Phillip Futures Energy Daily Outlook - US Fed’s bullishness spilled over to oil prices; US crude production not showing a fantastic sign, suggesting some consolidation today

Fundamental and Technical Analysis
FOMC statement released, hinting Dec’15 rate hikes; US preliminary Q3 GDP will be released tonight at 8.30pm (Singapore Time): The FOMC statement hinted the chance of a rate hike in Dec’15. Considering that we have only been seeing a slight improvement in US economic data over the past few months, it is possible that the US Fed is pressured to do a “customary” hike. As much as market pressures could influence the Fed to hike rates, we would think that this could happen as long as the US economy does not deteriorate any further. The Q3 preliminary US GDP would likely prove to be a strong indication of a rate hike. If it releases better than expected, this should further fuel the possibility of a Dec’15 hike.

EIA US crude oil inventories increased by 3.376m barrels; while production maintained strong at 9.112m barrels/day. US natural gas inventories will be released tonight at 10.30pm (Singapore Time): US crude oil inventories increased by less than expected, causing prices to spike. This should have been caused by higher US refinery utilization rates and possibly a drop in US net crude imports. Prices seem to have ignored the strong US crude oil production which holds above 9m barrels/day. We initially expected a drop in this figure to cause a spike in prices, however, prices spike nonetheless. US natural gas inventories would be released today and believe that it would have significant impact on prices.

Market Summary

Crude Oil:
Prices spikes yesterday after US crude inventories and US FOMC statement was released. This spike has allowed prices to move back into the previous range bound movements seen in Sep-Oct’15 and now lies in bullish territory. The only event that turned out as expected was price increases. With the increasing US Dollar Index and US crude oil production, we initially expected this to push prices down. However, it would seem the market went into euphoria mode when crude oil inventories increased less than expected. For today, we expect prices to consolidate and start to price in the downsides of yesterday’s data. This should lead to some drops today and lead to prices maintaining above $44.15 and $47.46 for WTI and Brent Dec’15 for this week.

Natural Gas:
Prices does not seem to be able to do without more drops as prices plunged again to a new low of $2.263. This is just before inventories data which could be a result of over anticipations of higher inventory figures. We continue to believe that prices are way too low for Dec’15 and would only reserve further drops for when 2012 inventories have been exceeded. This would suggest that we could be seeing some increases to prices today if inventories fail to increase more than 94B ft3. (Read Report)

Source : Phillip Futures Pte Ltd