Oil: Close to close: Down at $ 62.06/bbl for Brent ICE MAY15 (This morning at $ 62.59/bbl)
o Oil prices plunged strongly yesterday again for a fourth straight session. Both benchmarks posted significant losses with Brent now trading below $62.5, its late April levels, and WTI holding around $57.6/b. The Bent/WTI spread also strongly narrowed up to above -$5/b this morning, +$3/b above its level one month ago. The market is said to be under pressure mostly by firmer dollar but the general context –oversupply- is also weighing on prices for months now. Crude oil prices recovered slightly overnight despite expectations of higher US crude stocks by API. Driving season is boosting consumption in US while Middle-east also support prices through summer oil demand for power generation.
o Main events: In a draft of its long-term strategy report published yesterday, the OPEC says the North American oil boom is proving resilient despite low oil prices, suggesting the global oil glut could persist for another two years. The report shows forecast crude supply from rival Non-OPEC producers would grow at least until 2017, leading to a drop of the “call for OPEC” volumes down to 28.2 Mbd in 2017 (30 Mbd last year). The group would then have no choice to cut output (from current levels of 31 million bpd) or be prepared to tolerate depressed oil prices for much longer… REUTERS reports this morning some briefing papers from a Moscow think tank that show the Kremlin was warned against cutting oil output last year. Knowing that OPEC and Russia are still currently negotiating (last meeting last week with Saudis), it reveals the position of Russia, balancing between the desire of supporting prices and the risk of an output cut: the paper shows that he think tank (Vygon Consulting group) advised the Kremlin that OPEC would not cooperate, that unilateral action would be very costly and that OPEC members would take their market share in Europe… A collaborative action between the two payers seem not ready to be implemented so far… Because of Memorial day on Monday, the API figures were out yesterday and the EIA report will be published today. Although the US output will make the headline once again, operators will also closely watch US stocks move as API forecasts a rise in inventories (+1.3 Mb) after 3 weeks of decline.
o Outlook: Today, the main event will be the EIA report at 5pm. Despite expectations of rising stocks, we could see a technical rebound of Brent today after $3/b loss during the last three sessions. A first resistance could be $63.3/b today before PAI figures. Then, with US oil output expected to come up around 9.4 Mbd (as last week’s drop was due to a maintenance in Alaska), markets could post losses after 5 pm.
Gas: Close to close: Down at 21.50 EUR /MWh for TTF CAL 16 (This morning at EUR 21.50/MWh)
o Lower Norwegian supply due to an upward revision in the impact of the unplanned outage at the Kvitebjorn field supported European spot prices on Wednesday. However, lower gas demand on the continent, lower UK exports to Belgium through the IUK pipeline and strong supply from other sources limited movements. All in all, European prices remained relatively flat with no major change in fundamentals. A rebound of the euro against the pound offered some support to British curve contracts, which posted marginal gains at the close.
o NBP ICE June 2015 prices edged slightly higher at the close: +0.19 p/th (+0.46%), to 41.91 p/th. TTF ICE June 2015 prices were unchanged at the close to €20.492/MWh. A sharp drop in oil prices weighed on the far curve. TTF ICE Cal 2016 prices lost 9 euro cents at the close (-0.4%), to€21.503/MWh.
o Fundamentals are stable compared to yesterday, which could lead to another stable session in European markets today. Nevertheless, lower demand forecasts for the coming days on the continent could exert some bearish pressure on continental spot prices whereas lower temperature forecasts for tomorrow in the UK could support NBP day-ahead prices. In addition, a small rebound in oil prices could push curve contracts slightly higher.