Find out the Factors that are Driving our Traders Today - 02/15/19
Energies are higher as supply cuts are supportive, some fresh news underscores this. Reuters reports that the Saudis' largest offshore oil field with a capacity of 1 mln bpd is partially closed, the shutdown (as Reuters calls it ) occurred 2 weeks ago and the timing of a return to full capacity is unknown. Trafigura trading house is said to be stopping oil trading with Venezuela. They took an average of 34,000 bpd of Venezuelan crude last year and in exchange provided refined oil products. In addition, Reuters reports that 370,000 bpd of Venezuelan crude oil for export in March is without a home, underscoring the impact of US sanctions.
Crude oil rallied in Asia on expectations of a rig count decline today. The US oil and natural gas rig count declined by 15 this week to 1,099, marking its lowest level since February 2018, as per analysis by S&P Global Platts Analytics released Thursday shows.
Reuters details comments from oil executives from a conference this week indicating production restraints continuing by shale producers. The restraint is due to pressure from Wall Street investors seeking better returns. Thus, drillers will have to drill less to stay within cash flow, while waiting for the opening of 3 proposed pipelines from West Texas to the U.S. Gulf Coast to come online over the next 18 months. In that vein, Pioneer Natural Resources this week said that they will lower their Capex by 11% this year. Bottom line to all this being that output might not grow as fast as some have predicted.
Energies held well on Thursday even in the face of some disappointing US economic data. Retail sales in December fell by the most since 2009 and US jobless claim filings were greater than expected; the most in a year and a half, taking the 4 week average to its highest level in a year (Reuters).
Technically, the energies are firm with positive price action as RB/ULSD & Brent all have traded at their highest price since late Nov. The one drawback and cautionary signal is that those 3 contracts have mean reversion set ups as they trade above their DC upper bollingers. Brent has its upper bollinger in the 6465 area, with resistance seen above that at 6577, with support coming in at 6363-73 area.
ULSD"s upper bollinger lies at about 1.9720-25 area, with resistance seen at 2.0147, and support at 1.9768-85 then 1.9530-34.
RB upper bollinger lies at about 1.5345 area, with resistance seen at 1.5419-25 and support at 14890-14910.
WTI spot futures have support at 5424-30 (5424 is the low), resistance comes in at 5537 (tested) then 5575, with the DC upper bollinger below those prices at the 5516 area.
NG is up 2 cts from settlement, after making a fresh 1 year low overnight at 2.543.
NG had an inside day in quiet trading Thursday despite slightly bearish EIA storage data. The draw of 78 bcf was below WSJ survey expectation of -85 bcf, but right in line with Platt's S&P survey forecast. Storage is still 30 bcf below year ago level at current 1.882 TCF and is still 15.0% / -333 bcf below the 5 yr avge.
TVA yesterday announced that they would mothball 2 coal fired plants --1 by Dec,2020 and the other by Dec,2023. This underscores what the EIA said earlier this week that coal will be used less in electricity generation, in favor of NG. 2019 will see coal drop to 26% -down 2% from 2018 and is seen dropping a further 2 % in 2020. NG is seen up 1% in 2019 and another 1 % in 2020 , from 2018's 35% level.
We are being told that currently NG prices are cheaper than coal, thus it seems NG will catch bids on a fall as power generators seek fuel sourcing.
Technically, NG has neutral momentum and seems stuck at current between 2.543-2.549 support and resistance in the 2.62 area. Resistance above 2.620 comes in at 2638-2639. The curve has improved overnight with March gaining almost 2 cts on August 2019 price - and failing to make a fresh low for the spread even though the flat price for spot futures did.
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