Market Uodate 12/3/2020

Overview

Energies are lower as news reports have OPEC+ working on a plan to raise output by 500 MBPD per month starting in January. This would be disappointing versus the expectations heard over the past few weeks for a rollover of the existing accord. (WSJ)

European equities fell on poor economic news from Italy and Spain. Their PMI's were 39.4-39.5 , which signals severe contractions in those countries. This quarter is expected to show shrinkage in economic growth for the Euro zone as a whole. (Reuters)

The U.S. dollar index has traded today at a 2 1/2 year low. (Reuters)

The Asian crude market has a firmer undertone on reports of Indian buying interest for February loadings. China, Japan and S.Korea are also expected to demand barrels for February loading. The tone is reflected in the January versus February Dubai spread. It was said to be worth +8 cents today. This is up from a valuation of -9 cents on November 11th. (PLatts)

The Jet Fuel crack in Asia was seen today at its highest value since March 30th. The crack from Dubai crude was seen at $4.35. That is more than double the value of $2.15 seen on November 3rd. The crack has been buoyed by kersoene demand for heating and by a " firming aviation demand from domestic routes." Australia's Qantas Airways said on Thursday its outlook had improved significantlybecause the country had reopened its state borders. The jet margin was also helped by the weaker tone seen in the crude market. Yet, the jet margin is 70% below the seasonal average. (Reuters)

Platts reports that ULSD is flowing from Europe to the US ,which is the reverse of the normal flow. Weak demand and excess supply in Europe together with favorable shipping rates has opened the trade possibility. Newly built VLCC's have brought product to Europe. With European diesel stocks long, the arbitrage to send US Gulf Coast ULSD barrels to Europe has remained shut for most of the second half of 2020.

Yesterday's DOE data was met with buying interest as crude oil supplies fell by 0.679 MMBBL on the week. This was seen as a positive, given that the API had reported a more than 4 MMBBL build. The drop in crude supplies was spurred by an increase in US exports of 625 MBPD. This more than offset the drop in refinery runs of 251 MBPD and the increase in U.S. crude production of 100 MBPD to a total of 11.1 MMBPD. Product data for the DOE's disappointed. Gasoline stocks built by 3.491 MMBBL. Gasoline demand dropped by 156 MBPD to 7.973 MMBPD. Distillate data disappointed also as stockpiles grew by 3.238 MMBBL. This was contrary to the expectation for a modest draw. Though historically over the past 5 years during this week, distillate supplies rose on average 3.1 MMBBL. This week's distillate supplied was 2% over the 5 year average, while distillate production was 13 % below the 5 year average . (Reuters) Crude supplies remain 7% over the 5 year average, gasoline stocks are 4% over their 5 year average, while distillate supplies are now 8.5% over the 5 year average. Distillate supplies in June were as much as 29% over their 5 year average.

Technicals

The energies are stable. The momentum for Brent on the DC basis looks poised to turn positive.

Brent futures for February have support at 4767-72. The low overnight is 4767. Below this we see support at the prior 3 sessions' lows at 4682-88. Resistance lies at the most recent highs at 4906-09.

WTI January futures show support at 4442-55, then at 4378. Resistance lies above at 4570-80.

January ULSD sees its support at 13551-61, tested with a low of 13541. Below this support is seen at 13389. Resistance comes in at 13792-93.

RB January support lies at 12235-45, then at 12096-12100. Resistance is seen at 12541-53, which are the past 2 highs. Then resistance lies at 12690-96.

Natural Gas

The following is the headline from N G I this morning : ""Bearish Overnight Guidance Prompts ‘Panic-Selling’ as Natural Gas Futures Plummet Early".

The NG market is beng hurt by not only the prospect of warmer weather, but also by the expectations for a storage number today that is foreseen as below average. Storage is seen falling by 13 to 17 BCF as per Platts and WSJ surveys. This compares to last year's draw of 22 BCF and the 5 year average draw of 41 BCF.

Technically the NG has turned diametrically from the view seen 24 hours ago. Momentum is negative and supports have been broken at the 2.64-2.65 area. Support is seen at the most recent low at 2.525. Resistance above 2.65 lies at 2.686-2.693.

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