The fundamental situation became slightly more bearish last week, as the monthly reports of IEA, EIA and OPEC stated that markets were oversupplied. This allows for the countries to ramp up their oil reserves creating more supply security when the European oil embargo against the Iran is implemented on July 1.
Given the disappointing economic data from China, the world's second most important energy consuming nation, oil futures traded lower at ICE and NYMEX on Friday morning. Losses at stock exchanges, increasing worries over the stability of Italy's and Spain's financial market, the bearish monthly energy reports of EIA, IEA and OPEC, as well as the strong dollar kept pressuring oil prices in the course of the day. Ahead of the negiociations that started on Saturday between the Iran and six world powers, investors and speculants avoided building new short positions, however, as the Iran had stopped oil exports to Spain, Greece and Germany at the beginning of last week. Market players preferred to wait and see how the negociations would develop, before fully pricing in the new bearish factors. Thus quotations at oil markets only moderatly declined on Friday. For the time being, the negociations have not brought about any decisive results. Still, Catherine Ashton, an EU envoy, called the talks "constructive" and announced a second round of talks in Baghdad on May 23rd. During early morning trade, oil futures seem to catch up on last night's increased selling pressure and are currently significantly retreating.
The stochastic indicator is no longer bullish at ICE and NYMEX this morning. However, since the indicator's lines have not crossed yet, there has not developed any selling impulsion so far. We therefore assess the technical situation as neutral (for the time being). Losses have mainly been caused by last week's fundamental factors and events. The technical range currently is rather wide, providing some leeway up as well as down in the medium run. Some analysts presume that quotations head for the lows they reached on April 10. In this territory oil prices are likely to find some support that might be breached in the course of the week, however, in case the dollar remains steady and US oil inventories data come out bearish again.
ICE Gasoil contract for May delivery settled at 1,008.50 dollars on Friday. This was +4.25 dollars above Thursday's settlement. With some 81,500 contracts the traded volume was far above average.
The IEA said that the circle of ever growing scarcity that existed since 2009 was interrupted. According to the agency, the OPEC over-produced by 1.2 million barrels per day, causing oil stocks to rise. The continually rising US oil inventories also reflect this development.
According to Ritterbusch of Ritterbusch & Associates prices may even see a correction down to 95 dollars for the WTI crude and 115 dollars for the Brent, as the latest Chinese economic data are indicating that oil demand of the second most important energy consumer will not rise as sharply as expected in 2012. In contrast to the +8.3% growth in the first quarter, China's economy "only" increased by +8.1%.
There was no breakthrough in talks with the Iran in Istanbul but they were rather "constructive", according to Catherine Ashton, EU envoy. Negotiators from Iran and six world powers met on Saturday for the first time in more than a year to discuss concerns about Tehran's nuclear program, which Iran says is for energy and others fear is meant to build an atomic bomb. The group, which included the United States and the other four permanent U.N. Security Council members Britain, France, China and Russia, plus Germany, agreed with Iran to reconvene in Baghdad on May 23. There is also some criticism regarding the negotiations, however, in the USA and Israel. The fact that the EU spoke of "constructive talks" was only due to the low expectations beforehand, critics said. Benjamin Netanjahu called the negociations a "freebie" giving the Iran more time "to continue enrichment without any limitation, any inhibition". The aim of the negotiations is to stop the enrichment of Uranium which might - in a further stadium - be used for nuclear weapons. Moreover, the IAEA's inspectors are to receive access to installations where the Iran is supposed to do research on nuclear weapons. In earler IAEA missions in January and February, the inspectors were denied access to the installation Parchin.
The euro stabilises versus the dollar this morning after having declined to less than 1.30 dollars for the first time in two months as a surge in Spanish government bond yields renewed concerns about Europe's sovereign debt crisis and undermined investor appetite for riskier assets. Spain's government bond yields jumped on Friday and the cost of insuring its debt against default hit an all-time peak as record borrowing by its banks from the European Central Bank highlighted fears about the country's finances. The 17-nation currency dropped as a Spanish minister called on the European Central Bank to do more to stem the debt-market turmoil. Worries about slowing demand from China boosted the dollar as a safe-haven currency that also benefitted from a positive economic outlook in the U.S. The Stochastic oscillator gives a selling signal at the euro chart today. The euro last sold at 1,3020 dollars down from 1,3078 dollars Friday night. The single currency has support at 1,30 dollars, 1,2975 dollars, 1,2965 dollars and 1,2930 dollars today. Resistances are at 1,3075 dollars, 1,3085 dollars, 1,31 dollars and 1,3180 dollars.
• According to preliminary estimates, the euro zone's trade balance showed a surplus of +2.8 billion euros in February 2012, after a revised deficit of -7.9 billion euros in the previous month. In February 2011 the trade balance showed a deficit of -2.8 billion euros.
U.S.
Nymex acces bearish: Oil futures have retreated in Asian trading and on Globex electronic trading platform this morning. As the Iran seems ready to negociate again and Catherine Ashton expects talks to be constructive, market players increasingly price in the bearish monthly reports of EIA, IEA and OPEC. The still strong dollar makes oil futures more expensive for investors outside the USA, prompting them to take some profit. The traded volume has been slightly above average. Market participants now eye stock and forex markets and today's economic indicators.
Houston (ex-wharf indications 16-4)
380cst $707
180cst $743
MGO $1027
Very tight avails for 180 cst
New Orleans (ex-wharf indications 16-4)
380cst $709
180cst $745
MGO $1037
Singapore (correct as of 1430hrs LT - delivered indications)
Crude is dropping further with the dollar gaining and things calming slightly with Iran with WTI -$0.42. Singapore paper is following with -$9.70 for 180cst and -$9.35 for 380cst for May, and for June 180 cst -$9.70 and 380cst -$9.35 with MGO contracts May -$1.05 and June -$1.05. The cargo market has yet to adopt bearishness with 180cst +$3.71, 380cst +$3.64 and MGO +$0.42.
High premiums for prompt deliveries.
380 cst $713
180 cst $728
MGO $990
Fujairah (delivered indications 16-4)
380cst $725
180cst $745
MGO $1045
ARA (Amsterdam - Rotterdam - Antwerp)
Loading delays continue to be an issue in Rotterdam with significant premiums being applied to prompt product with particular problems on LS.
Rotterdam
Indications for delivered bunkers:
380cst : $ 692
(1.0 %) :$ 750
180cst: $ 719
(1.0 %):$ 777
MGO 0.1%S: $990
