Market Update 1/12/2021
Overview
Energies are higher today forging to new highs since last February. The news wires cite the Saudi cuts, U.S. stimulus hopes and expectations for a crude supply draw in this week's petroleum data for the uptick today.
The U.S. stimulus hopes have been elevated based on comments from President-elect Biden that there will be "trillions of dollars" of new stimulus coming. The U.S. 10 year Treasury note yield has risen to the highest level since last March 20. (CNBC)
Survey estimates for this week's petroleum data for crude supplies are calling for a draw of 2.7 to 3.8 MMBBL. This would be the 5th draw in a row. Reuters says their surveys are calling for increases in product supplies.
In Asia, the jet fuel cash differential has fallen to a one month low on "muted" demand for physical cargoes and worries over weakening prospects for a recovery in passenger travel due to renewed lockdowns. The cash differential was said to be -28 cents. On December 29, the differential stood at -6 cents. The Jet crack was quoted today at $4.13. This is lower than the value of $4.90 seen on December 29. (Reuters)
News about biofuels caused RIN prices on Monday to fall back to near 75 cents from the 90 cents valuation seen Friday. Two news items seem to have pressured prices. The EPA is said to be close to granting waivers to some refiners for the use of biofuels. There are 32 petitions pending before the EPA for 2019 usage levels. (Reuters) Pressure on RIN prices also was said to have been caused by the announcement from the U.S. Supreme Court that they would hear an appeal of a judgement from January 2020, which sought to limit refinery biofuel waivers. The ruling of a year ago sought to only allow biofuel waivers to refineries which had received them prior. (Platts)
Investors have expanded their net long positions in Brent on the ICE to their highest level since the beginning of last February. (Dow Jones)
Technicals
The buying interest for energies has propelled them to overbought status as per the momentum indicator on the DC and Weekly Continuation charts. RSI indicators on the DC charts have risen over a value of 70. This indicates an overbought condition. Brent spot futures at a value of 76 have the highest RSI for the energies.
Spot WTI futures have resistance at 5354-59. Support lies at 5193-97, then at 5150-56.
RB spot futures support is seen at 15098-15106. There are now 3 successive highs between 1.5482 and 1.5496. Above this we see resistance at 15868-85.
ULSD support lies at 1.5705-10. The overnight low is 1.5709. Below that support comes in at 1.5544-54. Resistance is seen at 1.6100-03, then at 1.6400-15. The overnight high is 1.6011.
Natural Gas
NG is up 10 cents today continuing the late day rally seen yesterday. Prices are up due to the latest forecast revisions for late-January weather pointing toward colder-than-normal temperatures in the Midwest and the East Coast that could keep demand strong. (WSJ) Some news articles hint at the possibility for a polar vortex event bringing cold air down from the North Pole into the U.S. that might come to fruition in February. A storm is said to be setting up for the upcoming MLK holiday weekend.
Likely also aiding prices is the fact that Northern Asian consumers are searching feverishly for spot LNG cargoes for delivery in early February. An LNG cargo into S. Korea for early February was said to have changed hands at $36.05.(Platts) Japanese power prices have set new records as utilities are calling on the public to save power. The utilities there are turning away from coal to fuel oil for electrical generation. The Japanese government has also appealed to the public to conserve energy. Temperatures in China have fallen to record lows. (Reuters)
Platts reports that industrial demand for NG in the U.S. has averaged 25.3 BCF/day in January. This is up 2.8% / 700 MMCF/d from a year ago.
NG spot futures have risen to their best value since early December. Resistance at the 2.80 area has been broken. Resistance lies above at 2911-18, then at 2949-2955. Support is seen at 2806-2811, then at 2768-2770. Momentum is positive, though in a day or so it looks like it will be overbought.
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