Friday morning, the slightly bullish cues provided by the technical constellation and the bearish cues provided by market fundamentals have created a rather balanced trading environment. That is why profit taking didn't sustain in the first half of the day, even though last week's news were rather bearish. US crude oil inventories saw the sharpest increase since May and the meeting of OPEC and other important oil producers didn't even bring conjoint measures for a reduction of the oil glut on the table. After oil futures had declined in the days before, investors tended to stay on the sidelines on Friday. Oil prices only slumped in the early afternoon, after several short-term supports had been breached. The advancing dollar added to selling pressure. The reports on China's central bank having stepped up its accommodative measures of monetary policy provided the crucial selling cues. More expansive measures are regarded as further proof of a weakening economy in China which might also hamper oil demand growth. After oil futures had sharply declined, they slightly recovered at the beginning of US trading as equities kicked of the session in New York with considerable gains. Overall, oil futures in London and New York were nonetheless dominated by bearish cues on Friday. After the Stochastic indicator had given off a buying signal at the Brent and the Gasoil chart on Friday, the lines of the indicator are running in parallels again this morning. The indicator has thus lost some of its bullish impact. Since the lines of the indicator still haven't sustainably crossed at the WTI chart, there is no confirming buying signal, either. However, the bearish impact of the 7- and the 21-period moving averages has waned as well for the lines had already crossed days ago. Overall, we thus assess the technical constellation as neutral. Even so, the constellation also bears considerable upward potential. If the lines of the Stochastic indicator cross at the WTI chart and/or the RSI exceeds 30%, fresh buying signals would be triggered which might push oil futures notably higher. The divergence of the RSI at the WTI chart can also be regarded as a warning sign. The fact that the indicator edged higher in the past few days whereas WTI retreated favors an upward correction.
ICE Gasoil contract for November delivery settled at 443.75 USD on Friday, this is -0.75 USD below Thursday's settlement. With some 48,000 deals the traded volume (front month) was below average.
Last week, the number of active US oil rigs renewedly declined. According to the Baker Hughes report (released on Friday evening after our office hours), only 594 oil rigs are still active in the USA by now.
Since the number of active rigs only decreased by one compared to the preceding week, the rig count is unlikely to provide significantly bullish cues for oil markets at the beginning of this week, the more so as the DOE reported on Wednesday that US oil output remained flat at 9.1 mbpd compared to the week before. This is higher than the agency's estimates for the month of October (9.02 mbpd).
Analysts at Energy Aspects expect that oil demand will decrease in the last quarter of 2015. Compared to the fourth quarter of 2014, the experts expect a mere +0.8 mbpd-rise in demand. The EIA also forecasts that crude oil demand will slightly decline from the third to the fourth quarter of 2015 - by -0.11 mbpd. On year, oil demand is to increase by +1.19 mbpd in the fourth quarter, according to the EIA. Even so, the Energy Information Administration doesn't expect oil demand to recover in the medium term as it is expected to renewedly decline by -0.21 mbpd in the first quarter of 2016. Along with the expectations of increasing crude oil supplies from Iran, this doesn't provide an environment in which oil prices are likely to rise. The trend rather points to the downside, the more so as the latest expansive measures of the Chinese central bank indicate a weeker economic growth and a slower oil demand growth.
The first data on market managers' net-long position shows that money managers cut their long-position with WTI by 13,481 positions. Figures regarding Brent will be released in the early afternoon. Bullish market participants are throwing the towels in as the market is still well supplied, Tyche Capital Advisors analyst Tariq Zahir explains. He also stresses that the time spread, i.e. the price differential between futures with a sooner and a later delivery, has considerably widened with WTI futures over the past weeks. The Contango-constellation has thus exacerbated pointing to more selling pressure for futures with a sooner delivery.
Analysts at Energy Management Institute say that the situation on the market is still bearish and is likely to remain so through 2016. Oil futures might be buoyed by some short-covering this morning but currently there are no signs of a significant price increase. Gasoil thus pulled back but marginally from Friday's lows.
U.S.
Nymex above average : Oil futures rose in early morning trade, as investors covered some of the short positions they had raised last week. As there are no bullish cues yet, gains remain limited, however. The traded volume at NYMEX is on average this morning. Market players are now waiting for the European financial and forex markets to open, as well as the economic indicators which are on the agenda..
Houston (ex-wharf indications 26-10)
380cst $213
180cst $276.50
MGO $471.50
New Orleans (ex-wharf indications 26-10)
380cst $225
180cst $275
MGO $466
Singapore (delivered indications 26-10)
Brent is losing again after a slight bounce with -$0.15 for December contracts. Singapore paper losing with -$0.75 for 180cst with -$1.20 for 380cst for Nov, and for Dec 180 cst -$1.75 and 380cst with -$1.70 with MGO contracts Nov also down with -$0.60 and in Dec with -$0.59. The cargo market is down with 180cst -$3.85, 380cst down with -$5.05 and MGO with +$0.17.
380cst $228
180cst $243
MGO $434
Fujairah (delivered indications 26-10)
380cst $236
180cst $272
MGO $613
ARA (Amsterdam - Rotterdam - Antwerp)
Indications for delivered bunkers:
380cst : $216
MGO 0.1%S: $406
