After having gained considerable ground ahead of the week-end, oil futures consolidated in a rather narrow range at the beginning of this week. Mixed Chinese economic data did not provide any decisive cues for oil markets this morning. Meanwhile, oil futures have fallen below their first supports, however. During the first half of the day, trade has been very calm. This might also be due to the fact that Japanese investors are absent today due to a holiday in Japan. Nevertheless, Citigroup analysts see some downward potential for oil futures in the medium term. Demand is still rather weak, even though it is likely to rise again (for seasonal reasons) in the fourth quarter. Apart from this and despite oil futures rise during the past few days the Citigroup analysts leave their forecast for the price of a barrel of Brent unchanged for the third (105 USD/barrel) and the fourth quarter (100 USD/barrel). The price for Brent has risen by nearly 8% since mid June. This development has been caused rather by the risk premium for possible supply disruptions from Egypt than by the actual situation regarding supply and demand. If the situation in Egypt calms down, this risk premium might be priced out again. Analysts say that the premium currently amounts to some 5-10 dollars. The spread between the Brent and the WTI, which had briefly fallen below 2 USD last week due to a renewed draw in US crude oil stockpiles (DoE), has climbed back above 3 USD. Traders say that the shut-down of the Trans Niger pipeline keeps supporting Brent-futures as most of the oil exports from Nigeria are meanwhile destined for European markets. Since the US' domestic production is higher, the WTI is less affected by supply disruptions from Nigeria.
The stochastic indicator is still slightly bearish at the WTI and Gasoil chart this morning even though it already gave the signals last Thursday. Formally, the lines of the stochastic indicator have crossed at the Brent chart, too, this morning. However, this is not a strong signal as the lines don't significantly diverge, yet. The RSI is likely to be the indicator that will give the next selling signals - in case it falls below the 70% at ICE and NYMEX. The short-term supports might provide some cues, too, if they are breached, see also technical analysis. Given the past 3 day's lows between 104.21 dollars and 104.36 dollars, a new key-support has formed at the WTI chart near 104.20 dollars. We assess the technical constellation as neutral this morning, even if there is some profit taking. The technical situation would only turn bearish if the RSI gave the according selling signals and if the WTI's key support is breached. Given the past 3 day's lows between 104.21 dollars and 104.36 dollars, a new key-support has formed at the WTI chart near 104.20 dollars. We assess the technical constellation as neutral this morning, even if there is some profit taking. The technical situation would only turn bearish if the RSI gave the according selling signals and if the WTI's key support is breached.
ICE Gasoil contract for August delivery settled at 916.25 USD on Friday. This was +6.75 USD compared to Thursday's settlement. With some 84,900 deals the traded volume was above average.
Analysts have often cautioned recently that - merely from a perspective of supply and demand - oil prices might see a correction. However, the geopolitical risks deriving from Egypt still hamper a significant downward correction. Even though global supplies are still on a comfortable level, market players already price in possible supply disruptions that might be caused by further unrests. This risk premium will only be dropped if worries over the geopolitical situation subside.
According to analysts at Barclays bank, China's oil demand rose 10.7% on year in June as refineries restarted units that had been closed for maintenance, agricultural demand increased, and stable profit margins prompted refiners to ramp up production.
Oil demand rose 5% on month to 9.94 mbpd showed data from the National Bureau of Statistics. Year-to-date oil demand was 4.9% higher than in the first half of 2012, at 9.88 mbpd. This surge reverses several months of gradually slower growth, which fell to 1.1% on year in May. Even though industrial production in the country slowed, other sectors of the economy showed that activities kept expanding at a steady pace, even though more slowly than during the previous years. Barclays expects Chinese oil demand to grow by 5% in 2013.
Crude oil stocks in the USA have significantly decreased throughout the past few weeks. However, there is still more than enough supply and stockpiles still are higher than the average in the past years. Recently, some US refineries that needed to halt production last week due to technical problems caused some trouble. Consequently, the NYMEX gasoline contract soared, hitting a 4-month high on Friday. Analyst Phil Flynn says that the move of NYMEX futures is a squeeze, as suppliers increasingly hedged possible shortages last week by buying futures. Accordingly, they might have drawn from gasoline stocks last week. However, gasoline inventories are sufficient as well. Gasoline stocks are at the highest level since 2001 (for this time of year), amounting to some 221 million barrels per day. Moreover, refinery operator Phillips66 restarted one installation on Friday. Market players are now probably eying the DOE's data in order to be able to better judge the situation.
Euro zone economic indicators:
• Trade balance May +14,6 Bln. Forecast: +15,8 Bln; previous month: +15,2 Bln
• ZEW Economic indicator July +32,8. Forecast: +31,8; previous month: +30,6
• Consumer price index (yoy) June +1,6%. Forecast: +1,6%; previous month: +1,4%
U.S.
Nymex neutral: Despite weak economic data ouf China, oil futures have consolidated on a high level this morning. This is probably also the case because Japanese markets are closed today due to a holiday. The traded volume at NYMEX is about on average for this time of day. Market players are now looking ahead to the performance of European markets, new clues from forex trading and some economic indicators.
Houston (ex-wharf indications 16-07 )
380cst $587
180cst $674
MGO $990
New Orleans (ex-wharf indications 16-07)
380cst $599
180cst $631
MGO $993
Singapore (correct as of 1430hrs LT - delivered indications)
The Singapore bunker differential – the price spread between delivered marine fuel prices and HSFO cargo values – dropped $7.53/mt to $5.45/mt discount to 380-CST quotes. Delivered 380cst in Singapore was seen avg. in range off 587-590-mt. For bunker prices, Singapore 380-CST ex-wharf prices were transacted at $600/mt on Monday. In general Singapore fuel oil market was very quiet, and capped by weak demand and concerns over increasing supply.
380cst $603
180cst $606
MGO $915
ARA (Amsterdam - Rotterdam - Antwerp)
Indications for delivered bunkers:
380cst : $600
(1.0 %) :$606
180cst: $623
(1.0 %):$ 640
MGO 0.1%S: $ 899
