PVM Midday Report 19 January 2016

Headlines

1. Chinese implied oil demand eases 1.3% in December but rises 2.5% in 2015 to 10.32 mbpd
2. IEA sees further stock builds in 2016; leaves oil demand growth forecast at 1.2 mbpd
3. Exports of Russian Urals and CPC crude resume at Baltic Sea ports following bad weather
4. Oman announces oil storage project which will boost capacity by 25 million bbls by 2019
5. IMF trims global GDP growth estimates for 2016 and 2017 to 3.4% and 3.6% respectively

Oil                                                                                              

Fundamentals: Chinese implied oil demand slipped by 1.3% in December from a year earlier to 10.46 mbpd but rose by 2.5% across the year to an average 10.32 mpbd – a 256,000 bpd increase over 2014. However, the outlook for this year looks weaker and comes as one of China’s state-owned oil major CNOOC reduced its targeted oil output levels for 2016. A day after claiming that it would be willing to contribute to an oil output cut to help stabilise markets, Oman has announced a storage project that will boost capacity by 25 million bbls by the end of the decade. Elsewhere, the IEA has left its predictions for 2016 global oil demand growth and the decline in non-OPEC crude supply unchanged at 1.2 mbpd and 600,000 bpd respectively. Its projected call on OPEC crude for this year was cut by 300,000 bpd to 31.7 mbpd and it estimates that the cartel’s output including Indonesia fell by 90,000 bpd to 32.28 mpbd in December.

Technicals: This morning’s correction higher is not a huge surprise. A test of the 5 and 8 day MAs looked likely early this morning, and this is exactly what is happening. The 5s are around 30.30 WTI; 29.72 Brent; 96.49 Heat; 106.00 RBOB; and 280.00 Gasoil. These have been breached on Brent and RBOB which makes a further move higher to the 8s probable. The 8s are around 31.19 WTI; 30.68 Brent; 99.48 Heat; 108.56 RBOB and 287.50 Gasoil. Rallies to the 8s are sales. The targets lower are valid whilst below the 8s. These objectives are to 26.65 WTI; 25.05 Brent; 81.15 Heat; and 245.50 Gasoil. The trend is down but experiencing a rally. It is not expected to last.

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