Market Update 02/13/2020

Overview

Energies are higher even as the IEA lowered its demand forecast and the Coronavirus count in China rose dramatically due to a new methodology for diagnosing the illness. The Euro fell to a near 3-year low vs. the dollar as China is Germany's largest export market (Reuters)

The IEA sees first quarter demand for oil contracting for the first time in 10 years. (Reuters) They see first quarter demand contracting by 435,000 bpd. (Platts) The IEA trimmed 480,000 bpd in oil demand for 2020 from its previous estimate. They see first quarter demand for OPEC crude oil at 27.2 mmbpd–almost 1.7 mmbpd below January’s output of 28.86 mmbpd. (Platts)

The Mideast crude market soured again slightly in Asia as April cash vs. futures sliding to a slight contango of 3 cents from Wednesday's plus 5 cents with "Demand sentiment in Asia maintained at multi-month lows.” (Platts) 

Cash jet fuel in Singapore is seen sliding into contango as demand is weak after slipping 32 cents already in February. However, refiner maintenance is keeping the jet/kerosene crack vs. Dubai firm. Wednesday's value was seen at $10.18–up from the low of $8.22 seen January 31st. (Platts)

Refiners ramping up runs in Europe has seen the Brent contango narrow in recent days. Note, late last week April/May Brent was worth about 32 cents, narrowing to 12 cents yesterday, and now worth 16 cents. (Platts)

The Saudis have let their term crude buyers reduce their contractual volume take by up to 10%, which is allowed in their agreements as a result of a clause called "contractual tolerance.” Refinery maintenance was cited, not the virus outbreak. (Reuters)

Yesterday's DOE data disappointed as crude exports fell and crude imports rose, raising net imports of crude oil by 808,000 bpd. Crude supplies rose by 7.459 mmbbls–above the roughly 3 mmbbls build forecast.

Product supplies fell as the demand for Gasoline and Distillates fell. Distillate supplies fell by 2 million, gasoline drew 95,000 bpd–both beating estimates. Note, gasoline was seen building about 0.8 mmbpd and distillate was forecast to draw about 600,000 bpd. However, distillate demand fell by 381,000 to 3.82 mmbpd while gasoline demand fell by 211,000 to 8.722 mmbpd. 

Technicals

Technically, the energies have positive momentum with RB again leading the pack, though the crude oils have more of a sideways look over the past 10 days.

March RB futures have support at 15735-40 and then at the low of 15550-64. Resistance lies at 15986-16001 (the high is 15999) and then at 16100-25.

March ULSD futures support is seen at 16555-75 (the low today is q6600) and then at 16400-14. Resistance comes in at 16975-80 and then at 17275-17300.

WTI support lies at 5060-69 (the low seen overnight). Resistance is at 5213-20.

Natural Gas

NG is up 1.5 cents in what looks to us like subdued trading. The EIA data due out today is forecast by WSJ survey to show a draw of 109 bcf, beating last year's -101 bcc, but below the -131 bcf 5-year average.

Yesterday's rally was helped by cooler forecasts, dubbed by NatGasweather as showing 7 day demand outlook as "high" after many days of "low" demand outlooks.

Technically, NG is stable to firm, having yesterday closed over the gap left from last weekend. Support is seen at 1.800-04. Resistance above comes in at 1880-88 and then at the1906 area where the mid bollinger lies. Momentum is positive as is the price action on the forward curve with June gaining 1.7 cents vs December–now worth about 47.7 cents. Note, this is up from the 51.5 cent level seen just 2days ago. Momentum for the spread is positive with resistance seen in the 46 cent area. Support is likely to be at the 50 cent mark.

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