Market Update 11/20/20

Overview

Energies are higher, boosted by vaccine hopes as well as hopes for stimulus talks in the U.S. 

U.S. Senate Republican Majority Leader Mitch McConnell has agreed to return to the table with the Democrats to try and hammer out a new COVID-19 relief package, which gives rise to hopes of sustaining demand. (Investing.com)

Reuters and WSJ have articles that describe the strength in demand from China and India, which has boosted crude values for certain grades. The overall demand has caused Dubai to rise to a premium versus Dated Brent. Dubai is seen at a premium of $1.06 versus Brent. Normally, light crude trades at a premium to heavy crude. In 2019, Brent averaged 85 cents over Dubai and was worth double that in 2018. The Middle East crude premium is drawing U.S., European and African crude to Asia. Russian ESPO crude is at a 5-month high premium for January loading. Crude exports from Europe and the Mediterranean to Asia have risen from around 380 MBPD in September to 1.16 MMBPD so far in November. 

In the U.S., Treasury Secretary Steven Mnuchin has asked for $455 billion of the current U.S. stimulus package to be returned to the U.S. Treasury. The funds were meant for general lending to local government, business, and non-profits. The lending program has been credited with playing a vital role in shielding the country from being far worse hit by the COVID-19-caused economic recession. The potential loss of the program is causing fears of an even greater slump in demand than previously factored in. Funding for programs would end on December 31st. (Investing.com/ WSJ)

Libyan oil output has risen to 1.25 MMBD this week. It was at 1.215 MMBD one week ago. Libyan crude oil exports have risen on the back of the increase in production seen over recent weeks. The National Oil Corporation chief says that Libya will join the OPEC quotas once their production level reaches 1.7 MMBD. Libya has not produced that much since late 2008. (Reuters)

Today is the last trading day for the WTI futures contract for December. 

Technicals

Momentums are positive, but are getting near overbought for the crude oils.

WTI for January has support at 4126-30. Resistance lies at 4235-45. The overnight high is 4235.

January RB support is seen at 11463-79. Resistance lies at 11787-99. These are the highs from Wednesday and today.

ULSD for January has its support at 12527-43. Resistance comes in above at 12898-12900. This was tested with a high of 12940 overnight. 

Natural Gas

NG is up almost 5 cents for the winter strip in what is seen as a shortcovering rally as the underlying fundamentals remain weak, as well as the prospect for some possibly cooler weather next month. (NGI)

Yesterday's EIA data was bearish. Storage rose by 31 BCF. Most estimates seen were calling for a build of 19 to 23 BCF. Storage is 293 BCF/7.99% over last year's level and 231 BCF/6.2% over the 5-year average. 

LNG prices in Asia have retreated this week from last week on increased supply from Malaysia. January loadings are said to be worth 10 cents less, while those for December are said to be 10 to 20 cents cheaper. January's value is seen at $6.40, while December is worth $6.70. U.S. LNG shipments to China reached a record in November. Beijing and Seoul are expecting temperatures below average over the next 2 weeks.   

Technically, NG has stabilized with 2 indicators supporting the possibility of a near term low having been seen yesterday. Firstly, CME data shows high volume traded yesterday for the NG futures. The volume was 736,111 contracts. Also supportive is the oversold condition of the DC momentum. 

December NG has support at 2571-2580. The low overnight is 2580. Support lies below that at yesterday's low of 2525. Resistance is seen at 2687-2690. The overnight high is 2679.

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