Whilst Gasoil kept trading in a relatively tight range between its first support and its first resistance on Monday morning, Brent already breached first supports in Monday morning trading. Since WTI remained rather steady at that point in time, investors have probably cut or raised their spread bets again. Even though there weren't any estimates on US oil inventories available then, market players already yesterday expected that US refineries had renewedly stepped up production, crude oil stock piles had renewedly sunk and that product inventories had increased in the past week. This favored a narrowing of the spread between the prices of refined products and Brent on the one hand, and between the Brent and WTI on the other hand. In the course of the afternoon ICE futures consequently kept track of their earlier losses breaching further supports. This continuously generated more technical selling orders which added to the downside. In the afternoon, the lines of the stochastic indicator crossed at the WTI chart giving an additional selling signal. Oil futures remained under pressure until late in the evening and so all contracts settled near their lows. However, WTI lost less ground than the other contract as it was slightly buoyed by the expectations of a draw in US crude oil stocks.
At ICE, Gasoil and Brent dropped below their mid-term uptrend, which had formed since mid November, generating more downward potential. The stochastic indicator gave a selling signal at the WTI chart yesterday, however it failed to push the US-crude oil contract significantly lower up to now as WTI found a strong support at 97 dollars. Only if the WTI is able to breach this support will their be more technical downward potential for the contract. After ICE futures saw some (most likely spread-related) profit taking late yesterday evening, futures now tick higher as investors are covering their short positions. Since there are no new technical cues this morning but Brent and Gasoil have fallen below their uptrend, we assess the technical situation as neutral to bearish. Technical selling pressure is only likely to renewedly increase if oil futures fall below yesterday's lows. However, investors' focus will be on fundamental news today and tomorrow, as well as on the US oil inventories data.
ICE Gasoil contract for December delivery settled at 934.25 USD on Monday. This was 6.50 USD below Friday's settlement. With some 30,500 deals, the traded volume was far below average. The shared currency extended its gains yesterday despite weak data on Germany's industrial production. According to Rainer Sartoris, analyst at HSBC Trinkaus, "on forex markets the common currency is currently supported by some tailwinds."
The availability of the North Sea crude oil sorts Brent, Forties, Oseberg and Ekofisk is expected to increase in January. In all, about 987,000 bpd are to be loaded in January. In December the embarkment of BFOE crude is to amount to 968,000, according to the latest embarkment program.
US refinery operators are continuing to step up production, probably trying to reduce crude oil stocks at the coastal areas before the reporting date. In doing so, they are trying - as every year - to secure a tax advantage. Since stockpiles currently are on a very high level, this year, refineries have begun to increase their production earlier than usual. This is likely to have a significant effect on the development of inventories in the coming weeks. Accordingly, product stocks are expected to rise in this period, whereas crude oil stockpiles should decrease. The fact that the southern segment of the Keystone pipeline will be started from mid or end of January will add to the draw in US crude oil stocks in the heartlands. The installation is to pump crude oil from Cushing, Oklahoma (the delivery hub for NYMEX WTI futures) to Port Arthur in Texas with a capacity of 700,000 bpd. Motiva Enterprises operates the largest US refinery at Port Arthur. This refinery alone has a capacity of 600,000 bpd. After the start of the pipeline segment had been postponed once, the planning seems to be on time now. A spokesman of the operator TransCanada confirmed that the pipeline was already being filled. In the next few weeks, about 3 million barrels are to be pumped into the pipeline. This too will lead to a reduction of crude oil stocks in the heartlands. The DOE's data had a significant impact on the price level at ICE and NYMEX in the past weeks, which is why market players will also focus on the figures this week, Fat Prophets analyst David Lennox expects. A draw in US crude oil stocks currently has a bullish effect for WTI and a bearish effect for Brent, as speculators bet that the price spread between Brent and WTI narrow if the US market is less oversupplied. Builds in product stocks are also bearish for Brent, as US refineries can export these stocks to Europe. In this case, refineries in Europe needed/could produce less dampening the demand for Brent crude.
Over the past weeks, there has been the tendency that the euro gained considerable strength against the dollar each time there were no important US economic data due - like yesterday. This morning the euro is able to defend its gains approaching 1.3770 dollar. Economic data released in China this morning brought some mixed cues. While China's construction spending and industrial production fell short of expectations, retail sales came in better than forecast. The euro has relatively sharply risen over the past few days and so market players might take some profits with the euro in the course of the day as there are no more indicators out of the euro zone on the agenda today. In the USA, data on wholesale inventories is going to be released, however. These figures might bring some positive cues for the greenback. Technically, there are no new cues currently. If the RSI falls below 70% and the lines of the stochastic indicator cross, there would be selling signals at the euro chart. The common currency last sold at 1.3748 USD. Supports are at 1.3730 USD, at 1.3715 USD, at 1.37 USD and at 1.3690 USD. Resistances are at 1.3745 USD, at 1.3760 USD, at 1.3770 USD, at 1.3785 USD and at 1.38 USD.
U.S.
Nymex bearish: After investors took some (spread-related) profits in late trade yesterday, they covered some of their short positions in electronic trading this morning and so oil futures edged higher. The traded NYMEX volume is well below average for this time of day. Market players are anticipating the opening of European stock and forex markets and a few German indicators.
Survey on US oil inventories
While refinery run rates are expected to have increased, crude oil inventories are to have declined in the past week. Product stocks are expected to have climbed. The figures of the Survey in detail:
Refinery utilisation might climb to the highest level since July 2012 if the the expected +0.5% rise (to 92.9%) is confirmed. The forecast draw in crude oil stockpiles and the builds in product stocks can therefore be seen as a result of higher refinery run rates. Shipping in the Gulf of Mexico has slightly been hampered by bad weather conditions including much fog. That is why analyst Kyle Copper at IAF Advisors presumes that product exports have been hampered, too.
Houston (ex-wharf indications 09-12)
380cst $598
180cst $671
MGO $994
New Orleans (ex-wharf indications 09-12)
380cst $618
180cst $653
MGO $992
Singapore
WTI is losing sharply after the gains of yesterday on the back of a strengthening euro with -$1.57. Singapore paper starting to with -$1.00 for 180cst and -$2.75 for 380cst for Dec, and for Jan 180 cst -$3.00 and 380cst -$3.00 with MGO contracts Dec -$1.50 and Jan -$1.25. The cargo market is reacting never really having adopted the bullishness with 180 cst -$1.38, 380cst -$0.78 and MGO -$1.84.
A shortage of blending materials had led to high viscosity cargoes in the region and adding to the bearish sentiment, demand for high sulphur fuel oil cargoes in North Asia has tapered off, with South Korean importers heard to have covered their requirements for December. The volume of finished grade fuel oil remains limited, providing some support to the market in December. Fuel oil crack are up 75c this morning in Asia compared to NY close, slightly stronger on the back of lower flat price.
380cst $603
180cst $610
MGO $940
Fujairah (delivered indications 10-12)
380cst $623
180cst $669
MGO $1020
ARA (Amsterdam - Rotterdam - Antwerp)
Indications for delivered bunkers:
380cst : $583
(1.0 %) : $620
180cst: $613
MGO 0.1%S: $ 915
