Fundamental and Technical Analysis
Strong El Nino fuels expectations of a warmer winter, further affirming the lower need for heating in the winter: The impact of a warmer winter will trickle down to several energy products like natural gas and heating oil which generally increases during winter. The strong El Nino this year round is causing a warmer than expected winter. This will weigh down on prices for these seasonal commodities as seasonal consumption would be lower. This explains the huge discounts given to natural gas and also heating oil. On the larger scale of things, this could even weigh down on crude oil as less refining would be needed to supply heating oil during winter. The fact that inventories remain robust does not help this as well which could possibly bring US crude oil into heavier oversupply.
US Durable Goods and Consumer Confidence will be released later at 8.30pm and 10pm (Singapore Time): With the US Federal Reserve sticking to their data-centric approach, we would think that the various data points leading to the end of the year would be crucial. Although the impact of these 2 economic data pales in comparison with the coming US Q3 GDP, we expect these data to give some movement to the US Dollar Index. This is especially so with the jittery market as they wait for the FOMC meeting outcome on Thursday.
Prices dropped again, breaking our expected support. In the short term, the bearish momentum seems to be building up as prices slowly inch downwards. With prices falling again, we see immediate support for WTI and Brent Dec’15 to be at $43.44 and $47.23. As we expect prices to receive some support due to the weakening USD after the FOMC, we continue to believe that prices could stay above $44.15 and $47.46 by the end of the week. At the end of the day, we would think that as we draw nearer towards Nov’15, the idea of Iranian oil coming back could still be putting a stop to any bullish momentum. Bullish plays would likely put on hold until more certainty towards Iranian oil has come to light. In the event where prices continue to fall and not find support from a weakening USD, we would think that prices could move towards $42.57 and $46.57 for WTI and Brent Dec’15.
Prices plunged again without remorse, dropping to a low of $2.342. No signs of retracements were seen as forecast for the coming winter remains warm. This reaffirms that inventories would be remaining robust and could even be possible that this year’s inventories to exceed 2012 levels. When this happens, it is very possible that prices could revisit 2012 lows. This suggests that prices for Nat Gas Apr’16 could reach $1.896 considering that inventories could be reaching new highs. We continue to believe that prices should remain at this level for now and would only drop more towards the end of winter. (Read Report)
Source : Phillip Futures Pte Ltd