Market Update 12/30/20

Overview

Energies are higher, lifted by supportive API data, a weaker dollar and gains in equities overseas.

MSCI’s gauge of Asia-Pacific shares excluding Japan rose 1.4% to a record high, led by gains in Chinese shares and bringing its gains this year to 19%. Europe’s main markets were heading for a sixth straight session of gains. (Reuters)

The Euro rose 0.3% to $1.2295, a level last seen in April 2018. (Reuters)

    API                 Forecast           Actual

    Crude Oil         -2.5/-3.8          -4.785

    Gasoline          +1.6/+2.3        -0.718

    Distillate          +0.6/+1.3        -1.887

    Cushing             n/av              +0.131

    Runs               +0.6/+0.7%       n/av

Chinese state-owned refiners have dialed back refinery runs to date in December from November levels. The run rate has dropped to 78% from 80% as the refiners look to decrease inventories ahead of year end and some undergo maintenance at their facilities. Gasoline and Gasoil sales have risen since mid-November, according to the Platts article. Independent refiners in China are also said to have lowered their runs somewhat.

The news from Japan shows refinery run rates at their best in 38 weeks. They have risen to 81% of capacity at 2.80 MMBD for the week ended December 19th. But, they remain down 11.5% from year ago levels. In anticipation of the need to make kerosene for winter demand, Japan's crude imports rose in November by 1.9% from October. Imports were seen at 2.30 MMBD. Kerosene demand in Japan is seen remaining firm as people stay home due to the pandemic and temperatures remain chilly. The period from December 19th through January 1st is forecast to see temperatures below the 30-year-average. (Platts)

Technicals

The sideways pattern for prices persists, even as momentum has turned positive for the energies.

March Brent has resistance at 5205 and then at 5246. Support comes in at 5092-96 and then at 5059-69. The one drawback here is the weakness seen in the front spread the past few sessions. It is trading at its lowest value in almost 5 weeks. Is the February weakness due to the upcoming expiration for the contract? The March/April spread has also weakened this week, but the chart shows positive momentum.

RB spot futures have risen to their best value since late August. The February contract has some resistance at 1.3969. The February high today is 1.3928. Resistance above 1.4050 comes in at 1.4345-60 from weekly chart lows. Support for the February futures lies at 1.3582-83. 

ULSD support in February is seen at 1.4782-87. Resistance lies at 1.5090-93 and then at 1.5188.

WTI price support lies at 4750-56 and then at 4654-60. Resistance above comes in at 4859-62 and then at 4928-31.

The CME will have regular trading hours tomorrow December 31st. They will close at 5:00 PM ET. The markets will be closed all day Friday for New Year's. The CME will reopen on Sunday January 3rd at 6:00 PM ET.

Natural Gas

NG is trading near unchanged after yesterday's firm expiration for January futures. The January contract gained 16 cents, while February rose almost 12 cents. Some cited the need to close out positions ahead of expiration for the rally. Some said it was a technical bounce since the forecast still shows above average temperatures until mid-January. The latest weather models still don’t show potential for sustained widespread cold until January 12th at the earliest, according to NatGasWeather. (NGI) 

WSJ says that some of the rally may be in anticipation of a better than average EIA storage number expected tomorrow. The US Energy Information Administration is expected to report a 123 BCF withdrawal for the week ended December 25th, according to an S&P Global Platts survey of analysts. A 123-BCF pull would be stronger than both the 87-BCF withdrawal reported in the corresponding week last year and the five-year average draw of 102 BCF. (Platts)

Platts Analytics sees LNG global growth in 2020 at +2%.They see it rising by 3% in 2021, fueled by Chinese led Asian demand, which will offset a decline in European demand they say. The 2020 and 2021 growth estimates lag behind the 11% increase seen in 2019. Citigroup projects prices in 2021 to average $3.30 for the Henry Hub, $4.80 for TTF and $5.50 for JKM.  

Technically, NG still has negative momentum with resistance seen at the bottom of the gap created over the weekend at 2.515. Above that, resistance lies at 2.594-2.596. Support comes in at 2.381 and then at 2282-2284.

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