Market Update 12-2-2022

Overview

Energies are mixed as crude oil has traded in a narrow range around unchanged, as the market awaits this weekend's OPEC+ meeting.

News?wires?tout?the?likelihood?of?OPEC+?keeping?ther?output?unchanged.

Support for energy prices overnight came from the weaker U.S. dollar. The Euro today rose to its best level since early July. Today's Non Farm Payroll came in showing that in November 263,000 new jobs were added.?It was expected to see 200,000 new jobs added. This comes after October saw 261,000 new jobs added.?Crude fell as the number may suggest the Fed needing to tighten rates further. The strong NFP number caused the dollar to raly.

Some support for crude was seen due to a more positive outlook for China with Beijing set to announce some relaxing in its Covid quarantine rules and testing protocols, although details remain sketchy. China said it would allow some infected people to isolate at home, in a softening of its Covid Zero policy. (Quantum/Bloomberg)

Bloomberg reports that refiners in China have started to snap up Russian crude cargoes after a short hiatus, citing sharply lower prices due to ample unsold supplies. The purchases are for December/January delivery and are said to be trading at wider discounts to global benchmark Brent crude than deals done just weeks ago.

President Biden said that he is open to talks with Russian President Putin regarding the Ukraine conflict. In response, President Putin is open to talks on a possible settlement to the conflict in Ukraine and believes in a diplomatic solution, the Kremlin said on Friday. But, the Kremlin has said that they will not pull out of Ukraine, which was a stipulation President Biden has set for talks.

The Biden administration is looking to ask Congress to halt mandated SPR sales for the years of 2024 thru 2027. These sales are set to total 147 MMBBL. An administration official said : “It doesn’t make sense for us to be releasing oil while we’re trying to refill the SPR,”. The White House plans to refill the oil reserve when crude prices reach around $70 a barrel, an agency official told a Senate committee Thursday. (Bloomberg)

On Thursday, European Union governments tentatively agreed on a $60 a barrel price cap on Russian seaborne oil with an adjustment mechanism to keep the cap at 5% below the market price, according to diplomats and a document seen by Reuters.

The U.S. ISM manufacturing index issued Thursday fell to 49.0 for November. This was the first contraction in business activity in 2 1/2 years. Reuters had a forecast of 49.8 for the index.

In Asian trading, gasoline cracks fell below $1/b on Friday, a three-week low, amid lacklustre regional demand, as per Quantum reporting. Platts describes the fact that gasoline exports out of China in November and December are very high relative to those seen in prior months. November exports are seen at 466 MBPD and December at 548 MBPD. October exports were seen at a rate of 274 MBPD. Platts added that Chinese domestic demand in November was weak "amid tight movement restrictions. "

Technicals

Momentum?is?positive?for?the?energies.

ULSD has a supportive element when looking at the January daily chart. The past 3 sessions' lows are in the 3.2450-76 area. Resistance comes in at 3.3575-80, then at 3.4103-3.4114.

RB support for the January futures lies at the overnight low at 2.3170-84. Resistance comes in at 2.3871-87, then at 2.4325-50. Gasoline pries at the pump in the u.S. continue to soften. The AAA says the national average today is $3.448. One month ago it was $3.765 and a year ago the price was $3.378.

WTI spot futures have support at 79.93-94, then at 78.40-47. Resistance is seen at 82.59-64, then at yesterday's high at 83.34.

Natural?Gas

NG is lower today as EIA data disappointed and Freeport has said that their restart will be delayed by 2 weeks from their prior timeline. Next day cash Henry Hub pricing is down almost $1 versus yesterday, but we have seen weakness be the case often for weekend pricing in recent months.

The EIA data seen Thursday disappointed slightly as storage drew by 81 BCF, about 3-7 BCF below estimates. Total storage stood at 3.483 TCF as of November 25. This is 89 BCF less than in storage a year ago and 86 BCF less than the 5 year average for the period.

NG slipped further after the EIA data as next day cash values had dropped quite a bit from those seen earlier in the day. They started the day at about $6.630, but had fallen to near $6.20 by mid-morning.

Our enthusiasm regarding the TTF price is being put to the test as momentum has turned negative for the Jan TTF contract as the price has reverted to value seen during much of November. The pullback, which started late in the session yesterday, was seen due to seven European Union member states pushing for a more effective cap on gas prices, arguing that the one on offer is unlikely to help consumers afford their energy bills. The Czech Republic proposed shortening the length of time prices would need to stay above that to trigger the mechanism to five days from two weeks. That’s still unlikely to be sufficient to those countries pushing for a tighter cap. (Bloomberg) Some countires are considering proposing a cap of 160 Euros for TTF pricing, which is well below the 275 Euro cap currently proposed. The fall in TTF futures pricing the past 24 hours comes even as European temperatures are seen falling below average over the next 2 weeks. (Reuters)

Technically NG has negative momentum basis the DC chart. Support for the January futures is seen at 6.500-6.505, then at 6.399-6.409. Resistance lies at the overnight high at 6.829-6.839.

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