After the sharp downward correction oil markets had seen during the past week, futures took a breather on Friday. In the morning they tested their upward potential several times but in the afternoon there was some light profit taking. Supports at 978.00 dollars for the Gasoil and at 92.60 dollars for the WTI crude have briefly but not sustainably been breached and so oil futures at ICE and NYMEX settled on levels within their technical ranges, see tickcharts. As fundamental news were lacking there were no decisive clues from that part. While the nearing talks with the Iran regarding the country's nuclear program caused some insecurity, the pessimistic economic outlook for the EU and the FOMC's meeting minutes (published Wednesday evening) have probably still weighed on oil futures. The stochastic indicator's lines converge at the WTI, as well as at the Gasoil and Brent charts and so the indicator can be interpreted as neutral. The RSI does not give any new signals either, see also technical analysis. Even though both indicators point to a slichtly oversold market situation this morning, we still assess the technical constellation as neutral - as crucial clues are still lacking.
ICE Gasoil contract for March delivery settled at 977.75 dollars on Friday. This was -3.75 dollars below Thursday's settlement. With some 39,200 deals the traded volume was below average.
According to analysts at Goldman Sachs, given the price correction the past weeks, the oil market is now trading closer to the actual physical supply and demand situation. The price rally at the beginning of the year had been largely due to optimistic economic forecasts and geopolitical risks while the physical market had remained well supplied. Especially in the USA, crude supply is more than comfortable. Given the build in crude last week, inventories would suffice for 27 days at current refinery runs. Thus, crude stocks compared to actual consumption are at the highest level since 1994. Andy Lebow of Jefferies Bache sees WTI to trade within a medium-term range of 90 to 95 USD. Market participants may now focus on the upcoming meeting of the P5+1 group and Iran in Kazakhstan. On Tuesday, both parties will resume negotiations on Tehran’s controversial nuclear programme. If an agreement were finally reached in these continued and hardened talks, traders expect new potential to take profits at the oil market. Meanwhile, gasoline futures are expected to be quite volatile in face of the front month change (March to April) on Thursday this week, which also entails a switch from winter to summer fuel. This time of year always is a balancing act because sufficient supplies of winter goods still need to be produced before switching to summer blends.
In Italy the polling stations will close at 3.00 p.m. this afternoon. The election results could weigh on the single currency as investors are wary that a deadlocked vote could split parliament, stalling reforms and leaving the country mired in its longest recession in 20 years. A hung parliament should leave the euro vulnerable to escalating political uncertainty and would probabely weigh heavily on the single currency. In European morning trading the euro rises vs the dollar despite a worse-than-expected HSBC indicator in China. The single currency is trading well within its downtrend but neither the RSI nor the Stochastic indicator are giving any clear signals. As both indicators signal an oversold market, a modest downward correction would be triggered should the two lines of the Stochastic oscillator cross during the session. The euro last sold at 1.3231 USD. Supports are seen at 1.3180 USD, at 1.3165 USD, at 1.3145 USD and at 1,3120 USD. Resistances are at 1.3220 USD, at 1.3245 USD and at 1.3290 USD and at 1,33 USD.
Chinese economic indicators:
• HSBC manufacturing PMI (estimate) February 50,4. Forecast: 52,2; previous month: 52,3.
U.S.
Even though the Nikkei 225 marked some gains, oil futures edged slightly lower in Asian trading, as the Chinese HSBC purchasing manager index slightly weighed on sentiment. At the beginning of European trading, however, they regained some ground. The Brent found strong supports at 113.70 dollars while the Gasoil bounced back from the 979.25 dollars marker. The strengthening euro also dragged oil prices higher. European equities also provided some positive clues even though market players are already focussing on the elections in Italy. Currently, it looks as though none of the parties will reach the necessary majority of votes. The traded volume at NYMEX is above average for this time of day. Market players are looking ahead for the further performance European markets and for signals from forex trading. As to economic indicators, there is only the Chicago Fed National Activity Index to be released today.
Houston (ex-wharf indications 25-02)
380cst $630
180cst $720
MGO $1045
New Orleans (ex-wharf indications 25-02)
380cst $633
180cst $723
MGO $1050
Singapore (correct as of 1430hrs LT - delivered indications)
WTI climbed yesterday and is still up gaining +$0.21. Paper for Mar is mirroring the gains with 180cst +$2.25 and for 380cst +$0.75, and Apr contracts with 180cst +$2.30, 380st +$0.70. The cargo market is losing very sharply with 180cst -$4.14, 380cst -$4.91 and MGO -$0.18.
Also the market is seeing enough Oil in the market for now and still a weak demand despite recent better economic numbers from the US and China. Asian markets rose this morning on reports of a probably new leadership in the Bank of Japan –Mr. Kuroda- who is a supporter of aggressive monetary easing. However, news that China’s February Manufacturing grew at the slowest pace in four months (+50,4) limited the gains. China announced its intention to raise domestic fuel prices in the midst of the rising crude prices.
High premiums for prompt deliveries.
380 cst $638
180 cst $645
MGO $980
ARA (Amsterdam - Rotterdam - Antwerp)
Demand picked up as buyers saw a sharp dip in prices and sought to take advantage. Low sulphur fuel oil prompt deliveries were tight at due to limited availabilities resulting from a lack of blending components with loading delays at installations. Some suppliers are needing about four days notice for very prompt delivery. HSFO was sufficient for prompt deliveries. Antwerp suppliers saw around 15,000 mt of volumes and fixed around 10,000 mt.
Indications for delivered bunkers:
380cst : $ 625
(1.0 %) :$ 659
180cst: $ 649
(1.0 %):$ 712
MGO 0.1%S: $ 975
