Market Update 11-6-2020

Overview

Crude oil and ULSD are lower as virus fears resurface and the uncertainty surrounding the U.S. election hurts. Rb futures are unchanged in the spot contract.

The election uncertainty has made the likelihood of a large stimulus package dimmer. (Reuters)  

The virus fears are evidenced by lockdowns being implemented in Greece and Denmark. (Platts)

Saudi Arabia issued their OSP's for December. They came in as expected for Asian customers., ranging from -10 cents to +20 cents depending on the grade of crude. Prices to NW Europe and the Med rose, reflecting tightness in Russian crude supplies. Prices to the U.S. fell by 20 cents. (WSJ)

Shell announced Thursday they would close their refinery in Convent, LA. The refinery has a capacity of 211,000 BPD. It is the first unit in the Gulf Coast to be shuttered. It is the 9th unit targeted in the U.S. Two million BPD of capacity has been shut globally since the pandemic began. The gasoline crack margin ( based on the RB and WTI contracts) is seen just above $8, which is below the profitability level for refiners. (Reuters) We notice a large increase in open interest in the RB futures contract on the CME from Thursday's activity. The increases are in the January through March contract months. Are these mostly new bets on higher prices due to tighter supply as a result of refinery shut ins ?

In Asia, the Jet Fuel crack reached its highest level in 4 months on tighter regional supply and a pickup in air freight demand. Kerosene demand from S. Korea and Japan has helped. The crack stood at $2.81 , which is the best value since June 22. The cash discount for Jet fuel is the narrowest since June 4th at -31 cents. (Reuters)

Technicals

Energies continue to have positive momentum, but as we suggested yesterday have hit stiffer resistance. They are nonetheless up from last week's settlement prices.

WTI support in December is seen at 3726-33, which are the lows from Wednesday and today. Resistance lies at 3901-10.

Brent support seen in January lies at 3937-42. Resistance is seen at 4096-98.

RB December futures support is seen at the double bottom from yesterday/today at 1.0853-61 then at 1.0610-18. Resistance comes in at 1.1125-40. The high today is 1.1140.

ULSD futures for December see resistance at 1.1682-94. Support lies at 1.1317-31.

Natural Gas

Ng is continuing its decline with extremely mild temperatures in the forecast for the next two weeks at least. (N G I )

The slide in prices seen in the past 24 hours comes despite a bullish EIA number yesterday. The draw of 36 bcf bested expectations. Storage is now 5.4 % over the 5 year average as well as last year's level. Storage is now 200/201 BCF over the 5 year average and last year's levels. Total storage is 3.919 TCF.

Over the past 2 days, Henry Hub next day cash pricing has fallen to as low as $2.50. Thursday, prices were seen in the upper $2.60's. Based on the value of November futures contract's value versus December when it expired , spot futures prices over $3.00 will be hard to sustain with HH pricing in the mid $2.60's.

Technically, Ng is soft with negative momentum. Support at 2884-2890 has almost been tested this morning with a low of 2.895. Below this we see support at 2.821-25. Resistance above comes in at 2.967-2.971, which is the overnight high. Above that we see resistance at 3.002-3.006. The spot futures are attacking the DC mid bollinger which lies at about 2.945.

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