Fundamental and Technical Analysis
Heightened political tensions failed to support prices last Friday; even as France increased its participation against ISIS in Syria, prices only inched up slightly: Historically, with heightened political tensions, we tend to see increased oil prices. We are not exactly seeing the same happen as prices slumped even after the terrorist attacks in France started. The market is only reacting upon today’s market open as France started to increase its participation against ISIS in Syria. This has pushed prices up only slightly, preventing it the bearish momentum from continuing. It would seem that the oil markets are more concerned with the fundamentals of oil rather than the short term impacts of heighten political tensions.
Weak Eurozone and Japan Q3 GDP pushes the US Dollar Index up: Eurozone Q3 GDP was released last Friday with a slightly weaker than expected growth. Same goes for Japan which was released earlier this morning, showing a contraction in the Q3. This caused the US Dollar Index to move upwards towards 99 which has an inverse effect towards USD-denoted oil prices which resulted in price drops.
Prices extends drops, leading to both WTI and Brent nearing towards the low of this price rout. We believe that this was a result of the US Dollar Index gaining strength from weak Eurozone Q3 GDP, which results in lower oil prices. It was surprising to see that oil prices ignored the risk premium that would have come from terrorist attacks but rather, follow the US Dollar Index instead. With the recent turn in events, the week ahead seem to be becoming more uncertain. We believe that we could be seeing some upside coming from increased geopolitical tensions. However, would think that this should at most allow prices to maintain at current supports of $40 and $43.60 for WTI and Brent Jan’16. We would think that these supports could hold provided downside pressures remain at bay. Judging from how the market seems to be eyeing fundamentals more, US crude inventory data should be the most crucial for this week. If US crude production continues to inch upwards, it would spell disaster for oil prices. On top of this, USD strength’s appreciation streak could cause oil prices to dampen more. If the US Dollar Index moves past 100, it would mean oil prices would be testing further lows.
Prices spiked towards the end of the week and even gapped upwards upon open. This is likely a result of a natural gas pipeline explosion in the US which has yet to be resolved. This has allowed prices to move higher despite natural gas inventories reaching historic high of 3,978B ft3. For the week ahead, we highly doubt that prices would move higher due to this explosion. The idea of excess inventories would soon remind the market and wipe out any gains that natural gas could get within the week. (Read Report)
Source : Phillip Futures Pte Ltd