Market Update 10/20/20
Overview
Energies are mixed as the crude oils and ULSD contracts are slightly lower, while RB is slightly higher. Fresh news today is sparse.
Overnight prices were lower as a lack of any commitment by the OPEC ministers yesterday to curb the output increase set to take effect January 1st was deemed as negative. Also fears of renewed lockdowns, especially in Europe hurt prices. Added to this is the increase in Libyan oil supply, which is seen rising further in the near futures. (Reuters)
The OPEC committee meeting only offered a commitment that they will support the oil market, but gave no concrete action plan as to how or when to do so. They are set to add supply come the turn of the year as per their agreement. (Reuters)
Japanese crude oil imports in September were down 20.7 % from year ago levels at 2.34 MMBD. Imports fell by 21.2 % year-on-year for the period of April through September, to the lowest since at least 1979. (Reuters)
Today is the last trading day for the November WTI futures on the CME.
Technicals
The products have fallen below their mid bollingers on their daily charts for the December contracts and their momentums are negative.
December RB support is seen at 11274-83, right below the 100-day moving average, which is 1.1302. Resistance above is seen at 11596-11610. The overnight high is 11588.
ULSD December support comes in at 11555-11563, tested with a low of 11530. Below this, we see support at 11348-57. Resistance above comes in at 11888-11902.
WTI has its support in December at 3998-4005 and resistance at 4174-78. The 100 and 200 day movng averages are right by each other at 4081 and 4080 respectively. Momentum is positive.
One drawback for WTI right now might be the narrow arb vs. Brent. The December arb is at a fresh narrow level for the contract near $1.50. The fears of further lockdowns in Europe seem to be hurting Brent more than WTI. The spread is attacking its upper bollinger on the daily chart, which may limit WTI's upside for now, but momentum favors WTI.
Natural Gas
NG is holding on to the late day gains seen Monday afternoon. Monday NG spot futures rallied almost 10 cents from the settlement price as colder weather forecasts were seen. NGI headline today says LNG volumes are set to "ramp up rapidly.” This is ikely underpinning prices today.
The rally Monday came in spite of the news earlier in the day that U.S. NG output had reached a 6-month high at 90 BCF. Increases of 1.5 BCF in the Appalachia & Gulf of Mexico regions were cited. However, Platts Analytics recently forecast that NG output woud stay near 87 BCF through much of 2021. This projection, and the fact that last year saw output near 95 BCF in the winter, has allowed the December/February strip to remain firm. Yesterday, the strip settled at $3.356. November settled at $2.795.
The JKM and TTF markers have risen to new highs today. This is supportive for feedgas volume in the U.S.. The JKM marker is at a 1-year high. It settled yesterday at $6.51 on the CME. One week ago the value was $5.75. Buying interest from South Korea, Japan and China has supported prices. Also, Platts cites the recent disruptions in supply from the U.S. (due to hurricanes), Norway (due to the recent labor strike), and Nigeria as supporting the Asian pricing. However, Platts Analytics says that sellers (when referring to the Asian market) are comfortable selling at current prices and are increasing output to do so. Platts goes on to say that without colder-than-normal temperatures this winter, spot prices will have limited upside.
The TTF/European NG market has risen to $5.136 today, up from $4.684 one week ago.
Technically, we were mistaken yesterday when we stated that prices were struggling to stay over $2.80. They seem more so to have found support just above $2.60. For today, we see resistance at last week's high at 2.955. Above this, we see decent resistance in the 2.983-2.993 area from weekly trading going back to mid-2018 to January 2019. Support lies at 2821-2825. The overnight low is 2824. Momentum on the DC chart is neutral.
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