Market Update 10/21/20

Overview

Energies are lower as crude supplies rose unexpectedly in yesterday's API data. Added to that is the prospect for increased oil supply from Libya. Libyan output in the key El Sharara field is seen increasing to 250 MBD within the next 7-10 days from current 160 MBD level. (Platts)

Yesterday, Russia's Energy Minister Novak dialed back comments he made last week. Tuesday, he said that it is too early to make a decision regarding output curbs beyond December. Last week, he said that output could be raised turn of the year as per the agreement.  (Reuters)

Yesterday, oil prices were supported by hopes for a stimulus package from the U.S.  (Reuters)

    API                    Forecast                Actual

    Crude oil             -1.0/-1.38             +0.584

    Gasoline                -1.5                    -1.622

    Distillate                -1.7                    -5.983

    Cushing                  n/av                  +1.174

    Runs                     +0.7%                  n/av

Technicals

Energy prices are having inside days versus yesterday's prices, reinforcing the overall sideways trading range we have touted the past several sessions. Product momentums are negative and that of the DC Brent looks poised to turn negative.

WTI spot futures have support at 4008-14 and resistance at 4170.

December Brent support lies at 4213-19 then at 4148-56. Resistance above comes in at the prior 3 sessions' highs at 4321-30. 

December RB support lies at 11415-27. Resistance is seen at 11750-75.

ULSD December futures have support at 11555-63, then at 11446-55. Resistance lies at 11878-88. 

Natural Gas

Spot month NG futures have hit a fresh high since late January, 2019, touching $3 today. Yesterday's strong spot futures prices were propelled by the prospect for a narrowing of the storage surplus this week, a return to full capacity for LNG exports from Cheniere and Sempra's Gulf Coast facilities. The waterways blocking those terminals during the last week are seen reopening. (NGI) 

Also supporting prices Tuesday were heat in Southern California and Texas and pipeline maintenance restricting some flow there. Permian next day prices jumped 63 cents to +39 cents. Henry Hub next day cash rose by 25.5 cents to $2.585. 

Also helping Tuesday we believe was news that European storage had seen withdrawals for 5 days in a row. NGI said this was 2 weeks earlier than normal. 

So while the above news supported the November futures, we note that the rest of the winter strip settled lower in price on Tuesday, while the contract months behind that through 2022 saw increases. We suspect that some of the negativity evident in the winter strip may be a function of production increases seen recently. Haynesville output has risen by 1 BCF to 12.4 BCF this month from August/September's annual lows . The uptick in output has been incentivized by the strong winter strip pricing. The winter strip settled at $3.23 Tuesday. Some concern has been voiced that higher pricing for the winter may cause some switching back to coal from NG when winter demand picks up.  (Platts)

Technically, NG is firm. November futures have risen over the 3.002 high seen beginning of September. Above this, the weekly chart shows us resistance at 3032-3036. Support below comes in at 2885-2890. The latter is the overnight low. There is light support above that at 2.950 via the 60 minute chart. Momentum remains positive on the DC chart.  

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