Market Update 11-21-2022

Overview

Energies are lower as a stronger dollar and Chinese Covid concerns weigh.

Schools in some districts in the capital Beijing switched to online classes on Monday after officials asked residents to stay home, while the southern city of Guangzhou ordered a five-day lockdown for its most populous district. (Reuters)

A Reuters analyst sums up the current slump in crude prices : ""Brent spot prices and calendar spreads are retreating as traders anticipate the market will be balanced or over-supplied in 2023, after having been under-supplied continuously since the middle of 2020. Business cycle downturns across Europe, Asia and North America are expected to reduce oil consumption absolutely or relative to trend, helping rebuild depleted inventories.""

Friday, Reuters reported how European refiners have ample supplies of crude. They are seen able to replace a loss of Russian crude with barrels from the U.S, Mideast and Latin America. Added to this are recent reports that several Chinese refiners asked Saudi Aramco to supply lower amounts of oil in December. China has also ramped up its refined fuel export quotas, potentially indicating a surplus in crude stockpiles due to waning demand. (Investing.com)

December Gasoil is higher today as unions at the BP Rotterdam refinery are threatening to widen their work action on Wednesday. Workers at BP's Rotterdam refinery, which is currently offline, will not help restart operations unless their wage demands are met, union leaders said on Monday. The company said on Saturday it expected to have the refinery back on line "early" this week after an unspecified technical problem. (Reuters)

Today is the last trading day for the December WTI futures. Eyes will likely be focusing as well on the front month spread as it dipped into contango Friday.

CFTC data issued Friday showed money managers shed net length in WTI,ULSD and RB in the week ended Tuesday Nov. 15. RB net length fell by 4,010 contracts. ULSD net length fell by 1,816 contracts. WTI net length on ICE/CME combined fell by quite a bit. It was down 19,203 contracts, due to a large reduction seen on the CME.

The CME will have the following schedule this week due to the Thanksgiving holiday : Wednesday will see a regular close at 5 PM (EST). The market will re-open Wednesday at 6 PM and remain open until 2:30 PM (EST) Thursday. Then the market will re-open at 6PM Thursday and remain open until 1:45 PM Friday. The settlement period for the energy contracts will be from 1:28 to 1:30 PM Friday.

Technicals

Momentum?remains?negative.

WTI for January sees support at the 77.59 area.The lower daily bollinger lies above that at about 78.30.?Resistance lies at 81.15-81.21.

January?RB?support?is?seen?at?2.2965-74?and?resistance?at?2.3945-60.

ULSD for January sees support at the overnight low at 3.3395-3.3407, then at 3.2900-3.2925. Resistance lies at the overnight high at 3.4020-30, then at 3.4200-3.4233.

Natural?Gas

A cooler forecast is boosting NG prices today. Henry Hub next day pricing is currently abour 25 cents higher than pre-opening Friday.

News wires have focused today on the longer term global LNG market. Business Insider had the following headline: "Leading gas importer Japan says LNG is sold out until 2026, as energy-squeezed countries battle over dwindling supplies." And in addition, news came out today that China has signed a 27 year LNG supply agreement with Qatar--the longest-term contract ever, Reuters reported. This news with a longer term view masks the current softness in Asian LNG pricing. Last week, the LNG price for Northeast Asia fell by 50 cents to $25.50/mmbtu as warmer than normal temperatures and ample inventoires are keeping a lid on prices. The price a year ago was $31/mmbtu. (Reuters)

The reaction was muted Friday to Freeport's announcement that they plan to restart operations at their LNG facility in mid-December. They look to ramp up to full production by March 2023. Freeport expects to "turn" 2 BCF/d of gas into LNG in January. (Reuters)

This week's EIA NG storage data is to be released Wednesday at Noon (EST) due to the Thanksgiving day holiday. Some support for NG may come from the prospect that the next 3 weeks' data will show larger draws than seen in prior years. “The next three EIA weeks could see withdrawals 140 Bcf larger than the five-year average,”, as per EBW analysis. (NGI) This week's data is seen as a draw of 77 BCF, as per Reuters estimate. This beats the 5 year average draw of 48 BCF.

CFTC data seen Friday showed money managers covered some more of their net short position in NG futures/options on the CME, as they have done the past 5 weeks. Net shorts were reduced by 3,769 contracts. The net short total stood at 67,148 contracts.

Technically NG has positive momentum with resistance above seen at last week's high of 6.547 then at 6.798-6803. Support lies at 6.162-6.175. The low overnight is 6.145.

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