During early Asian session, oil futures prices are trading above $84.50/bbl with gain of almost 0.90 percent from yesterday’s closing. Positive trend in oil prices is seen driven by both fundamental and economic stimulus in the market. That said, the lower USD also supports higher oil prices and the USD has been falling for the past 24 hours, with lackluster eco and jobs data from the US, the euro has broken above 1.26 the highest since last month. The USD has fallen against most of its trading partners.
Also the outlook for more Fed interaction is weighing on the USD. This presents an easy opening to speculators to enter the market at depressed prices and low dollar value.
Starting with the fundamental factors, OPEC kept its production ceiling unchanged from prior level, i.e. 30 million barrels per day. As per OPEC monthly report production have climbed up above 31 million barrels in May, so output cut is expected from largest producer like Saudi Arabia to keep production level as decided. Thus, hope from Saudi Arabia to cut its supply in order to stem the slipping oil prices may continue to support oil prices. Other than this, National Hurricane Centre has issued advisory on tropical storm Carlotta in eastern pacific, which may create supply disturbance. So, concern of supply disturbance may keep on oil on higher side.
China is also planning to increase its strategic petroleum reserve, where import has been increased by more than 10 percent in the month of May. This is the indication of upcoming higher demand by world’s second largest oil consuming nation which is a positive factor for oil prices. From economic front, turmoil of European debt crisis is still weighing on market, however monetary easing is expected by Fed. Thus, expectation of monetary easing to strengthen US economy may support oil prices. However, there may be little pressure during European session as Moody has already downgraded six Dutch banks on yesterday. Ahead of Greece election in the weekend may keep some pressure on financial market, so on oil prices. However, net TIC flows in US are likely to climb up which may again add some positive point on oil prices.
Currently, gas futures prices are trading above $2.535/mmbtu with gain of more than 1 percent in Globex electronic platform. Today we may expect gas prices to continue the positive trend supported by its intrinsic fundamentals. National Hurricane Centre has issued advisory on tropical storm Carlotta in eastern pacific, which may create supply disturbance. So, concern of supply disturbance may keep on gas on higher side. As per US Energy department, natural gas storage has been increased by 67 BCF in the last week, which is lower than last 5 weeks average at this time. Consumption of power sector have also increased by 6 percent , which may support gas prices to remain on higher side.