Market Update 11/03/20
Overview
Energies have continued their strong rally off the lows seen yesterday. The main driver is said to be discussions that the Russian Energy Minister had yesterday with oil companies there. They discussed the possibility of extending output cuts through the first quarter of 2021. Also discussed was the possibility of increasing output as per the current accord with OPEC, but they also supposedly discussed cutting output further from current levels. (Reuters)
A lower dollar and upside price action in broader markets were also cited as helping energy prices today. (WSJ)
Yesterday, the U.S. manufacturing data surprised, as had other PMI data from around the world. The U.S. manufacturing number came in at 59.3 for October, which was 3.9 points above September's number. The WSJ estimate for the October gauge was 56.0. New orders were the highest in 17 years. (Reuters)
Reuters reports that the Jet Fuel crack in Asia hit a 3-month high today, as the level of global scheduled flights has seen some slight improvement. The crack stood at $2.15. This is up from a value of $1.22 seen on October 27th, as per Reuters reporting.
As of Monday, the amount of oil production shut-in in the Gulf of Mexico was said to be 518,441 BPD, which is 28 % of the total output in the region. The loss of output seen recently due to storms is the likely cause for the estimated drop in U.S. crude supplies expected this week. Platts survey is calling for a -0.6 MMBBL figure. Gasoline supplies are forecast to fall by 1.1 MMBBL. Distillate supplies are seen falling by 2.4 MMBBL. Runs are estimated to drop 0.2%.
Continued demand concerns due to the coronavirus and higher costs due to the pandemic are causing Marathon Petroleum to reduce its refinery runs in the 4th quarter. Runs are set to be at a rate of 2.265 MMBD, down from 2.39 MMBD seen in the 3rdquarter. (Platts)
Technicals
The Crude Oil and ULSD contracts had key upside reversals Monday. This, with the turn to positive momentum from oversold conditions, is supportive. WTI spot futures have support at 3697-3706. Resistance lies at 3865-68.
ULSD December support is seen at 1.1000-1.1010. The low is 1.1000. Resistance is seen at 1.1484-89. The contract is attacking its mid bollinger in the DC chart. That value lies at the 1.1350 area.
RB for December has its support at 1.0544-46 and then at 10294. Resistance lies at 1.0927-33.
Brent spot futures sees its resistance at 4077-82. Support lies at 3875-79. The low overnight is 3865. Support is seen above at 3930-38.
Natural Gas
NG has slid further today following yesterday's sharp fall. Forecasts for warmer temperatures to last into the latter half of November have caused prices to fall back from their multi-month highs seen Friday.
NGI cited a weather forecasting source that suggested this November could be one of the top 5-6 warmest on record.
The pullback in prices comes despite the expectation for this week's EIA storage data to show the first withdrawal of the season. The WSJ says the withdrawal is forecast to be between 20 and 30 BCF. However, the WSJ goes on to say that bullish news has been baked in already.
Also hurting prices may be the drop in the JKM marker seen in the past few sessions. The settlement Monday for December JKM, as per CME data, was $6.915. This is down from the peak of $7.25 seen over one week ago.
Feedgas volumes in the U.S. reached over 10 BCF this past weekend, but fell back slightly Monday. Saturday saw record volume of 10.37 BCF. Monday, that amount slipped to 9.85 BCF. (Platts)
NG output shut-in in the Gulf of Mexico was seen at 431.48 MMCFD Monday. This equates to 15.9% of the total production in the Gulf. (Platts)
Technically, NG topped out Friday/Monday at the double top of 3.393-3.396. Momentum is negative. The mean reversion set up from Friday was confirmed on Monday, underscoring the retreat from the highs. The market has broken below the December contract's low seen last week at 3.151. This opens up the possibility for a drop down to fill the gap from the expiration of the November contract. That gap goes down to 3.051.
Support for spot futures is seen ahead of the gap at 3.091-3.097. Resistance above comes in at 3.214-3.217.
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