Market Update 10-19-2022

Overview

Energies are mixed again today with crude oil and RB up, but distillates lower. Crude oil is being helped by the surprise draw seen in last night's API data.

The U.S. is set to release 15 MMBBL from the SPR. The oil will be delivered in December and will complete the historic, 180 MMBBL drawdown the President announced in the spring, as per a statement from the White House. In the statement, the administration added : "the President is announcing that the Administration intends to repurchase crude oil for the SPR when prices are at or below about $67-$72 per barrel, adding to global demand when prices are around that range." In addition, the administration has also spoken with oil companies about selling an additional 26 MMBBL from a congressionally mandated sale in fiscal year 2023, a fourth source said. Fiscal year 2023 began Oct. 1. (Reuters) Among comments we have seen regarding the 15 MMBBL release was the fact that that amount of oil to be released from the SPR is less than the daily demand seen in the U.S. Crude oil inputs to refineries last week were 15.683 MMBPD and demand via Total Product Supplied stood at 19.271 MMBPD.

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

Crude?Oil????????????+1.6/+1.7???????????? -1.27

Gasoline????????????????-1.4????????????????? ?-2.17

Distillate?????????????? -2.2????????????????? -1.09

Cushing?????????????????n/av?????? ?????????? ?+0.9

Runs????????????????????-0.5%???????????????? ?n/av

Reuters cites the impending Russian sanctions and the OPEC+ cut as being supportive for oil prices. Bloomberg adds that the restoration of full oil output at the Kashagan field in Kazakhstan has been delayed as the operator keeps working on a solution to a gas leak.

Some comments have been seen about less gas to oil switching needed as TTF/NG prices in Europe have fallen by 67% from the peak seen in late August. This may be a reason for some of the pullback in distillate prices. We are alos hearing that diesel supplies destined for Europe are being redirected to the U.S., whch may account for some of the ULSD falloff today. Added to this is a report that China is likely this month to export the highest volume of diesel, aviation fuel and gasoline since June 2021. (Nasdaq)

Technicals

Momentum has turned negative in the ULSD from overbought condition, as the spot futures have been clearly repelled from above $4. Momentum for the Rb and crude oil remain negative.

ULSD for November has resistance below $4 at 3.9491-3.9531, then above $4 at 4.0211-32. Support comes in at 3.8030-63, then at 3.7577-3.7602.

December?RB?support?lies?at?2.3733-54?and?resistance?at?2.4636-55.

December WTI support lies at the 8130 area. Resistance comes in at 84.43-84.53 and then at 85.39-85.45.

Natural?Gas

NG has eased back further today as the NOAA's 6 to 10-day and 8 to 14-day forecasts show warmer-than-normal temperatures across the entire eastern and central US, as per WSJ reporting. WSJ also cites record production for the weakness. Refinitiv says October output has averaged 99.6 BCF/d, beating September's 99.4 BCF/d level.

TTF prices are stable, but Bloomberg touts the fact that European storage has filled amply, LNG imports remain high with a vast number of vessels waiting to offload, weather forecasts point to a warmer-than-usual winter over Europe and the EU is working on price caps for NG and electricity.

Refinitiv is projecting average U.S. gas demand, including exports, would fall from 101.0 BCF/d this week to 95.9 BCF/d next week.

This week's EIA data is seen adding over 100 BCF to storage. That would be the 5th straight triple digit injection. There have only been 2 other times when there have been longer such streaks. The spring of 2014 saw seven 100+ BCF injections and spring of 2019 saw a string of six 100+injections.

We are reminded of a comment from a colleague made one month ago regarding a head and shoulders pattern on the DC chart, which projected a possible fall to the 5.62 area. Momentum remains negative. DC based chart support is seen at the major low from July at 5.325. But we see lows from July on the November daily chart at 5.465-5.467 that should provide support. Resistance lies above at the 5.907-5.912 area.

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