Market Update 1-3-2023

Overview

Energies are lower, dragged down by several factors. Chinese Covid concerns, a stronger dollar, weak Chinese PMI data and overall economic concerns.

The IMF's Managing director said Monday that 1/3 of the world faces recession in 2023. She warned that China would face a difficult start to 2023. (BBC News)

The IMF Director's comments were borne out in Chinese PMI data seen the past few days. The official Chinese PMI data out the weekend showed a reading for December of 47.0, down from November's reading of 48.0. The drop was the largest since the beginning of the pandemic in February 2020. A Reuters poll was calling for a reading of 48.0. Caixin's PMI data ( one with a smaller sample size than the official one) seen today fell to 49.0, from the prior month's reading of 49.4. This was the 5th month of a reading below 50, signaling contraction in the economy. Covid infections disrupted production and lowered demand. (Reuters)

More than a dozen countries have announced new entry restrictions on travelers arriving from China. Chinese state media labeled the new testing requirements “discriminatory” and a politically-motivated effort to undermine the Chinese government.?(Time)

The Chinese government has raised export quotas for refined oil products in the first batch for 2023. Traders attributed the increase to expectations of poor domestic demand. (Reuters)?

A Reuters survey of 30 economists and analysts sees 2023 oil prices averaging $89.37 for Brent and $84.48 for WTI. These are down from November's forecasts of $93.65 for Brent and $87.80 for WTI.?

Bloomberg reported Friday that Russia is set to export more diesel fuel in January ahead of the February 5th sanctions to be imposed by the EU. Shipments from the Baltic and Black Sea ports in January are seen rising by 8% from December, to the highest level since January 2020. The total is seen at 2.68 million tonnes ( equating to about 20.1 MMBBL).?

The CFTC data for money manager's positions seen Friday showed little change in RB & ULSD holdings, while WTI length grew by 6,513 contracts on ICE/CME combined.

Technicals

Momentum has turned negative for the energies on their DC charts.

ULSD has fallen back below 3.300 on the DC chart basis. Resistance lies at 3.3268-93, which was tested last night with a high of 3.3322. Support comes in below at 3.1732-57.?

RB spot futures see support at 2.3846-47, then at 2.3524-37. Resistance lies at 2.4793-2.4810, then at 2.5091-93. The overnight high is 2.5057.?

WTI support for February futures is seen at 77.71-77.79. Resistance lies at the overnight high at 81.38-50, then at 82.34-40.??

Natural Gas

NG has fallen to its lowest spot futures value since Feb. 11, 2022. Weather forecasts in the U.S. are calling for nice weather thru mid-January. (Bloomberg)?

Spot TTF futures prices fell on Monday to their lowest value since February 16. Europe saw record warmth over the New Year's weekend. End of year economic slowdown also weighed on gas prices in Europe. In addition, German wind power is seen near record generation tomorrow. Storage levels for gas are well above their 5 year averages. Gas Infrastructure Europe says that European storage is at 84%, well above the 70% 5 year average. Storage in Germany has risen to 90% over the past week, well above the 5 year average of 73%.

?CFTC data issued Friday showed money managers added to their net short position in futures/options on the CME. Net shorts rose by 8,265 contracts to a total 63,467 contracts.

Technically NG remains oversold. Support at 4.006-4.019 has been tested today with a low of 4.011. Support below $4 lies in the 3.924-3.931 area from highs seen in December 2021 on the DC chart. Resistance comes in at the overnight high at 4.385-4.394.?

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