level as 2012 was the highest that US natural gas inventories have reached. We continue to expect inventories surpassing this level to be significant. With strong natural gas production coming from shale and warmer temperatures in the US, natural gas inventories seems to be poised to break the 2012 level. Provided next week sees a 94B ft3 increase, we could easily see new found oversupply even coming for natural gas.
Prices resisted from dropping after the US Dollar Index increased, unconventionally following the inverse relationship between the USD strength and USD-denoted crude oil. WTI and Brent changed by less than 1%, which was the display of the strong support at $44.62 and $47.86 for WTI and Brent Dec'15. We could be seeing some selling pressures today for both WTI and Brent due to strong USD strength which will be tested the aforementioned supports. In addition, preliminary Eurozone and US manufacturing PMI will be released today which should affect prices. With expectations of unfavourable figures, we could see the downward pressure intensifying. However, at the end of the day would still hold to our view that prices would maintain above $44.62 for WTI Dec'15 and $47.58 for Brent Dec'15.
Prices took another hit as it dropped lower to $2.555 shortly after a stronger USD as well as the substantial increase in US natural gas inventories. Over the past month, we have been seeing some recovery after a new low was reached which suggest that some bargain hunting could be happening for today as natural gas finds current support at $2.555. Retracements to the 38.2% could happen which could mean that Natural Gas Dec'15 may reach back to $2.584. We expect prices to move below $2.555 if next week's inventory reaches past 3,908B ft3. (Read Report)
Source : Phillip Futures Pte Ltd