Oil futures kicked off Thursday on a steadier note, fostered by the bullish data on US oil inventories and the bullish technical constellation. Oil futures tested their upward potential before losing some ground around noon. On the one hand, some market players locked in profits from the long-positions they had raised Wednesday evening, on the other hand, prices were weighed down by Goldman Sachs analysts forecasting a rise in OPEC crude oil production. Since the dollar steadied as well, oil futures successively retreated Thursday afternoon, erasing most of the gains they had posted Wednesday. Still, maintenance work at a major oil field in the North Sea has also stoked concern that supplies might tighten. The Brent contract with delivery in June even briefly signaled a backwardation constellation, which might indicate rising prices. Over night, oil prices renwedly surged and so Brent and WTI eventually settled above the 7-period moving average, near the levels had been at the open. The bullish technical signals only had a limited effect on oil prices on Thursday as most of the upward potential had already been spent during Wednesday evening's price increase. However, the Stochastic indicator remains slightly bullish at ICE and NYMEX charts this morning, favoring tests of the upside. Despite having declined Thursday afternoon, Brent and WTI settled above the 7-period moving average for the second consecutive day. This indicates that oil futures will test the resistances near their 21-period moving averages. Currently, oil futures are hovering between these two markers. Usually, this isn't a very stable constellation. From a merely technical perspective, wie thus assess the situation as slightly bullish for oil futures are rather likely to test the 21-period moving average than break below the 7-period moving average.
ICE Gasoil contract for April delivery settled at 323.50 USD on Thursday, this was 5.50 USD below Wednesday's settlement. With some 44,200 deals, the traded volume (front month) was below average.
The surprise draw in US crude oil inventories has lost its impact on oil markets, compared to Wednesday. As expected, the fact that crude oil imports sharply declined dampened the bullish effect of the draw in stockpiles, the more so as imports are probably only delayed due to bad weather conditions. They are likely to arrive in the coming weeks. According to Criterion Research analyst Kyle Cooper, the figures released by the DOE on Wednesday aren't "as bullish as the headlines." He doesn't think that global supply decreased that much. The time-spread of the Brent contract has nearly halved since mid-February. This is clearly indicating that traders no longer consider the market as oversupplied as in February. Analyst John Saucer at Mobius Risk Group says that the market is tighter than most people think. US oil production shrank from its peak of approximately 9.6 mbpd reached in April 2015 to just above 9.0 mbpd. That is, approximately 0.6 mbpd have already been taken off the market. If US oil output keeps declining - as anticipated - and if OPEC and other important producers freeze their output, prices might indeed see some support, Fat Prophets analyst David Lennox explains. However, Mr. Lennox is still seeing some downward risks for the oil market, given the persisting oversupplies. On the physical market the glut in crude oil continues as additional supplies from Iraq and Iran offset the decline in US oil production. Iraq was able to ramp up the exports from its terminals in the South to 3.5 mbpd in April, despite problems regarding embarkment. In March, the country had exported approximately 3.29 mbpd from these terminals. Iran was also able to increase its exports by 250,000 bpd to more than 2 mbpd in March. The outcome of the meeting between OPEC and non-OPEC producers next week will be pivotal for analysts estimates regarding the situation on the oil market. An output freeze at certain levels might well continue to foster prices. However, oil prices might see a sharp downward correction if the meeting doesn't bring about any decisive results. Analyst Mark Scullion expects that Thursday's price decrease might provide some upward potential ahead of the weekend. Today's upward move is a typical "Friday-hedge", he notes. Traders are likely to avoid new positions as markets are very nervous ahead of the producer meeting next week.
U.S.
Nymex above average: Oil futures remained steady in Asia and in Globex electronic trade this morning, testing their upward potential. Up to now, they haven't reached Thursday's highs, yet. The traded volume at NYMEX is above average this morning. Investors are now waiting for the European financial and forex markets to open as well as for further comments on the meeting of important oil producers. Moreover, they eying the release of some economic indicators due today.
Forecast: Crude oil +3.3; Distillates -0.9; Gasoline -1.5 million barrels vs previous week.
DOE: Crude oil -4.9; Distillates +1.8; Gasoline -1.3 million barrels vs previous week.
API: Crude oil -4.3; Distillates +2.7; Gasoline -0.5 million barrels vs previous week.
Houston (ex-wharf indications 8-4)
380cst $143
180cst $253.50
MGO $346.50
New Orleans (ex-wharf indications 8-4)
380cst $161.50
180cst $201.50
MGO $348
Singapore (delivered indications 8-4)
Brent is possibly losing momentum temporarily with +$0.56 for Apr contracts. Singapore paper is following with +$1.70 for 180cst with +$2.55 for 380cst for Apr, and for May 180cst +$2.55 and 380cst with +$3.25 with MGO contracts Apr with +$0.29 and in May with +$0.30. The cargo market is now adopting the bullishness with 180cst +$9.14, 380cst with +$8.20 and MGO with +$2.71.
380cst $179
180cst $185
MGO $336
Fujairah (delivered indications 8-4)
380cst $178
180cst $184
MGO $424
ARA (Amsterdam - Rotterdam - Antwerp)
Indications for delivered bunkers:
380cst : $158
MGO 0.1%S: $318
