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PVM Midday Report 04 February 2016

Published Thursday, February 4th, 2016

Headlines

  1. Saudi Arabia lowers March OSP of its Arab Light crude to Asian and European buyers
  2. Mario Draghi warns of the consequences of inaction against deflationary pressures
  3. European Commission trims 2016 eurozone GDP and inflation estimates
  4. BoE leaves monetary policy on hold and cuts UK growth outlook

Oil                                                                                              

Fundamentals: Saudi Arabia has lowered the March OSP of its Arab Light crude for Asian and European buyers by 20cts/bbl and 10cts/bbl respectively from February’s level. This was the first pricing announcement since Iranian oil sanctions were removed and the cut in prices is in line with  its strategy of maintaining existing market share. Meanwhile, fellow-OPEC member Qatar has retroactively trimmed its crude OSP for January to its lowest in at least 12 years to better reflected the sharp fall in global oil prices seen at the start of this year.

Technicals: The price roller coaster continues as does the danger of significant fluctuations. The news of a meeting between Saudi/OPEC and Russia would send the market into orbit. No results from such a meeting would have the opposite effect. The longer the delay for such a meeting the more we’ll go sideways with volatile ebbs and flows. The key technical levels are straight forward. WTI needs to hold over 32.40 to begin to look like it might firm a bit. Brent has no real upside until it can move and close over the 35.94/36.20 area. Heat needs to m/c over 112.52, RBOB over 101.59, but with more work thereafter to do; and Gasoil needs to m/c over 313.25. These are all key levels. The longer term indicators are becoming more bullish, but timing is the key and it’s too early to be very positive. It’s advised to exercise patience.

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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.