Fundamental and Technical Analysis
US natural gas inventories scheduled to release on the eve of Christmas, at 11.30pm (Singapore Time): Depending on the extent of the drop for US natural gas inventories, we would know if the natural gas bulls were being “naughty or nice” this year. If we are seeing a huge drop in natural gas inventories, Santa would most likely be favoring the bulls and save them from the big discount given to prices that we have seen lately. Most likely, we would not be seeing 2012 inventories being tested but if current inventories close up that to level, it should be enough for prices to hike upwards.
US crude oil inventories decreased, making up for the increase last week: This week’s US crude oil inventories decreased by about 5.88m barrels. Although we had expected a decrease to have come from an increased refinery utilization that dropped last week, it was more about net imports. Moving forward, with the US crude export ban lifted, we would expect net imports to decrease. Judging from the strong production as well as inventories in the US, it may not be surprising to see the US playing a bigger role in exporting. From a global standpoint, our main concern is that US production is not decreasing. It is holding steady at 9.179m barrels/day which we had initially expected to see further cuts with low oil prices.
It has been awhile since WTI and Brent moved in unison. Ever since the market started to price in the lifting of the US export ban, WTI and Brent have been moving in opposite directions. Yesterday’s increase in prices came about from a decrease in US oil inventories which eased the market after last week’s data. This allowed prices to move higher, well above supports of $36 that we have identified yesterday. We highly doubt that there will be much resistance and support-breaking on Christmas Eve and would think that markets would likely be just consolidating before the holidays. That being said, WTI and Brent Feb’16 should hold above $36.78 and $36.74 for this week. As for spreads, we continue to see the front month WTI-Brent spreads widen. We continue to believe that it will reach $0.50.
Prices hiked above $2, almost as though the market was sure this week’s inventories would turn out weaker than expected. We had initially expected a more than expected decrease in inventories to push prices past $2. However, it would seem the market is moving ahead of the inventory data. We remain skeptical on how much more prices could climb and would think that resistance for Natural Gas Feb’16 at $2.084 would hold. Only unless US natural gas inventories drop more than last week’s drop, then this resistance could be broken. If not, we do not expect to see much more changes. (Read Report)
Source : Phillip Futures Pte Ltd