Fundamental and Technical Analysis
Markets go quiet with the thanksgiving holiday and should remain quiet today without much economic data scheduled to release: As we approach the end of the year, we would expect markets to experience lower volatility. There are, however, a few foreseeable events left in the year that could shift oil fundamentals. In the coming weeks, we have an OPEC meeting scheduled for 10 Dec which would likely give some volatility to the market. Although we continue to believe that this would be a non-event, the willingness of Saudi Arabia to cooperate seems to be stronger this time around.
Thus, the outcome of the meeting could be a surprising one.
Shortly after, the FOMC meeting is scheduled to happen and end on the 16 Dec. This meeting is crucial as it could result in higher US interest rates. This could also cause a shift in oil prices coming from the stronger USD, especially if the US Dollar Index manages to break the previous high. Other events in the year could include the lifting of Iranian sanctions which seem to be receiving some headwinds. Previously scheduled to be lifted in Nov’15, progress on Iranian sanctions seems to have gone stale. If this does not follow through, we should be seeing some bullish momentum setting in to push prices higher.
Prices are still moving in the similar range bound fashion, despite the slight dip it took yesterday. Prices are finding it hard to move higher or lower on the unchanging fundamentals. For today, without much release of economic data, we highly doubt that both WTI and Brent would be moving much. Prices would likely be moving as traders take/close positions for the weekend. Technically, we see a support for both WTI and Brent Jan’16 to be at $42.48 and $45.27. We expect this support to hold here for the rest of the day and would unlikely be broken. Even if it does, we expect prices to fall not much further which reiterates our stance that prices would not be moving much lower for the week.
Spreads widened back towards -$3 over the weeks after narrowing towards parity for WTI and Brent. We believe that the cause of the widening spreads comes from lowered possibility of Iranian sanctions being lifted in this year. We have hardly seen any progress even as we approach the end of Nov’15. However, in the event that sanctions do get lifted, we have little doubt that spreads could narrow a great deal.
Prices returned to test support of $2.228 after the US natural gas inventories continued to increase. We continue to wait for when inventories start to drop in order to see prices move higher. As long as inventories continue to increase, prices would very likely be maintaining low and could even test new lows if this persists. (Read Report)
Source : Phillip Futures Pte Ltd