Fundamental and Technical Analysis
US crude oil inventories scheduled to be released tonight at 10.30pm (Singapore Time): US crude oil inventories have been on the increase lately, mainly coming from the low refinery utilization rate. This increase should continue as refinery maintenance season should still be underway. This would mean that inventories would be increasing. We continue to believe that the more interesting figure to focus on would be US crude oil production which should continue on its drop. Another drop this week would likely cause production to drop below 9m barrels/day which would be taken as a bullish sign.
From a technical approach, oil has hardly reached bullish territory even with the recent increase; however, neither has it dropped back into bearish territory: Using the Ichimoku Kinko Hyo technical overlay, we are seeing both the WTI and Brent holding within the Kumo cloud. What this suggests is that prices are trapped within this range and only until it breaks out, we would hardly be seeing a clear trend forming. Brent hold a lot nearer towards the support levels which suggest that if it falls any further, it is possible that prices would be falling into bearish territory.
Prices held stable yesterday and was left unchanged. WTI Nov'15 expired yesterday which could have explained some of the volatility as we moved towards the end of the trading day. Apart from this, we expect some of the volatility from the US Dollar Index to have ripple onto oil prices as a result of Janet Yellen's speech. However, at the end of the day, prices hardly moved and we continue to find price support for WTI Dec'15 being kept strongly at $45.77. This support should be tested again today with the release of US crude oil inventories. We believe that prices would be given immunity over inventory changes as an increase should be expected. We place higher emphasis on US crude oil production. If this figure drops below 9m barrels/day, we would think that crude oil prices would move upwards. Therefore, would think that WTI Dec'15 should trade towards of $48.03, while Brent Dec'15, towards $51.11 for today.
Prices moved slightly upwards again almost like clockwork. We were seeing similar movements when prices increase slightly at the start of the last week. Prices, subsequently, pulled back heavily once US natural gas inventories turned out higher than expected. There does not seem to be much change to the forecast of a warmer US winter and thus, would suggest that prices should remain weak. On the flip side, we do not see how prices could fall further than $2.606 for Natural gas Dec'15 contract and thus, would think that natural gas has a capped downside. (Read Report)
Source : Phillip Futures Pte Ltd