Fundamental and Technical Analysis
US crude oil inventories increased by more than 4m barrels, causing inventories to break the previous high. US crude production continues to inch upwards, reaching 9.185m barrels/day. US natural gas inventories scheduled to be released tonight at 11.30pm (Singapore Time): US crude oil inventories continues its increase, resulting in inventories breaking the previous high. Historically, US crude oil inventory increase should slow down from here as refinery utilization increases. Refinery utilization inches up towards 89.5% and if this continues, we should be seeing inventories declining. With US oil production increasing towards 9.185m barrels/day, this has undone 2 months of declines and essentially sets back anticipations of supply cuts.
OPEC Nov’15 report reflects OPEC’s stance of their fight for market share as OPEC production remains stable: OPEC’s continued strategy of fighting for market share continues to be reflected in their consistent production despite the decline in oil prices. Comparing Oct’15 and Sep’15 OPEC production, production dropped by -0.257m barrels/day which should be seen as an optimistic sign. This keeps OPEC production at the Q2 and Q3 average of about 31m barrels/day.
Prices dropped by about 3% yesterday mainly coming from the US EIA crude inventory data which emphasizes the supply glut. US crude inventories breaking to a new high and production inching upwards should have been the reason for the market shakedown. Over the past few months prices have been receiving support from declining US oil production; however, with US production increasing again, prices are losing their support. This plunge in prices has push momentum back into bearish territory. We continue to remain wary of further drops due to the possibility of the reintroduction of Iranian oil by the end of the year. This drop puts prices in a pinch where we could see new lows if Iranian oil causes another drop in price. Nonetheless, we expect supports for WTI and Brent Jan’16 to be at $41.32 and $43.64 for today. We expect to see some retracements today after the drop from yesterday and would think that these supports should hold.
Prices maintain stable just before inventory data. Last week’s release revealed that inventories has reached the historical high level of 3,929B ft3. A continued increase would bring inventories to a new high which could push prices down further. We do not expect a huge drop as we have seen earlier because prices are already low. Therefore, would think that for today, prices should be testing support of $2.4 for Natural Gas Jan’16 especially if inventories increase again. (Read Report)
Source : Phillip Futures Pte Ltd