Market Update 1/18/2021

Overview

Energies are slightly lower as Covid concerns are outweighing the positive economic news from China.The virus concerns are forward looking, while the Chinese data is backward-looking-- to quote a news article from Investing.com.

China has almost 30 million people in lockdown, while new cases there have risen by over 100 for the past 2 days. China has in the past week seen the number of daily cases jump to an over 10-month high. (Reuters)

Support for crude oil may have also come from news that Libya will shut a pipeline for 2 weeks. Production is seen fallling by 200 MBPD as a result. (Reuters)

China's economy grew at a 6.5% pace in the 4th quarter. This beat the Reuters estimate of 6.1%. For the whole year GDP rose by 2.3%. The forecast for growth in 2021 is +8.4%. In addition, positive news was seen from Chinese refinery runs. The calendar year 2020 saw runs as a whole rise by 3% to average 13.45 MMBPD. Refineries ran 14.13 MMBPD in December , which was just below November's record of 14.20 MMBPD. (Reuters)

But the Mideast crude market looked soft in Asia as demand is seen easing for March loadings due to worries over lockdowns and seasonal maintenance expected in March and April. The March cash versus futures differential for Dubai crude was seen at +31 cents Monday. On January 8th the differential was valued at +47 cents. (Platts)

But the Low Sulfur Fuel Oil (LSFO) market in Asia is buoyant as demand from power generators and restocking of inventories are supportive. The demand from power generators is due to the runup in LNG prices seen recently, as utilities seek alternative sources of fuel. Sellers ran down inventories at year end and are now seeking cargoes to replenish their stockpiles. The cargo versus Mean of Platts Marine fuel differential rose on Friday to an 11 month high. "Market sentiment is optimistic".

Equities were lower overseas Monday on virus fears. The dollar was stronger overnight.(WSJ)

CFTC data issued Friday showed money managers raised their net length in WTI futures/options on ICE/CME combined by 21,841 contracts. On the CME, longs were added and shorts were covered in WTI. RB net length rose by 6,904 contracts as here too, longs were added and shorts were covered. ULSD net length fell by 1,252 contracts to a total net length held by money managers of 3,135 contracts.

On Friday, Baker Hughes reported that the U.S. oil rig count rose for the 8th straight week. The number of rigs operating rose by 12 for the week. This reenforces for us the notion that producers are hedging more forward sales with WTI having risen $50, as they are bringing more production on stream.

Technicals

Momentum for the energies points lower as the contracts look to be forming rounded tops.

March WTI futures have support at 5193-96, tested wth a low of 5183. Below this support lies at 5146-51. Resistance lies at 5269-74, then at 5347.

Brent spot futures support is seen at about 5434. Resistance comes in at 5636-39.

February RB support is seen at 15098-15115. The latter is the low overnight. Below this we see support at the 1.4930 area. Resistance comes in at 15365-70, then at 15486-95.

ULSD support in February is seen at 15709-24. Resistance lies at 15996-16006, then at 16150.

Natural Gas

Henry Hub NG futures are sharply lower today as the threat of polar air invading the US is falling apart, to quote a colleague.

European prices have also retreated. The TTF marker is seen down 0.9 Euros on the CME platform. February TTF is printing 19.3 Euros. It reached a 3 year high last week over 26 Euros. While in Asia , prices are seen slipping quite dramatically in coming months after the recent run up to record prices. February cargoes were assessed last week over $30. The March and April contracts are assessed today at $8.675 and $6.75 respectively on the CME's platform.

Friday Baker Hughes reported that the NG rig count in the U.S. rose by 1 unit.

The CFTC data issued Frdiay showed that money managers raised their net length in NG futures & options on the CME by 31,387 contracts in the week ended Tues. January 12. Longs were added and shorts were covered. Total net length held by money managers rose to 76,280 contracts on the CME.

Technically Henry Hub NG futures are looking soft as support at 2.66 has been broken. This is where the DC mid bollinger lies. Momentum points lower. Resistance for spot futures comes in at this 2.660 area. There is a gap below from 2566 to 2547. Support lies at 2525-2526.

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