West Texas Intermediate fell as the U.S. debated a military strike on Syria, while Russia raised objections to intervention, clouding the prospects for an attack that could heighten tensions in the Middle East. Futures lost as much as 0.7 percent. The U.S. Senate Foreign Relations Committee is scheduled to vote today on a use-of-force resolution that sets a 90-day limit on military action and explicitly doesn’t authorize use of ground troops. Russian President Putin said he will only support a United Nations resolution for military strikes if there’s conclusive proof the Syrian government used chemical weapons.
WTI for October delivery dropped as much as 72 cents to $107.82 a barrel in electronic trading on the NYME and was at $108.11 as of 9:12 a.m. London time. The contract climbed 89 cents from the Aug. 30 close to settle at $108.54 yesterday. Floor trading was closed Sept. 2 for the Labor Day holiday. The volume of all futures traded was about 37 percent below the 100-day average. Brent for October settlement was up 19 cents at $115.87 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.59 to WTI compared with $7.14 yesterday.
After a rather flat trading session on Monday due to the holiday in the USA, oil markets saw much more movement yesterday. Late in the morning, reports about a ballistic missile launch from the Mediterranean Sea along the Coast to the East disturbed the market. As a result, oil futures shorty shoot up. In the afternoon, however, Israel resolved the situation, informing that it was just a successful missile defence test. Along with the disappointing Markit PIMs, oil futures had to cede much of their gains again. Thus G.Oil slipped below its support at 957.25 USD but failed to breach it. As the ISM PMI as well as the data on construction spending came out surprisingly better than expected, the tone of the market changed and oil prices regained some strength. Out of office hours in the evening, leading U.S. politicians from both factions presented a joint resolution draft which enables President Barack Obama to command a military intervention in Syria. The news pushed prices higher once again and thus Brent and WTI settled a their day’s highs while product futures remained relatively soft.
In light of the U.S. Sentate's resolution draft for a military intervention in Syria, the risk premium on oil may certainly rise again. This is also indicated by option trade. Traders especially bet on rising prices while the implicit volatility with Brent call options also points to increasing volatility of Brent contracts with a shorter duration, says Goldman Sachs. Analysts also forecast Libyan oil production to drop from 1.0 to 0.5 mbpd in September. Furthermore, Iraq’s oil output prevision has also been lowered by 0.1 mbpd.
ICE Gasoil contract for September delivery settled at 960.25 USD on Tuesday. This was 1.75 USD above Monday's settlement. With some 55,900 deals the traded volume was about average.
The Stochastic oscillator has given off a buying signal for Brent and WTI after its both lines crossed. The RSI still hovers above the 70%-line in the overbought zone. The Stochastic’s lines have crossed near the 50%-line which is why the bullish signal is not that strong. Moreover, there have been no signals for product futures yet. Although formally, this hints at a slightly bullish technical orientation, we consider the constellation as neutral as long as signals for product prices are lacking.
U.S.
Nymex bullish: After surging yesterday evening, Brent and WTI have been consolidating in a narrow range at last night’s level this morning. NYMEX Heating Oil has been edging lower, indicating some profit-taking. The traded volume at NYMEX is slightly below average for this time of day. Market players are now waiting for European markets to open, for new signals from forex trading as well as for today’s economic indicators. They will also continue to closely eye developments in the Middle East.
Survey: crude oil -2,0, distillates +1,0, gasoil -0,4 vs million barrels previous week.
Houston (ex-wharf indications 03-09)
380cst $625
180cst $697
MGO $1028
New Orleans (ex-wharf indications 03-09)
380cst $627
180cst $678
MGO $1031
Singapore
Crude is bullish with WTI +$1.08. Singapore paper is rising steaply with +$7.05 for 180cst and +$5.20 for 380cst for Sep, and for Oct 180 cst +$4.75 and 380cst +$4.50 with MGO contracts Sep +$0.66 and Oct +$0.59. The cargo market is slightly bearish with 180cst -$0.66, 380cst -$1.09 and MGO -$0.89.
The Singapore fuel oil markets slipped more than $0.5 during the Asian Platts window yesterday. The delivered bunker premiums were around +$4.0 above cargo prices amidst volatile crude movements after the window. Bunker fuel oil swaps posted up to $5/mt gains at the front of the forward curve for Singapore papers. Backend was slightly weaker, assessed up by app.$3/mt. Visco spread gained some strength on spot and closed at $6.33/mt yesterday. Balance September is trading at $7.0 while forward prices remain stable trading in a range of $7.5-8.0/mt for the rest of the year. This morning markets are trading slightly higher.
380cst $610
180cst $617
MGO $940
Fujairah (delivered indications 04-09)
380cst $612
180cst $672
MGO $1005
ARA (Amsterdam - Rotterdam - Antwerp)
In September (starting week 4) ESSO Antwerp will start working on maintenance of their refinery. Because of this, local Antwerp suppliers will need to buy more product in Rotterdam, therefor long waitinglines at Rotterdam refineries and storage are to be expected, with premiums on price as a result.
Indications for delivered bunkers:
380cst : $601
(1.0 %) :$624
180cst: $631
(1.0 %):$ 654
MGO 0.1%S: $ 944
