Market Update 1-6-2023

Overview

Energies are higher, led by crude oil, as energies swung overnight between losses and gains buffeted by opposing factors.

A stronger U.S. dollar and economic concerns weighed on prices overnight, while hopes for a sharp rebound in Chinese Lunar New Year travel this year versus last was seen as a bright spot. Chinese travel during the upcoming Lunar New Year, which is on Jan. 22nd,?is seen doubling from year ago levels. The dollar overnight hit a one month high. (Reuters)

Crude oil rallied this morning after the release of the Non Farm Payroll data. The data showed December added 223,000 new jobs. This beat the Reuters and WSJ forecasts for an increase of 200,000 new jobs. Revisions to October and November lowered prior data by 28,000.

Yesterday's DOE data showed steep drops in product demand, which caused RB & ULSD prices to weaken after the DOE data release. Gasoline demand fell by 1.813 MMBPD to 7.514 MMBPD, which was just above the 2020 figure of 7.441 MMBPD. Distillate demand fell by 1.081 MMBPD to 2.799 MMBPD, which is below 2020's demand of 2.941 MMBPD. The drop in product inventories of 0.346 MMBBL in gasoline and 1.427 MMBBL in distillates was due to a sharp fall in refinery utilization. Runs fell by 12.4%. Crude inputs to refineries fell by 2.329 MMBPD to 13.82 MMBPD. Crude inventories rose by 1.694 MMBBL, which was in line with expectations despite the sharp drop in refinery usage. This mitigated increase in crude supplies was likely due to a smaller SPR release than had been seen in recent weeks and a drop in net crude imports. The SPR release in this week's data was 2.748 MMBBL, down from last week's release of 3.496 MMBBL. Net crude imports fell by 1.282 MMBPD as crude exports rose and crude imports fell.

Technicals

Momentum remains negative, but the energies have found some support seen via the double bottoms in ULSD and Brent from the past 2 sessions.

Brent spot futures have a double bottom at 77.61-77.72 from Wed./Thurs. Resistance lies above at 82.31-39.

The double bottom in ULSD from the past 2 days is at 2.9200-2.9215. Resistance is seen at 3.0669 and then at 3.0912, which are the prior 2 sessions' highs.

RB for February see support at the low of today and Wednesday at 2.2433-51. Resistance lies at 2.3395-2.3435.

WTI spot futures see support at 73.33-41, then at 72.46, which is yesterday's low. Resistance lies at 76.37-41.

Natural?Gas

NG has fallen to its lowest value since July 7,2021 as weather demand remains overall weak. "January 2023 is off to the warmest start in more than 15 years," says EBW Analytics. Weekend cash pricing is seen near $3.50. Prices have risen off the overnight low, though, as some improvement in the 8-14 day forecast is heard.

Yesterday's EIA storage data disappointed with a draw of 221 BCF, which was below the forecasts for a draw in the mid 230's. Storage fell to 2.891 TCF, which is 308 BCF below year ago level and -208 BCF versus the 5 year average. The next few weeks' data is seen as weak. Thus, some see the storage deficit possibly being wiped out.

Technically NG remains on the defensive even as momentum remains oversold with an RSI reading below 30. The low today of 3.520 equaled the low seen on July 7, 2021. We see support above that at 3.536-3.538 from a low from December 2021 on the DC chart and a gap that existed on the February daily chart to 3.538 that was filled today. Resistance to the upside lies at the lows seen earlier this week at the 3.90 area.

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