Crude Oil Remain Under Pressure and Commodity Trading Tips
Crude Oil Commodity Weekly Trading Review and Outlook: Crude oil prices this week started on a negative note driven down by a series of important economic events along with some downside intrinsic fundamentals. International crude oil prices declined continuously for six trading sessions from 9th June – 16th June With weakness in dollar and subsiding Brexit fears, finally the crude oil was able to show some short coverings on Friday. As per Friday’s closing, WTI International and Brent crude oil posted gains around 5% each, ending the week at $48.86/bbl & $49.25/bbl. July contract MCX crude oil posted gains around 2%, ending the week at Rs.3246/bbl Though, on weekly basis, the calculation remained on downside, showing around 1.40% loss in WTI International and around 2.50% loss in Brent crude oil. Weekly losses in July contract MCX crude oil showed losses more than 3%. With a series of major economic events from U.S. interest rate hikes and Britain’s exit from the Euro zone, International crude prices crashed from its 2016 high levels. Despite of having much better than expected inventory data, crude oil failed showing any positive response. Though, having weaker jobs generation data in May month, it was likely that interest rates could be hiked in this month but still the traders were cautious, which fueled up dollar and weighed on the denominated commodities. Britain’s exit from the Euro zone had its own impact fearing of declining demand from the Europe and losing strength in Euro which could adversely fuel dollar. Apart from this, coming to the normal crude fundamentals, the weekly DoE inventory data was quite impressive, still the prices were not being able to hold upside move. Before the weekly inventory data, a day before API released its weekly data, which was quite negative and that pressurized crude oil prices further Crude Oil Commodity Trading Analysis: Crude oil stocks last week went down for the fourth continuous week, though the rate of drawdown got lowered on account of decline in weekly crude oil demand by more than 2.50%. Gasoline stocks went down much more than expected as the weekly demand for the same inside the United States domestic market surged by around 2%. Distillate stocks went up for the second consecutive week, though the injections got lessen as the weekly demand surged more than 5%. Refinery inputs declined by around 100,000 barrels per day, and due to this the crude stocks demand got lowered. On account of less output and high demand for gasoline its stocks went down. This summer season the refiners are facing lower crack margin problems, which have reduced their profitability. Gasoline and distillate stocks are running at near about same prices, which normally the former should have been in premium. Huge chances are there for significant increase in products side glut, which will pressurize crude oil prices. The most supportive data was the weekly crude oil production levels. The same was being anticipated to rise as the rig counts went up, but instead 29,000 bpd lower production was observed. Current levels of production in the U.S. average around 8.716 MBPD.
Rig Counts moving Up: With the recent release of the rig count data by the Baker Hughes, another 9 rigs were added by the shale oil driller, bringing a total count now 337. This was the straight third weekly additions and within the mentioned timeframe 21 active rigs were added. Overall 222 rigs were removed by the US drillers in 2016 which pressurized their production levels, but as the crude oil market seems to be balancing a bit, they ready for some greater production levels in future. With the next week release of the production data, it would be confirmed that the addition of rigs are actually boosting up levels or not. In current situation, where the US started playing as a role of swing producer, increased production levels from the same shall pressurize the market. Already the OPEC members are firm on their part of not reducing the levels of production. Saudi- Iran rivalry for grabbing the market share has signaled some alarming rise in levels of production. Iran’s minister in 169th OPEC meet mentioned of taking OPEC’s 14% share which comes around 4.40 MBPD, that almost 1 MBPD more than their current levels of production. Iran has also restored their pre- sanctions production levels and more or less exports. The European nations are also importing at multi- year high figures from the country apart from the Asian majors. How Will Crude Oil, Gasoline and Distillate Stocks Move In Next Week? Crude oil stocks in the coming week might show some downfall, which is indicated in the seasonality pattern also. Technically, crude inputs will increase now in the refineries, which will show an effective drawdown in overall crude oil stocks. If the production levels and imports also moves down then that would an additional advantage for the declining crude oil stocks. Gasoline, there’s some uncertainty as normally the stocks should decline as per the seasonality but due to stable demand and higher refinery outages, the same might show some buildup. Chances are there for the refiners to shift their production from gasoline to distillates as they are not getting better crack margins just like the same they did in winter when distillates demand was low. So, in that case, if the gasoline output is lowered the stocks will fall. Distillate stocks shall continue moving up due to low demand and greater refinery outages and plus if the crack shifts from gasoline to distillates, the refiners will produce more distillates which will further add up the glut The hedge funds money managers have curtailed their bullish bets on the U.S. crude to the lowest in two months. It was the second straight week of declines in the net long position of U.S. crude. Thus, we can see that crude oil prices for the coming week might remain under pressure. Apart from all the above mentioned factors, with return of the Canadian crude production levels after the wild- fire, prices shall further witness some downfall. Crude Oil Commodity Technical Analysis: MCX Crude Oil July delivery contract opened at Rs.3308 and made a high of Rs.3364 but could not sustained on higher levels as expected fell sharply lower. Currently prices are trading at its lowest levels in five weeks. Last week prices have formed a Shooting star pattern and confirming the pattern this week extended bearish trend. RSI-14 is heading down from over bought zone, currently reading at 59.43 in weekly prices chart supporting bearish trend. Natural Gas Weekly Review & Outlook: Natural Gas prices this week continued its upside move with warm weather forecast over the United States region. Though, the prices during middle week were bit cautious due to inventory data, but still warm weather forecast pulled back the prices again.
As per Friday’s closing, NYMEX NG posted gains around 2.80%, ending the week at $2.65/MMBTU whereas MCX NG showed just 0.50% gains ending the week at Rs.175.60/MMBTU. On weekly basis, gains in NYMEX and MCX Ng were around 3% 2% respectively. Natural Gas prices this week continued its uptrend seeing upcoming warm weather conditions over the United States. CPC forecast has shown almost entire country covered under red zone which means more than normal temperatures. Prices in coming week shall continue moving up as the forecast still remains more or less same. From 25th June- 1st July, conditions are shown extreme on the Pacific belt regions, which will drastically increase the CDD levels. Once the CDD levels moves up, usage of cooling devices would be more and hence the electricity consumption will be more. This year EIA has also forecasted NG consumption by the power generation plants will surpass the usage of coal. Many regions in the United States are expected to cross 350 levels CDD during coming days, which means much more than normal temperatures. Last week inventory data showed just 69 bcf Natural Gas injections, which was less compared to previous years, which means more demand is there compared to past summers. Natural Gas Commodity Trading Technical Analysis: MCX Natural Gas June future the week traded in a range after breaking a major trend line resistance last week. As long as prices hold above trend line support trend remains bullish for coming weeks. Short term exponential moving averages 9 and 21 periods are supporting for bullish trend in weekly chart.RSI-14 approached over bought zone which may limit rally for coming weeks. MACD entered in positive territory in weekly chart which holds bullish view for coming weeks. Commodity Trading Tips Sell Crude Oil Mcx July on Rise at 3320 sl 3500 Tgt 3100 Buy Natural Gas MCx June at dips 166 sl 165 Tgt 185