After Monday's rally oil prices at ICE and NYMEX consolidated on a high level in Tuesday morning trade with traders taking some profit later in the day. Moody's downgrading of France had no influence on prices as market participants focused on the situation in the Gaza strip. Not even better-than-expected US housing data could lend some support. The market was technically driven at this time of the day. During the session in New York, oil collapsed breaching several support lines in the process as news on a possible cease-fire between Israel and the Hamas hit the market. Operators took profit and liquidated their long positions. When the expected cease-fire was not achieved and the API, in its latest inventory report, showed unexpected draws in US oil product stocks, oil prices recovered part of their losses in after-hour trading.The stochastic indicator gives a selling signal at the WTI chart while the one at the ICE charts is still regarded neutral, see also technical analysis. This is why technical analysts are rather bearish this morning but they also point out that the Gaza conflict and the DoE oil inventory report will be in the centre of operators' attention today. Should support lines be breached in the course of the session, technically driven stop loss selling could accelerate oil's fall. According to media a bomb attack had been performed on an Israeli bus today. Market players fear that such action will lead to an Israeli ground offensive against Hamas forces in the region, after a truce had been in sight just Tuesday afternoon. This has pushed the market further up this morning.
The API's inventory report also has a slightly bullish impact on oil, the unexpected high draw in US crude oil and product stocks raising fears of a supply shortage. Still, market participants will eye the more important DoE report for direction in the afternoon. Should the report show similar draws, oil prices would get more support.
ICE Gasoil contract for December delivery settled at 944.75 dollars on Tuesday. This was 7.25 dollars below Monday's settlement. With some 66,700 deals the traded volume was above average.
News on a possible truce in the Gaza strip weighed on oil prices on Tuesday as market participants hoped for a positive result still in the evening. But fighting between Israeli and Palestinian troups went on throughout the night as no agreement has yet been reached. Market observers say Israel is not ready to accept the Hamas' demand of a permanent waiver of any kind of military control. But countless diplomates from all over the world are still trying to find a solution and are optimistic that a long-term agreement will be reached. A truce in the Gaza conflict would open some downside to oil markets as yesterday's price decline has shown. Analysts say the risk premium on oil originally was about 3 to 5 dollars but has meanwhile been reduced by about two dollars. Should a lasting truce be achieved and the political situation in the region stabilize market participants' attention will return to the demand and supply situation. OPEC's overproduction and the ailing demand give the market a bearish signal. Tim Evans, analyst with Citi Futures sees the fair price for a barrel of crude at 82,00 dollars (WTI) and 95,00 dollars (Brent).
Despite Moody's downgrading of France the euro consolidated close to its first resistance line on Tuesday, as market participants were hoping that European Finance ministers would agreen on paying a further credit tranche to Greece. When the ministers failed to agree on a debt-reduction package for the endebted country the single currency dropped in Asian trading this morning but compensated part of its losses before noon. The Stochastic oscillator at the euro chart is neutral at the overbought level today, favouring a downward correction. Still, the selling signal has not yet been triggered as the indicator's two lines have not yet crossed. The euro last sold at 1,2782 dollars down from 1,2818 dollars last night in New York. The single currency has support at 1,2735 dollars, at 1,2715 dollars, at 1,2690 dollars and at 1,2660 dollars today. Resistances are at 1,2820 dollars, at 1,2840 dollars, at 1,2875 dollars and at 1,2890 dollars.
The jobs market remains far from healthy, Federal Reserve Chairman Ben Bernanke said in a speech Tuesday. The unemployment rate is edging down gradually, but remains well above its long-run sustainable level. "We have some way to go before the labor market can be deemed healthy again," Bernanke said. The housing market is recovering slowly but Fed officials are not yet fully content with the development. In order to sustain the economic recovery short-term interest rates will be kept near zero.
Mr. Bernanke also emphasized that lawmakers must find ways to put the U.S. budget on a sustainable path. He warned that the economy could tip into a recession if policymakers don't find a way to avert a slew of tax increases and spending cuts. While the Fed chief generally doesn't weigh in on which fiscal policies lawmakers should pursue, he's urged them to make sure not to derail the fragile economic recovery. Fed officials are monitoring the jobs market closely, after starting a bond-buying program in September tied to its progress. The central bank is buying $40 billion of mortgage-backed securities each month and has said it will continue doing so until the jobs market shows substantial improvement. Separately, the Fed has been buying $45 billion of long-term Treasury securities each month with the proceeds from selling short-term Treasurys in a program known as "Operation Twist," slated to expire at year's end. Mr. Bernanke didn't tip his hand Tuesday on what the Fed should do after Twist expires next month. He said in September the Fed would evaluate all of its bond-buying programs when Twist ends in December. Some economists expect the Fed to start outright buying Treasurys with printed money, which would add to the size of its portfolio of assets. The Fed could also let Operation Twist end without replacing it with other measures. The central bank's next policy meeting is Dec. 11-12.
