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PVM Midday Report 07 January 2016

Published Thursday, January 7th, 2016

Headlines

  1. China expands underground storage capacity for strategic oil reserves
  2. Dubai Mid-East crude benchmark dips to 2004-low; differential to Brent surpasses $4/bbl
  3. German manufacturing orders in bigger-than-expected rise of 1.5% in Nov from Oct
  4. Eurozone jobless rate inches lower in November to four-year trough of 10.5%

Oil                                                                                              

Fundamentals: The global oil glut has sent the Dubai benchmark to below $28/bbl in what is a 2004-low and in turn has pushed the front-month differential with the international Brent benchmark above $4/bbl. The OPEC Basket price has been another leading indicator of the subdued oil price environment and has fallen below $30/bbl to $29.71/bbl – its lowest value since February 2004. Bank of America has become the latest financial institution to warn of the growing downside risks facing oil prices of a dip into the $20s. Meanwhile, China is mooted to be expanding its underground capacity for strategic oil reserves and are expected to account for a quarter of total capacity or 130 million bbls by 2020.

Technicals: The downtrend has gathered pace and the key technical indicators remain negative. This morning has seen a violent move lower and a m/c below 32.40 on WTI and 102.47 on Heat will open the floodgates to lower numbers. These two supports have so far held but watch them closely – they are the most important levels across the board. Rallies continue to be sells in the unlikely event of a leap to the 5-day MAs. Otherwise the advice remains unchanged – do not to be long.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.