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Trends

Rotterdam (ARA) fuel oil - US$3 higher

Singapore fuel oil - US$2 higher

US Gulf - US$3 higher


Sell-off compensated by technical buying

Oil plummeted over $1/barrel during intra-day trading as US Beige Book, durable goods order and EIA oil inventory figures came out worse than expected. Technical buying just above the strong support of $75/barrel helped to recoup some of the losses.

Another important earnings day ahead

Major companies such as Exxon, Shell, MAN, Southwest Air, Noble Energy are to report their Q2 earnings today. Lately, daily return correlation between oil and S & P500 increased to over 80% as speculators try to judge the health of economy with earnings instead of inconsistent fundamentals data. Thus, oil prices might be supported in the short-term if companies keep posting positive earnings even if fundamentals remain weak.

High volatility expected during hurricane season

US energy bill is set to impose tougher regulations and severe penalties on oil majors if a repetition of BP Macondo case occurs. Companies are expected to shut down oil rigs and production faster and for a longer term in the hurricane season to avoid related risks, causing high price volatility.

Today's important numbers include German unemployment figures, Eurozone consumer/economic/ business/industrial sentiments and US initial/contingent jobless claims.

Recommendation

Prices bounced back after hitting the strong technical support of $75/barrel once more. 200-day moving average of $77.5 presents a resistance on the upside. We recommend monitoring the market for dips towards $75/barrel to hedge future exposure after US jobless claims figures.

Release: EIA oil data (Consensus)

Crude: 7,308,000 barrels (-1,600,000)
Distillates: 938,000 barrels (1,800,000)
Gasoline: 91,000 barrels (400,000)
Refinery utilization: -0.9% (-0.6%)