Market Update 10/29/20

Overview

Energies have fallen to multi-month lows. Lockdown fears and disappointing DOE data seen yesterday are weighing on prices. Prices were actually higher in Asia overnight due to bargain hunting. (Platts)

The DOE showed crude stocks rising by 4.32 MMBBL. Estimates were for a build near 1 MMBBL. The market was seemingly somewhat shocked by the large increase in U.S. crude production. It was up 1.2 MMBD for the week, as output from the Gulf of Mexico was restored post Hurricane Delta. Total production is 11.1 MMBD. Crude input to refineries rose by 362 MBD/1.7% in the DOE figures. This was greater than the estimate for a rise of 0.7%. 

Product demand also was a bright spot. Gasoline demand rose by 256 MBD to 8.545 MMBD. Distillate demand rose by 652 MBD to a healthy 4.24 MMBD. Distillate supplies fell by 4.491 MMBBL; estimates were for a fall of 2.0 to 2.5 MMBBL.

WSJ commented yesterday that the ramp up of U.S. oil output out of the Gulf of Mexico may have been greater than before the storms as producers needed to meet contractual obligations.

Yesterday, the following lockdown measures were announced: France will require people to stay home for all but essential activities as of Friday, while Germany will shut bars, restaurants and theatres from November 2nd through the end of the month. (Reuters)

The U.S. Energy Secretary yesterday mentioned that U.S. production would not rise any time soon to the peak volume near 13 MMBD seen as recently as February. (Reuters)

Hurricane Zeta forced a shut-in of 1.23 MMBD of crude production in the U.S. Gulf as of yesterday's midday figure. This is about two thirds of the total Gulf production. (Platts)

Technicals

WTI and RB are at their lowest price since June 15th. Brent is at its lowest level since May 29th. Momentum is getting near oversold, especially for RB and Brent. The lower bollinger bands are being attacked. The momentum and bollinger band indicators might temper some of the bearish tone.

WTI support for the spot contract lies at 3528-41 and then at 3436-48. The low today is 3536. The low bollinger on the DC chart intersects at about 3620. Chart based resistance lies at that area at 3613-16 and then at 3663-67. The overnight high is way above at 3776.

January Brent futures have resistance at 3882-89. The low bollinger here lies at about 3850. Support below comes in at 3712-15.

December RB support at 10271-72 is being tested. The low is 10252. Below this, support lies below $1 at 9980-93. Resistance is at 10535-43.

ULSD December support is seen at 10650-54. The lower bollinger intersects at about 10875. Resistance lies at 11050-55.

Natural Gas

NG is down 8 cents for the December contract as it becomes the spot futures. WSJ says the drop is due to the loss of power for 2 million people in the Southeast due to Hurricane Zeta.

NG output shut-in as of midday Thursday was seen at 1.205 BCFD. This is about 45% of the total production in the U.S. Gulf. This was 0.294 BCF less of an outage than seen the day before.

Platts has written about gas to coal switching occurring in the ERCOT and the North SPP South regions. The latter services an area into Northern Texas and Oklahoma. Platts puts NG usage for power burn down 5% in October from September in the ERCOT region. Coal's share rose by 2%. Platts Analytics sees the November 2020 to March 2021 period power burn down 3.5 BCFD versus last winter same period. Last winter, that strip was priced at an average of $2.10. Wednesday's settlement on the CME for the winter strip averaged $3.265.

Today's EIA storage data is seen as a build of 34 to 42 BCF, as per estimates seen. This is better than last year's +89 BCF build and the 5-year average build of 67 BCF.

Technically, NG has positive momentum on the DC chart due to the bump in prices as December is now the spot contract. There is a rollover gap from the expiration of the November contract. The gap goes down to 3.051. The upper bollinger on the DC chart intersects at about 3.23.

Support for the spot futures lies at 3159-3166 and then at 3127-3132. Resistance comes in at 3253-54 and then at 3287-3293.

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