Market Update 1/13/21

Overview

Energies are lower now after rallying overnight to multi-month highs propelled by a bigger than expected draw seen in last night's API data. In Asia, prices were helped also by a weaker U.S. dollar.

Saudi Arabia informed some Asian buyers of reduced loadings for February. The cuts ranged from 10-25%. Reuters adds that demand in the Asian realm may ease a bit due to seasonal maintenance. Reuters adds that some crude sourcing may come from the West as arbs open up. 

Today, the UAE Energy Minister urged U.S. shale producers to show restraint since prices have risen. He sees the market balancing by the end of 2021 or beginning of 2022. He says that market share will be available to all once the pandemic ends. (Platts)

Vitol's CEO sees global oil demand growing by 6 to 6.5 MMBD this year. However, he adds that demand in Europe will likely not rise until April due to lockdowns. (Reuters) His demand growth view is slightly more than that issued by the EIA yseterday. 

The EIA, in its Short Term Energy Outlook issued yesterday, said that they see global oil demand rising by 5.6 MMBD this year. 2020 saw demand fall by 9 MMBD. The EIA sees OPEC output in 2021 at 27.2 MMBD versus the 2020 level of 25.6 MMBD. They see U.S. oil production falling to 11.1 MMBD. The 2021 output figure forecast is a fall of 190 MBD from 2020's figure. The prior forecast saw a drop of 240 MBD. The U.S. oil demand estimate was lowered by 180 MBD from last month. Demand is now seen rising by 1.45 MMBD to 19.51 MMBD. The EIA raised their 2021 price forecasts quite a bit for Brent and WTI. WTI is seen averaging $49.74, up $4 from prior estimate. The Brent forecast was raised by $4.25 to $52.75.

    API                  Forecast              Actual 

    Crude Oil         -1.9/-3.8              -5.821

    Gasoline             +2.1                +1.876

    Distillate         +1.9/+2.7            +4.433

    Cushing             n/av                    -0.2

    Runs                 Unch                   n/av             

Technicals

The energy complex is overbought. 

If WTI were to close higher today that would mark the 7th straight session of rising prices, which would be the best winning streak in 2 years. (WSJ) It seems we are not alone in having thought that prices had peaked prior to today. A colleague says that some traders have thought prices had peaked 4 dollars ago.

WTI is breaking support at 5270-75. Support below lies at 5193-97. Resistance comes in at today's high of 5393. Some resistance may be seen at yesterday's high of 5345.

RB support at 15470-85 has been pierced. Below this, support lies at 15280-95. Resistance comes in at 15613, then at 15756, which are the highs from yesterday/today.

ULSD support at 15863-65 is being pierced. Next support lies at 15710-14. Resistance comes in at 16026, then at 16158, which are the highs from yesterday and today.

Natural Gas

NG is unchanged as weather models for January have been all over the board in recent days, with forecasters going back and forth several times on their predictions of a demand-boosting polar vortex. (Dow Jones)

Asian LNG prices are seen easing in the coming weeks as above normal temperatures are forecast for Northern Asia, and as some supply returns. Shell, in Australia, is bringing some production back that had been offline for almost one year. (Reuters) LNG spot cargo prices this week have risen to record highs. A cargo for early February loading was said to have changed hands at $39.30 Tuesday. However, a late February cargo supposedly traded at about $15. Freight rates are very high. A vessel from the U.S. Gulf to Japan was said to be costing $253,270. The higher freight rates are likely to blame for the fact that 10 cargoes in February out of the U.S. have been cancelled, according to Goldman Sachs. (Reuters) 

The strong pricing in Asia filtered over to the European marker yesterday. The February TTF price settled on the CME platform at Euro 26.155. Reuters reporting says the TTF price registered a 3-year high. Prices for TTF have slipped back today to near Euro 21.55, as per the CME platform trades.  

The EIA yesterday, in its Short Term Monthly Outlook, forecast NG prices to average $3.01 in 2021. This is versus the 2020 average of $2.03. The EIA sees 2021 U.S. NG output at 88.2 BCF, then at 89.7 BCF in 2022. 2020 output was said to have been 90.8 BCF. The EIA sees end March NG storage at 1.6 TCF, which would be 12% below the average for 2016-2020. 

Technically, NG has momentum that looks to be cresting. We had opined earlier in the week that prices were in a range between $2.40 and $2.80. That belief was put in jeopardy with yesterday's rise to near $2.90. However, for today, we see resistance at 2.806-2.811 and then at yesterday's 2.899 high. Support lies below at 2.718-2.719, which are the lows of yesterday and today. Below this, support is seen at 2.649.

One colleague yesterday was very skeptical of the notion of an impending polar vortex invading the U.S. He said that such an argument has been made in recent years as well, only to fizzle out.  

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