Market Update 1-5-2023

Overview

Energies are higher due to the shutdown of Line 3 of the Colonial pipeline, which is supporting product prices better than crude prices.

Colonial Pipeline said late on Wednesday its Line 3 had been shut for unscheduled maintenance with a restart expected on Jan. 7. Information we received has the Line 3 portion of the pipe carrying 885 MBPD of jet,diesel and gasoline from Greensboro,NC to New Jersey.

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

Crude?Oil????????+0.4/+2.227????????????+3.298

Gasoline?????????? +0.2/-1.5????????????? +1.2

Distillate??????? -0.6/-1.833?????????? ??-2.4

Cushing?????????? ?+0.175??????????????? ?n/av

Runs???????????? ??-2.7%???????????????? ?n/av

In Europe, middle distillates have come under pressure as higher Chinese exports should help compensate for the loss of Russian supply at the beginning of February, while the mild northern hemisphere winter reduced the need for gas-to-oil switching. Diesel refining margins have dropped to three-week lows at around $40/b above ICE Brent this week for ULSD cargoes in northwest Europe and dropped below $30/b in Singapore on 10ppm cargoes. Cracks have shed around $5/b in Asia and Europe since the end of last year following reports that China’s first product export quotas for this year were sharply higher than the last batch. (Quantum Commodities)

Saudi OSP's for February were announced today. The flagship A-Light crude saw its price fall by $1.40/$1.45 to Asia, the Med and NW Europe. The price for Medium crude was lowered by $1.00 to those destinations. OSP's to the U.S., by contrast,?were left unchanged.These OSP's are the lowest in 15 months.

The Fed on Wednesday issued the minutes from their December meeting. In the minutes, they stated they do not expect to lower interest rates in 2023.?Fed officials noted they would need to maintain a “restrictive policy stance” until data gave central bankers confidence of easing inflation. The Fed's economic forecast was not as weak as the one seen in November. (WSJ)

The Fed news came on the heels earlier in day of the US ISM data, which showed a reading for December of 48.4, down from 49.0 seen in November. The December reading was the lowest since May 2020. (Reuters)

Technicals

Today's rebound may be a reaction to cumulative declines of more than 9% on Tuesday and Wednesday for crude oil, which were the biggest two-day losses at the start of a year since 1991, according to Refinitiv Eikon data. Momentum remains negative for the energies as today's action remains an inside day.

WTI spot futures see support at 72.73, then at 71.75. Resistance is seen at 7.38-44.

RB for February sees support at 2.2496-2.2524 and resistance at 2.3480-84.

February ULSD support lies at the 2.95 area and resistance at the 3.09 area.

Natural?Gas

NG prices have dipped back below $4 this morning as weather demand will be weak going forward. "Unseasonable temperatures for the U.S. over the next fortnight, could stretch to February", as per Investing.com.

TTF prices today for the February contract fell to their lowest value on the daily chart since Nov. 2,2021. Exceptionally mild winter temperatures across the continent continue to crush demand, as per Quantum Commodities reporting. Temperatures for January have reached an all-time high in a number of nations across Europe. The low seen today for February TTF is Euro 63.130/Mwh, which equates to approximately $18.50/MMbtu.

NG was boosted Wednesday not just by the prospect for the return of Freeport's LNG facility by the end of January, but also on increased demand from Cheniere's Sabine and Venture Capital's Calcasieu facilities. Refinitiv sees the LNG export level rising next week to 12.4 BCF/d from 11.8 BCF/d this week. Refinitiv also increased the demand they project for this week and next by 1.2 BCF/d total. Yet, Investing.com suggests that European inventories could remain so well supplied that they might negatively impact U.S. exports of?LNG to the E.U.

This week's EIA storage data is estimated to show a draw of 220 to 228 BCF as per news wire surveys. This compares to last year's draw of 46 BCF and the 5 year average draw of 98 BCF. But. smaller draws in the coming weeks are likely to make it that storage switches to a surplus to the five-year average, according to analysts.

Technically NG is oversold with an RSI reading of 30. Today's low has broken the lows seen the past 2 days at 3.894/3.900. The low today is 3.825.?Support lies at 3.781 from a low on the DC chart from last January. Below that we see support at 3.709-3.717.?Resistance is seen at the 4.188-4.198 area, just above the overnight high of 4.175.

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