Market Update 1-13-2023

Overview

Crude oil is trying to hold onto gains as China reopening remains the dominant theme. The weakness of the U.S. dollar seen yesterday was also a catalyst for the crude oils forging new highs for the move overnight.

The U.S. dollar yesterday hit a 9 month low versus the Euro, but the dollar has rebounded a bit today.

Chinese crude imports rose 4% in December versus year ago level. They averaged 11.37 MMBPD. But, overall for 2022, crude imports fell by 0.9% to 10.17 MMBPD. Bloomberg surveyed 11 Chinese focused consultants who see Chinese demand rising 800 MBPD in 2023.?That number was confirmed by Platts in their reporting. The Bloomberg survey says that demand could rise to a record 16 MMBPD. Chinese fuel oil exports in December rose to their highest level since April 2020 at 1.02 MMBPD. But, Platts says fuel exports may cool in Q1 as domestic demand for jet fuel and gasoline rise amid Lunar New Year holiday demand.

Bloomberg reiterated the purchases made recently of crude oil by Chinese buyers. The list they had today has widened to include N.American, N. Sea, Mediterranean, and West African crudes for delivery in March and April.

ANZ analysts see a pickup in road travel in China of late. (Quantum Commodities)

Gas Buddy sees gasoline demand in the U.S. up 5.8% this week as people resume normal driving habits after the holiday season. They see gasoline prices possibly rising to near $4 in the summer based on normal seasonal demand. (The Street)

The CME has reduced trading hours Monday in observance of the MLK holiday. The Globex platform will open as usual on Sunday evening at 6 PM EST and stay open until Monday at 2:30 PM EST. It will close then until 6 PM EST.

Technicals

ULSD has settled up 6 sessions in a row settlement basis as of yesterday. Momentum remains positive for the energies.

ULSD spot futures see support at 3.1672-3.1712. Resistance lies at 3.2700-3.2720.

RB February prices see support at 2.4172-75 and resistance at 2.5040-2.5057.

WTI spot futures see support at 76.77-79 and resistance at the 79.65 area.

Natural?Gas

NG is down as the 11-15 day outlook has turned a bit warmer. This comes on top of yesterday's negative EIA storage data and a further delay in Freeport's restart.

The EIA data yesterday showed a build of 11 BCF, which Reuters points out is the first ever injection in January. The injection was contrary to the small draw that was forecast. Storage rose to a total of 2.902 TCF. This is -140 BCF versus year ago level and -40 BCF versus the 5 year average. Estimates we saw yesterday are calling for next week's data to show a draw in the mid 70's. This is below the 5 year average of -156 BCF.

Bloomberg reported yesterday that at least two cargoes scheduled to load at Freeport's Texas terminal at the end of January and in early February have been canceled, according to traders with knowledge of the matter. Platts reporting quotes a research firm as saying that the FERC is only in the middle of its documentation process with Freeport. This leads the research firm to believe that a restart could be delayed to even mid-March.

WSJ commentary synthesizes NG pricing this year as follows : Strong production rates and relatively weak demand, both in terms of LNG exports and domestic consumption, have quickly turned the trading environment from a bull market for most of 2022 into a bear market for 2023. Prices are down 21% since the new year began, WSJ adds.

Refinitiv sees weekly demand for NG falling next week to 119.5 BCF/d from this week's level of 120.7 BCF/d.

Technically NG stills looks wobbly basis the chart even as momentum stays positive. Support at 3.520-3.527 was almost tested with a low today of 3.529. Below that, support lies at the low seen 2 days ago at 3.422. Could a test of the 100 month average at 3.304 be possible??Resistance lies at 3.900-3.911, which was tested a few times in the morning yesterday. The high yesterday was 3.946.

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