Market Update 10/28/20

Overview

Energies are down quite a bit despite nearly 1 MMBD of crude production being shut-in the U.S. Gulf due to Hurricane Zeta. The storm is set to hit near Biloxi, Mississippi later today.

Lockdown fears due to Covid-19 and disappointing API stats are weighing on prices. France is set to impose a new 4-week national lockdown. (The Guardian)

    API                    Forecast         Actual

    Crude Oil          +0.2/+1.5       +4.577 

    Gasoline            -0.4/-0.7        +2.252

    Distillate            -2.0/-2.5        -5.333

    Runs                 +0.7%            n/av

    Cushing              n/av             +0.136  

Chinese state run refiners are seen cutting ther run rate in October to 78.9% from September's 81.5%. Weaker refining margins are seen as the cause. The Platts article cited bad domestic demand and bad overseas prices as the reason. This is despite reports that Chinese jet fuel consumption has rebounded to near pre-coronavirus levels as a result of a recovery in domestic passenger travel and air freight. (Reuters) 

Crude production in the U.S. Gulf of Mexico saw 914,811 BPD shut-in Tuesday. This is 49.45% of the total output in the region. (Platts)

Asset markets are also being hurt by a comment from President Trump that a U.S. stimulus package will likely have to wait until after the upcoming election. (Reuters)

Technicals

Technically, the energies remain above their most recent lows, but are soft. Momentum is negative.

December WTI support lies at 3700-06. Resistance is seen at 3835-41 and then at 3900-10. The overnight high is 3901.

December Brent support is seen at 3930-31 and then at the most recent low at 3879. Resistance comes in at 4030-34 and  then at 4077-82, which is just above the overnight high of 4070.

RB for December sees support at 1.0730-33, which is right above the lower Bollinger, which intersects near 1.0715-20. Then support is at the low of 1.0543. Resistance is seen at 1.1024-30 and then at 1.1139-45.

ULSD is the best performer today, supported by the better than expected drop in distillate supplies seen in last night's API data. ULSD for December sees support at 1.1176-82 and then at 1.1051-52. Resistance lies at 1.1348-47 and then at the overnight high at 1.1490-11503. 

Natural Gas

As we have seen this week, the front month contract is stronger than the rest of the winter strip. The expiring November contracts is up 0.5 cents while the rest of the winter strip is down.

Hurricane Zeta has shut-in 1.5 BCFD as of yesterday. That is 55.35% of the total Gulf of Mexico NG output. (Platts)

Adding to the firmer tone for the spot futures seems to be the prospect for a lower than normal injection into storage in tomorrow's EIA data. Energy Aspects is calling for a build of 37 BCF, while NGI's model is calling for a +42 BCF injection. Last year saw a build of 89 BCF and the 5-year average is +67 BCF.

Technically, December NG still has negative momentum as it has again attempted to climb over $3.30. Resistance above is seen at 3.329-3.336 and then at 3.362-3.370. Support is seen at 3.253-54 and then at 3.204-07.

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