After Friday's late rise, oil futures at ICE and NYMEX saw some profit taking on Monday morning already breaching first short-term supports before noon. The conclusion of the negotiations between Iran and the 5+1 powers (last weekend) had a slightly bearish effect. After a temporary accord over Iran's nuclear program had been found in November, the two sides agreed last weekend on the technical procedures that will be necessary in order to achieve the agreed targets. Still, there was no greater downward potential resulting from this as the content of the accord had already been determined in November. Apart from that, there were no new important cues yesterday as news from the geopolitical hotspots (Iraq, Libya and Sudan) were lacking. Moreover, there were no economic indicators on the agenda. In the afternoon ICE- and product futures temporarily recovered once again but eventually, oil futures finished with losses hitting new intraday lows in what had been a listless session.
The buying signals of the stochastic indicator should be completely spent by now, as the lines of the indicator are reapproaching. Thus the indicator can be interpreted as neutral. Currently only the RSI may provide a buying signal if it depasses 30%. As long as there is no such signal, however, we assess the technical situation as neutral which is why futures at ICE and NYMEX are likely to keep track of their downtrends. The technical constellation will probably only provide new significant selling cues if oil futures fall below this year's lows (hit last week).
ICE Gasoil contract for February delivery settled at 907.00 USD on Monday. This was +7.50 USD above Friday's settlement. With some 71,700 deals, the traded volume was far above average.
Traders at ICE and NYMEX obviously expect that there is but limited upward potential at oil markets at the beginning of the year. At least, that is what the figures regarding speculative net-long positions in Brent and WTI futures and options, which were released yesterday for the effective date January 07, lead to expect. Net long positions in Brent futures and options alone have been cut by -26.7% compared to the previous week. This is a more significant cut than in any other week in 2013.
Iran was the predominating topic at the beginning of this week. The implementation of the intermediate accord regarding Iran's nuclear program is going to start from January 20, with first sanctions being lifted. Particularly sanctions over the country's oil industry are excluded from this easing. That is why the implementation should (at first) not lead to an increase in oil supplies. The only bearish effect is resulting from expectations that the negotiations might be the first step toward a final solution. Within the scope of such a final solution, the rest of the sanctions against Iran would be lifted, too, or at leased be significantly eased. Experts anticipate that Iran will be able to increase its output by about 1 million barrels per day within months and that large amounts of crude oil (which is in part ready to be exported) is stored on tankers. Even though there are no exact figures regarding the quantity of crude oil that is stored, estimates provided last year lead to conclude that by the end of December 2013 the amount of crude oil stored on land and on tankers might have climbed to about 100 million barrels.
The spread between Brent and WTI is currently amounting to about 15 dollars but according to Citi Futures analyst Tim Evans, it might narrow in the near future. The analyst is pointing to the bearish effect the increase in Libya's oil production from 200,000 to 600,000 bpd (last week) brought. The USA will become more and more independent from crude oil imports and US refineries will increasingly demand WTI in order to profit from its cheaper price compared to its benchmark. This effect is particularly favored by the start of the southern section of the Keystone XL pipeline. From january 22, this section will pump some 700,000 bpd from Cushing to the refineries in the region around Port Arthur in Texas. This should bolster the price of WTI whereas possibly positive developments in Iran, Libya and Iraq would have more bearish impact on Brent.
Euro zone economic indicators:
• Industrial production (yoy) November +3,0%. Forecast: +1,4%; previous month: +0,5%
German economic indicators:
• Wholesale price index December +0,4%. Forecast: +0,1%; previous month: -0,2%
U.S.
Nymex slightly bearish: After yesterday evening's lows, oil markets have seen a modest upward correction this morning. However, the moves remain refrained. The traded volume at NYMEX is about on average for this time of day. Investors are now closely eying the development at stock markets waiting also for new cues from forex markets. They will also keep monitoring the situation in Libya, Iraq and South Sudan, as well as important economic data.
Since the end of November, US crude oil inventories have sunk by about -33.5 million barrels, -8.6% respectively. The draw is to be chiefly due to a strategic reduction of US refiner's stocks, as they hoped for their (lesser) inventories to be evaluated more advantageously on the reporting date limiting their tax burden. Consequently, experts expect that this effect will turn around in January, when delayed imports fixed in delivery contracts will be realized. Along with a decline in refinery utilisation, this should lead to massive builds in US crude oil stocks.
Nonetheless, in the reported week, crude oil inventories are to have slightly sunk for one last time. But due to the recent cold snap in the USA it is hard to tell, how the data comes in. On the one hand, some refineries had to throttle or suspend production because of the arctic temperatures (favoring builds in crude oil stockpiles), on the other hand, pipeline operators were confronted with similar problems, which is why some crude oil imports from Canada couldn't be realized. Therefore, investors wonder which effect will predominate, with how many of the delayed imports to the US Gulf region the oil industry could already catch up and how refineries adjusted their production at the beginning of the new year.
Product stocks in the USA are expected to have increased. Even though the cold weather is likely to have boosted demand for heating oil, many deliveries have been disrupted due to the weather conditions. Moreover, the bad conditions have hampered traffic in vast parts of the region and so gasoline demand is also likely to have been on a low level. This favors a rise in gasoline inventories. As we already explained, refinery run rates are likely to have retreated, too, however. Therefore, probably, less fuels have been produced - a factor that should limit builds in gasoline and distillate stocks.
The countless imponderabilities the weather and the turn of the years have brought, might lead to a considerable difference between the survey and actual figures this week. The API is going to release its report tonight at 10.30 p.m. (we will provide the figures tomorrow morning on our website) and the DOE's data is going to be released on Wednesday at 4.30 p.m.
Houston (ex-wharf indications 14-1)
380cst $578
180cst $648
MGO $960
New Orleans (ex-wharf indications 14-1)
380cst $60
180cst $650
MGO $992
Singapore
WTI is continuing soft neutral -$0.21. Singapore paper is gaining now with +$1.50 for 180cst and +$1.00 for 380cst for Jan, and for Feb 180 cst +$0.25 and 380cst +$0.50 with MGO contracts Jan -$0.60 and Feb -$0.55. The cargo market is following yesterday's paper with 180 cst -$0.37, 380cst -$0.59 and MGO -$0.23.
The Singapore fuel oil markets dipped only a few cents during the Asian Platts window yesterday. The cargo premiums strengthened on a reflection of a tight market next month. The delivered bunker premiums were seen app.$5.5 above cargo prices.
380cst $601
180cst $612
MGO $895
ARA (Amsterdam - Rotterdam - Antwerp)
Indications for delivered bunkers:
380cst : $563
(1.0 %) : $585
180cst: $588
MGO 0.1%S: $ 866
