Fundamental and Technical Analysis
Actual US Q3 GDP will be released today; adjustments to this figure could cause movements to the US Dollar Index: This will be the last adjustment done to US Q3 GDP. Preliminary releases show that the US Q3 GDP grew by 2.1%, however, Bloomberg survey estimates only a growth of 1.9%. Adjustments to these figures are common and would think that if the figure turns out lower than 2.1%, we may be seeing some drops to the US Dollar Index. This could then give some support to oil prices which has an inverse relationship to the US Dollar Index.
Prices refrained from dropping further after Brent hit the 11 year low. Although prices dropped below support, oil prices tend to test price supports by breaking them slightly. Therefore, this does mean that prices are still holding steady at this level. No doubt, oil prices are still in its bearish run, but because prices are holding steady, we continue to believe that this run is coming to the end. That being said, we also do not take the stand that it should be increase as there is a lack of bullish news. Therefore, would think that prices would maintain between $35-40 for the rest of the year. For today, we believe that movements will rely on how the US Dollar Index moves. An appreciation of the USD would likely be depressing oil prices again and vice versa if the USD depreciates with a weaker than expected US Q3 GDP.
Spreads were mainly moving due to the lifting of the US crude export ban and as seen from the Mar’16 spreads, WTI has once again commanded a premium over the Brent. It would likely take time for US oil to gain presence in the global scene which is causing Feb’16 spreads to remain still in negative territory. However, for months after Feb’16, spreads has moved to the positive region. It is very likely that the market is still wary of the progress of this as we would believe that the WTI-Brent spread could move towards $1. We continue to expect spreads to move deeper into positive region and would think that at the moment, this could be an advantageous position to take, considering the volatility in the oil market.
Prices spiked yesterday by over 5%. This is a very common occurrence for natural gas ever since it went into oversupply. However, remain wary of how a spike like this would be sustainable. Earlier in the year, spikes early in the week are normally followed by a sharp drop after that week’s US natural gas inventories turned out stronger than expected. History could repeat itself and would only expect prices to maintain higher if current inventories reach 2012 levels. This would mean that this week’s inventories have to drop by 194B ft3 which is highly unlikely. Prices may maintain at $2 if inventories drop higher than expected, but for it to return to $3 in this year is going to be extremely difficult. (Read Report)
Source : Phillip Futures Pte Ltd