Market Update 10/05/20

Overview

Energies are higher supported by news that President Trump could be released from the hospital today. Also helping is the disruption of supply in Norway due to the workers' strike there. 330 MBD of output is at risk of being shut. (Reuters)

Gasoline has rallied more than the other energies as there is the potential for a Category 1 or 2 hurricane to hit the Louisiana coast later this week. There is a fear that the storm may disrupt refinery operations. (Reuters) The Asian gasoline market was helped by the prospect for the Tropical storm.

In Asia, the jet fuel/kerosene crack from Dubai crude improved to its best value in 2 months as stockpiling of kerosene for winter demand is seen in Japan and South Korea. Weather forecasters are calling for a cooler than normal pattern around the turn of the year in Japan. However, the Reuters article cites that analysts are not expecting a meaningful rebound in air travel demand until the second half of 2021, which should limit jet/kerosene's upside coming out of winter.

On the supply side for crude oil, we see 2 stories that have a slightly negative tinge. Libya's output is seen at 290 MBD, which is 20 MBD higher than seen last week. (Reuters) Iraq's  September crude oil exports rose by 1.3%  from August. September's volume was 3.063 MMBD. (Platts) Saudi crude exports in September rose by 100 MBD from August to 6.1 MMBD. The end of summer brought a decline in domestic consumption of crude for power generation. September's Saudi oil production was down 14 MBD from August to 8.974 MMBD. (Bloomberg)

Friday's Baker Hughes report showed the oil rig count rose by 6 units.

Money managers reduced their net length in WTI futures/options on the CME/ICE by a combined 23,582 contracts in the week ended Tuesday 9/29.  Money managers though were more bullish on products in the CFTC data issued Friday. RB net length rose by 1,837 contracts, while ULSD net shorts were reduced by 2,699 contracts.

Technicals

Energies have bounced off the lower end of recent ranges, but still have negative momentum and are almost touching up against the DC mid bollinger bands on the RB & ULSD charts, which may limit some upside. The lows seen overnight occurred on the opening of last night's session.

ULSD for November sees support at 1.1000. The overnight low is 1.0844. Resistance above lies at 1.1438-43. The DC mid bollinger lies at about 1.1300.

November RB support comes in at 1.1510-20, then at 1.1224-30. The low overnight is 1.1224. Resistance above lies at 1.1984-1.2000. The DC mid bollinger intersects at about 1.1868.

November WTI support is seen at 3761-68 then at 3682-93. The overnight low is 3700. Resistance comes in at 3935-42.

December Brent futures have resistance above at 4148-52, right by the mid DC bollinger. Support is seen at 3992, then at 3930-38. Both levels were tested overnight with the low of 3914.

Natural Gas

We suspect that Natural Gas has improved along with the energies and has been helped by a chilly start to October. WSJ headline cites a warm up in Texas and the threat of the tropical disturbance Delta in the Gulf as supporting today's rally. 

The rally masks some issues though. Most notably, the Northeast saw prices in some areas last week fall below $1 for next day delivery. Transco's Zone 6 N.Y. price was seen at 79 cents Friday, rebounding 29 cents from Thursday. Total Northeast NG inventories are just 50 BCF below the region's "observed maximum storage level" (Platts quote ). The current storage level is the highest early October since 2012.

Friday's Baker Hughes' NG rig count showed a decline of 1 unit.

CFTC data issued Friday showed money managers added to their net length by 12,674 contracts. This was mostly due to a reduction in short positons held. Total net length stood at 112,531 contracts as of Tuesday 9/29.

Technically, NG is coming off its worst week since last November, having fallen by 13% (WSJ). Currently the spot futures are up by 10 cents. DC Momentum is positive. The spot futures held the attack near $2.400 last week as we suggested it might. Support for the winter strip held at $2.925 on Friday. The strip has rallied back over $3.00 today. Resistance for the strip lies at the $3.05 area.

November spot futures have support at 2.490-97, then at 2.451-2.455. The overnight low of $2.446 was seen near the opening last night.Resistance for November comes in at $2.592-$2.598. The overnight high is $2.584.

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