Market Update 01/29/2020

Overview:

Energies are mixed with ULSD lower while the RB & crude oils are up. The higher call is due to favorable crude supply data seen in the API stats last night. Also helping are reports that OPEC is likely to extend, and possibly deepen, its output cuts to June, depending on the fallout from the Coronavirus.(Reuters)

Chinese refinery runs are seen being reduced due to the virus outbreak. In one province, runs are seen at 50% this week—down from 64% last week. (Platts) Runs are seen dropping by 600,000 to 1 mmbpd in February and March, which will likely lead to lower crude oil imports in April and May. One analyst quoted in the Platts article stated that a 50% reduction in gasoline consumption for 45 days would lead to a 1 mmbpd reduction in runs. 

Wednesday, British airways suspended all flights to and from China while other carriers are suspending or cutting flights as well.

API               Forecast            Actual

Crude oil    +0.5/+0.7            -4.3

Gasoline     +1.3/+1.4            +3.3

Distillate     -1.0/-1.2              -0.1

Runs          -0.8/-1.0 %           n/a

Cushing         n/a                  +1,0

Technicals:

Technically, the energies have stabilized, though a settlement over the $54 mark in spot WTI would be the signal for us that crude oil has definitively bottomed. WTI support lies at 5271-77. Resistance lies at 5461-62.

April Brent futures support is seen at 5834-47. Resistance is seen at 6016. 

March ULSD support is seen at 16985 (via a 60-minute chart) then at the double bottom from Mon/Tues at 16598-16600. Resistance comes in at 17303-05 (tested with a high of 17355) and then resistance lies at the 17485 area.

March RB support lies at 15085-15100, then at 14932-42. Resistance is seen at 15454-56–tested with a high of 15461.

Natural Gas:

NG futures are down 4 cents as the pall of lack of weather worldwide and ample supplies hanging over the market. Note NG February futures expire today. 

Platts and NGI detail the very narrow netback values for US Gulf Coast LNG versus European and Asian benchmarks. 

The netback to Europe for February delivers is valued at 34 cents as per NGI and 50 cents by Platts. 

The netback to Asia is slimmer as NGI and Platts see it as 12 cents 20 cents, respectively. This leads NGI to detail how Gulf Coast exports for later this year may be reduced as values looking forward in the Asian and European realms are not very high. 

Technically, the NG has positive momentum. However, price action is not so encouraging as March futures are testing the prior 3 days' lows in the 1854-1865 area (the low is 1863). Below that, support is seen at the low from last week at 1826. Resistance lies above at 1922-28 (the overnight high is 1922) then 1953-1957.

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