Fundamental and Technical Analysis
US crude oil and natural gas inventory data scheduled to be released on Wednesday and Thursday at 11.30pm (Singapore Time) respectively: A quiet week ahead is expected with major news for energy markets likely to be coming from inventory data. For crude oil, we continue to expect more drops to inventories. Although this week’s drop may not be as heavy as last week, a net decrease in inventories should be enough to maintain prices. With refinery utilization maintaining low, this could suggest that we would be seeing drops to inventories. On top of inventories, we keep our eyes on US crude oil production. There has been a slight increase in rig counts in the recent weeks and the impact could start to show in crude oil production. Although production would unlikely have immediate impact on prices, we still worry that this would affect the long term picture, causing prices to stay low. As for natural gas, inventories would play an even more crucial part. If inventories remain robust, prices would likely return back to previous lows. Prices have found some support from anticipations of lower natural gas inventories, however, this may not last if inventories disappoint.
Last week was a significant week for oil as prices tested the 11 year low and hiked upwards subsequently. We believe the biggest adjustment to prices comes from WTI gaining premium over the Brent. This was mainly followed by the US lifting its ban on crude oil exports. Although based on crude oil prices alone, this may have pushed prices upwards, however, we do not think that this would be ideal for prices in the longer run. Giving US oil producers access to global markets could prompt them to produce more. As we have always placed our hopes on the decreasing US production to help ease the global oversupply, this could prolong any possible recovery to oil prices.Therefore, would have to really keep a close eye on how US crude oil production would be going. For the week ahead, we do not expect much movement. Similar to what we have seen over Christmas, the markets remain rather quiet. Therefore, would highly expect the support for WTI and Brent Feb’16 at $37.36 and $36.89 to hold.
Prices hike last week both before and after US natural gas inventories dropped similar to the previous weeks. We had initially not expected a 32B ft3 drop to be very surprising. However, considering that natural gas prices hit a 17 year low, discount buying was probably in play. Similar to most weeks, we expect US natural gas inventories to play a crucial role in depicting the movement of prices. This winter seems to be unusually warm and thus, would think that natural gas inventories would refrain from falling much.This would also mean that prices would unlikely be move higher. We expect prices to maintain below $2.17. (Read Report)
Source : Phillip Futures Pte Ltd