Fundamental and Technical Analysis
Final annualized US Q3 GDP increased by 2%, slightly lower than preliminary estimates; US Durable Goods Orders will be released later at 9.30pm (Singapore Time): With the US Q3 GDP turning out lower than preliminary estimates, the US Dollar Index came off slightly, reaching the lower bound of 98. This has given some support to oil prices as it refused to drop lower. For today, we expect US Durable Goods Orders to move the US Dollar Index again. Should Durable Goods Orders turn out stronger than expected, the US Dollar Index could be moving above 99.
US crude oil inventories will be released tonight at 10.30pm (Singapore Time): With last week’s inventories leaping up by 4.801m barrels, the market remains wary if this would continue which explains the recent bearish prices. We believe that this sudden increase in inventories should be a result of low refinery utilization and should be an anomaly as we are past the refinery maintenance season. Refinery utilization should increase and therefore, should be causing US crude inventories to drop. On top of this, we should be expecting more exports to US crude oil and thus, should mean that inventories would start to decrease.
WTI and Brent moved in opposite directions as the market continues to price in the lifting of the US crude export ban. Despite the drop in Brent prices, Brent found extreme difficulty to move lower whenever prices reach $36. This happened on 2 occasions which iterates the strong support at this level. Therefore, for the rest of the day,as long as US crude oil inventories do not increase again, we highly doubt that Brent could drop below $36. As for WTI, we believe that the market has gone on a buying spree as they play on the widening spreads between WTI and Brent. The market would unlikely stop until WTI-Brent spreads widens towards $0.50 for the front month. We expect further months to be at about $1.
Prices are continuing to show strength as it hovers near to $1.9. Although this is far cry from where prices were months ago, prices did increase a great deal to reach closer to $2. As we move deeper into winter, it is very likely that there would be increased demand for natural gas. This would help ease the current US oversupply.However, ultimately, we would have to wait for inventories to decrease at a much faster pace; preferably to decrease past 2012 levels. When this happens, we could be seeing prices move higher towards $3. For today, we expect prices to maintain at current support of $1.93. Prices should be increasing in anticipation of a bigger drop in inventories. However, the inventories could easily bring prices back lower towards $1.837 which we believe is the next support for Natural Gas Feb’16. (Read Report)
Source : Phillip Futures Pte Ltd