The euro recovered from the markets' disappointment about the failure of euro zone finance ministers to agree on a debt-reduction package for Greece and rose from an intraday low in cross-trading thanks to the ailing yen. The ministers will gather again next Monday to take up discussions on the subject. The euro rises to a 7-months high against the Japanese currency in electronic morning trading. Though the yen also looses ground vs the dollar, the European single currency seems to profit the most. New monetary easing measures could be decided upon next year in the U.S., as Fed president Bernanke hinted last night. In the afternoon a string of US indicators could give market participants some direction. The euro is trading within a short-term uptrend that is crossed by a long-term resistance line. The single currency last sold at 1,2803 dollars. Supports are seen at 1,2735 dollars, at 1,2715 dollars, at 1,2690 dollars and at 1,2660 dollars today. Resistances are at 1,2820 dollars, at 1,2840 dollars, at 1,2875 dollars and at 1,2890 dollars.
Shell PLC today lifted force majeure on its exports of Nigerian Bonny Light crude oil declared last month. The force majeure was declared after supply of Bonny Light was affected by the fire on the Bomu-Bonny trunkline, while other incidents of oil theft and severe flooding in the Niger Delta dented supply of both Bonny Light and Forcados crude. As a consequence oil supply should improve mainly in European markets.
U.S.
Nymex Access bullish: Oil prices lost ground in East-Asia and on Globex electronic trading platform this morning in rather volatile trading as a cease-fire in the Middle East has not yet been achieved. The traded volume is little above average. Market players eye today's economic indicators, see economic calendar, news from the Gaza conflict and the DoE's oil inventory report in the afternoon.
Survey of US Petroleum inventories due out tonight at 16:30 (DOE).
Forecast: Crude oil +0.6; distillates -0.4; gasoline +1.1 million barrels vs previous week.
API's: Crude oil -1.9; distillates -4.4; gasoline -4.8 million, refinery runs +2.2 and Cushin+1.1 barrels vs previous week.
The API reports a surprise draw in US crude oil and gasoline stocks and a bigger-than-expected decline in distillated product inventories even though refinery run rates have decreased.Refinery run rates considerably increased last week after the damages done by hurricane Sandy at east coast refineries have widely been repaired. While this explains the unexpected draw in crude oil inventories, the higher-than-expected draw in product stocks is a surprise and has not been explained by the agency. Oil supply has thus decreased. But while this is not a problem for crude oil, product stocks fell below the long-term average which makes the figures rather bullish.
Houston (ex-wharf indications 20-11)
380cst $605
180cst $680
MGO $1005
New Orleans (ex-wharf indications 121-11)
380cst $615
180cst $708
MGO $1012
Singapore (correct as of 1430hrs LT - delivered indications)
Crude is losing at this time with WTI -$1.49. Singapore paper is losing with -$8.15 for 180cst and -$8.45 for 380cst for Nov, and for Dec 180 cst -$8.15 and 380cst -$8.45 with MGO Nov contracts at +$1.80 and for Dec at +$1.80. The cargo market is starting to react with 180cst +$1.82, 380cst +$1.24 and MGO +$1.76. Expect all change on this as the market is currently VERY volatile.
The Singapore markets inched up +$1.0-2.0 during the morning Platts window yesterday. The market remains weak and the selling interest is high which narrowed the Asian Fuel Oil crack. The delivered bunker premiums slipped to around +$3.0 above cargo prices. This morning both markets are trading higher.
High premiums for prompt deliveries.
380 cst $610
180 cst $620
MDO $930
ARA (Amsterdam - Rotterdam - Antwerp)
The market lost ground yesterday following a softer MOC tracking crude's retreat. Antwerp continued to report HSFO shortages due to blending components tightness in the area, sources said. Suppliers in the Belgian port anticipated resupplies to arrive over the weekend. Rotterdam continued to report difficulties with HSFO and low sulfur fuel oil deliveries due some supply shortages and delays at some loading installations, sources said.
Indications for delivered bunkers:
380cst : $ 592
(1.0 %) :$ 616
180cst: $ 625
(1.0 %):$ 646
MGO 0.1%S: $ 920
