Market Update 12-30-2022

Overview

Energies are mixed in slow trading with little new news moving prices. ULSD is down on the back of disappointing DOE data. RB is supported by the DOE data and by the strength seen this week in European and Asian gasoline cracks.

The DOE stats were mixed. Crude supplies rose versus an expected draw. Distillate demand fell, while gasoline demand rose. Gasoline supplies fell versus a Reuters' poll forecast for an increase. Distillate supplies rose, while a draw was expected. Gasoline supplies fell by 3.105 MMBBL. Reuters had forecast a build of near 0.5 MMBBL. Gasoline demand rose by 613 MBPD to 9.327 MMBPD. This still lagged last year's figure of 9.724 MMBPD. Distillate supplies rose by 0.283 MMBBL, versus the forecast of a draw of 2 MMBBL. Distillate demand fell by 135 MBPD to 3.88 MMBPD, which is less than last year's demand of 4.051 MMBPD. Crude supplies built by 0.718 MMBBL as net crude imports rose by 1.328 MMBPD on the week. The forecast was for a crude draw of about 1.5 MMBBL.

Quantum Commodities reporting says the European gasoline crack has doubled over the past 2 weeks. They also report that Asian gasoline cracks have risen to a 4 month high. The refinery outages seen last week in the U.S. due to the winter storm have been supportive. US tightness should help clear excess gasoline built up in northwest Europe from late November, Quantum says. Asian cracks have been supported by the hope and expectation for a reopening of China.

Reuters analysis of the distillate inventories says that inventories have risen by 14 MMBBL in the 11 weeks since the recent low on October 7, compared with a prior ten-year seasonal average draw of 5 MMBBL. This has allowed the deficit in inventories versus the pre-pandemic 5 year seasonal average to be cut in half. That deficit is said to be 17 MMBBL, versus a deficit of 34 MMBBL seen as of October 7.

The Dallas Fed survey issued Thursday has a WTI price forecast of $84 for the end of 2023. The June survey forecast had expected this year's ending WTI price at $108. The survey had 152 energy firms respond.

On Thursday, TC Energy said that its Keystone pipeline was back to full service after a 21 day outage.?At full operation, the pipeline normally pumps about 622 MBPD from Alberta, Canada, to refineries in Texas, Illinois and Oklahoma. (ABCNews)

GasBuddy is forecasting that gasoline prices at the pump in the U.S. will average $3.49 in 2023. This is down 50 cents versus 2022. $4 prices are possible next summer as driving season then will boost demand. But, the drop foreseen overall for 2023 is seen due to improving refining capacity, the analysis says.

The key factors seen influencing energy prices in the coming year are the sanctions on Russian oil, the refilling of the US SPR, Chinese Covid cases and policy, inflation and the effect on economic growth and the value of the U.S. dollar.

Today?is?the?last?trading?day?for?the?January?RB?&?ULSD?contracts.

Technicals

Momentum for the WTI on the DC chart basis has turned negative and that for the RB & ULSD on the February daily charts and Brent on the DC chart seem set to do the same.

WTI?spot?futures?have?support?at?76.77-83?and?resistance?at?79.90-92.

ULSD?for?February?sees?support?at?3.1860-84?and?resistance?at?3.3023-48.

RB February futures see support at 2.3652-82, then at 2.3282-92. Resistance above is seen at the 2.4240 area.

Natural?Gas

NG tried to rally from settlement overnight, but temperatures that will see the next 2 weeks' HDD's lag significantly below normal is seeing prices lower now versus settlement.

Refinitiv says the next 2 weeks' HDD's are set to be 315. Normal for the period is a level of 439. Refinitiv sees NG demand in the U.S. this week at 142.6 BCF/d. Next week's demand is seen falling to 111.6 BCF/d.

Yesterday's EIA NG storage data was better than expected. The draw of 213 BCF beat expectations for a draw near 200 BCF. NG futures prices attempted to rally on the news, but then fell to the low for the day soon after. Total inventories are 3.112 TCF. This is 133 BCF below last year's level and is -85 BCF versus the 5 year average.

The Dallas Fed survey of 152 firms had the following results for NG pricing : NG prices end of 2023 are seen at $5.64. The June survey had forecast this year's NG price to end at $7.55.

S&P Global Insights sees Asian LNG/JKM prices averaging $27.40 in 2023. Commodity analysts at Citi Research are more bullish on LNG prices and forecast the JKM to average $36/MMBtu in 2023 in their base case. The average in 2022 was $34.002. In 2021 it was $15.034. By contrast, the spot February 2023 JKM (Platts) futures price settled at $28.83 Thursday on the CME platform. High volatile spot LNG prices and a weak global economy will dampen China's appetite for LNG, Platts analysis says. The supply shortfall in Europe will lead it to keep bidding LNG away from Asia, with JKM prices lower than TTF.

Technically NG has 2 indicators that offer some support. Momentum is oversold and there is currently a double bottom on the spot NG futures from yesterday/today at 4.422/4.425. Below that we see support at the 4.286-4.293. Resistance lies above at 4.790-4.797.

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