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Fundamental and Technical Analysis
US Preliminary Manufacturing PMI released weaker than expected; also lower compared to the prior month: With the much anticipated rate hike coming in Dec, we continue to see every economic data as an indication of whether the Federal Reserve would go through with the rate hike. Weak US preliminary manufacturing PMI likely put a dent on the likelihood of a rate hike. This put a stop to the strengthening of the USD. Later in the day, we would be seeing US Q3 GDP released. A weak result coming from Q3 could be detrimental to the USD strength and this could give oil prices some support. On a side note, Eurozone manufacturing PMI turned out better than expected which does suggest that the region is still reaping the benefits of their QE program.
Saudi Arabia openly announced its willingness to cooperate in the stabilizing of oil prices; non-OPEC producers must cooperate for this to happen: With the Dec’15 OPEC meeting approaching, the eyes are on Saudi Arabia once again to see if they would be changing their stance. This time, things are slightly different. Saudi Arabia is openly declaring their willingness to support prices on condition that non-OPEC producers, probably Russia, chips in as well. However, at the end of the day, as long as nothing concrete is said, we would hold our horses on a bullish run for prices. Throughout the year, major oil producing countries have tried to hype the market with bullish sentiments. As long as nothing concrete is being rolled out, we remain skeptical of the possibility. Therefore, at this point in time, we would think that the Dec’15 OPEC meeting would be a non event again.
Prices recovered towards the end of the day after Saudi Arabia showed increased willingness to support prices. This allowed prices to remain supported weeks before the OPEC meeting. This has also allowed our supports of $40 and $43 for WTI and Brent Jan’16 from yesterday to hold strong. We would likely be seeing more support as the market plays on the idea of Saudi Arabia cooperating and stabilizing prices. Whether this would turn out to be a reality would likely only come after the OPEC meeting on 10 Dec. We continue to eye the USD strength in judging if prices would be facing more downward pressure. This would be pit against the sentiments of Saudi Arabia’s willingness to cooperate which means that for today, prices should move based on this. We believe that prices would hold above the supports given and would unlikely break.
Prices recovered slightly as expected after the huge drop last week. We expect the correction to continue for today, however, could again drop if US inventories releasing on Thursday turns out higher than expected.
Source : Phillip Futures Pte Ltd
Labels: Oil and Gas sector