Article / 29 January 2015 at 9:08 GMT

From the floor: WTI/Brent spread widens to $4/b

Former managing editor, TradingFloor.com / Saxo Bank
Denmark
Editor’s note: From the floor takes advantage of TradingFloor.com's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.

  • Rise in US oil inventories sends WTI/Brent spread beyond $4/barrel
  • WTI "shows some teeth" to hold at $44/b mark, says Hansen
  • Ongoing rangebound USDJPY offers potential dip trade, says Arkouzis Dahlerup
  • EURUSD rally likely to be capped at topside of 113.85
  • NZD hit by Fontera downgrade on 2015 production figures, says Davis
  • Nokia's relative swing in fortunes continues after strong results, says Garnry

By Martin O'Rourke

Spread 'em

US oil benchmark WTI slipped to the $44.40/barrel mark during the Asian session widening the spread to European benchmark Brent crude to over $4/b on the back of a rise in US oil inventory figures.

"This inventory figure is on the strong side and adding pressure on WTI," says Saxo Bank's head of commodities Ole Hansen. "Production simply just continues to rise and we've seen Barclays slash its forecast for 2015 from $72/b to just $44/b."

Billions of dollars has moved into ETFs in the past couple of months, he says, and "patience is becoming a bit of a thing there," but Hansen sees hope for WTI despite the downward pressure. "WTI is continuing to show some teeth so although it's still a sell fundamentally, it's still got some friends out there."

WTI is sticking in a tight $44-45.50/b range, he says.

Crude oil

 
Gold hold

Gold, meanwhile, may be drifting lower but Hansen sees support at $1,253-55/oz likely to cap any further move below with gold currently at $1,272/oz.  "It's a mixed bag on the back of international developments offering some support but it's drifting a little lower in line with the dollar."

"As long as we stay above that level, we'll still see some buying of dips going on," he says.

Meanwhile copper may be moving to a more balanced state after hitting its lowest since 2009 in recent days. "There are some mining companies reportedly scaling back production which will help balance the market," says Hansen.

Take a dip

The rangebound nature of USDJPY this week of 117.30-118.50 is offering "dips for a potential play below 117.30 back above 118.00," says Nana Arkouzis Dahlerup, speaking live from the Copenhagen trading floor. 

Meanwhile, the EURUSD rally is likely to be capped at two potential ceilings of 1.1325 or 1.1385, she says. "As long as the EURUSD doesn't clear the 115 handle, the downside is still prevailing."

Repercussions from the Greek elections continue to play out here with the banks following the Syriza victory at the weekend taking a hammering and vols on one-month EURUSD falling from around 14 to 12.0.

Milking it

Try as it might, NZD can't escape the intertwining of its fortunes with the national dairy producer Fontera and its revision down of production figures had a negative impact on NZD, says the Singapore desk's Martin Davis, sending NZDUSD below 73.00 at one point before settling at about 73.4.

Davis says a decision by the Reserve Bank of New Zealand to move to a neutral stance on rates with a hint that it could lower rates in the future, is also adding pressure on NZD.

AUD is finding the ride rough too with AUDUSD taking a look at the 78.50 level.

Don't Nok(ia) that

Nokia's return to growth continues to gather pace "and will make developments on its share price this morning interesting," says Saxo Bank's head of equities Peter Garnry.

Results season is of course in full flow and strong results for Boeing were also matched by "a surprise to the upside for Deutsche Bank," he says. 

But, despite the gloss, Garnry is "not impressed" by Facebook's Q4 and its subsequent share price fall of 2% corroborates that, he says. Garnry points to a potential straddle sell on Facebook as the market awaits further indications as to how the Facebook business model might evolve."

v
 The US continues to pump out oil as if it is going out of fashion. Photo: istock

Follow Saxo Squawk live throughout the day. Sign up here to keep abreast of all developments affecting your portfolios  

 Martin O'Rourke is managing editor at TradingFloor.com

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail