Market Update 1-19-2023

Overview

Crude & RB, now higher, were lower overnight on the back of a bigger than expected rise in crude supplies seen in the API data, as well as the lingering concerns of a U.S. recession from yesterday. RB is higher in line with the rise in pump prices in the U.S.

The concerns of a U.S. recession were raised yesterday as "U.S. December retail sales fell by the most in a year, while manufacturing output recorded its biggest drop in nearly two years, as higher borrowing costs hurt demand for goods." (Reuters quote) The Dow index fell over 600 points Wednesday on that data. This spilled over to the energies as the term "risk off" was used for the fall in the energies.

Two Fed officials yesterday reaffirmed their opinion that interest rates need to rise above 5%. (Bloomberg)

API???????????? ?Forecast?????????Actual

Crude?Oil??????-0.6/-1.1??????????+7.6

Gasoline??????+1.7?/+2.53???????+2.8

Distillate?????-0.4/+0.12???????? -1.8

Cushing?????????+3.61??????????? ?+3.7

Runs?????????????+3.0%??????????? ?n/av

The AAA reports that gasoline prices at the pump in the U.S. today are up to $3.379. Last month the price was $3.142. One year ago the price was $3.316.

Technicals

Yesterday's fall in WTI spot futures prices was the first in 9 sessions and for RB it was the first slippage in 7 sessions. Today's WTI high is below that seen in the prior 3 sessions. Momentum for the energies looks as if it is cresting. This is most pronounced on the RB & Brent DC charts.

RB spot futures have support at the overnight low at 2.4879-2.4905. Resistance comes in at 2.5725-50, then at yesterday's high at 2.5932-66.

ULSD spot futures support is seen at 3.2037-62 and resistance at 3.300-3.3025.

March WTI futures see support at the overnight low at 78.45-54 and then at 77.85-87. Resistance lies at 80.50-52, then at 81.51-62.

Natural?Gas

NG has made a fresh low for the recent slump with next day HH prices now under $3. Prices, though, are currently near unchanged as traders await the EIA storage data.

In a response to the question we posed yesterday regarding producers shutting in gas, Bloomberg has cited 2 NG CEO's in the past 2 days who see NG supply as slowing down and unnecessary.?EQT's CEO said he sees the forecast of a 3% rise in NG output this year as "ambitious", given the current pullback in prices. He spoke of a slowdown in activity citing inflationary pressures and a lack of takeaway capacity as low cost supply is not getting to the demand areas. EQT is the largest NG producer in the U.S.?Chesapeake's CEO urged his peers in the US natural gas sector to scale back production growth in response to the “very clear signal” from low prices for the fuel. "Growth in gas supply is not needed in the short term,” he says.

On the demand side, S&P Global Commodity Insights analysts previously forecast total US gas demand to rise by 2.2 Bcf/d in the first quarter of 2023 versus the same quarter last year. They now see that demand as +1.9 BCF/d. If the Freeport facility reopening is extended to mid-year, the market could face an oversupply situation as early as 4Q, with storage inventories well above the 5-year maximum range, as per Rystad Energy analysis. "In this case, we could witness prices falling into the sub-$3.00/MMBtu range, triggering possible shut-ins in predominantly dry gas basins and forcing upstream operators to reevaluate spending and activity plans for 2023.",they add. (Platts)

S&P Global analysts now expect the TTF and JKM indices to fall "into the mid-teens" this summer before rising back above $20/MMBtu in the fourth quarter. S&P Global-assessed JKM cargo prices closed Jan. 17 around $18/MMBtu. Today's TTF price of 59.100 Euros/Mwh for February futures equates to $17.32/mmbtu. US FOB Gulf Coast LNG cargo values dropped to an 11-week low around $14.75/MMBtu on Jan. 17, as supplies continued to outpace demand in the Atlantic.

Today's EIA NG storage data is seen as a draw of 72/75 BCF as per news wire surveys. This compares to last year's draw of 203 BCF and the 5 year average draw of 156 BCF. Tne current deficit to the 5 year average will thus flip to a surplus with a draw in the 70's.

Technically NG has attacked the 100 period average on the Monthly continuation chart. That value is at 3.300. Support via weekly data from 2021 is seen at 3.150-3.166, then near 3.00. Resistance comes in at 3.473-3.486, then at 3.611-3.616.

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