Market Update 1/25/21

Overview

Energy prices are down slightly as news stories tug in both directions.

The Petroleum Facilities Guard militia group has begun a strike at some Eastern Libyan export facilities. This imperils half of Libya's 1.2 MMBD exports. The Guard have issues regarding payments. (Platts)

In Asia, energy prices were said to have risen on the news that California's Governor was expected to lift some stay at home restrictions, which would boost gasoline demand in one of the highest consumption places. (WSJ) 

Oil prices were said to be supported by news of an Iranian oil tanker having been seized off Indonesia, as an oil transfer to another vessel was underway. Yet, both vessels had disabled their transmitters, violating Indonesian law. According to the Indonesian coast guard, the tankers have violated the rules of right of transit. (Platts) 

The positive news was offset by news out of China of an increase in COVID-19 cases. (Reuters)

Global equities were near record highs today, rallying on hopes for a large U.S. stimulus package. Goldman Sachs said: "On our estimates, a $2 trillion stimulus over 2021-22 would...boost U.S. (oil) demand by about 200 MBPD." (Reuters) Yet, as per Dow Jones reporting, Republicans and some Democrats signaled concerns over the size and cost of President Biden's $1.9 trillion bill. Some lawmakers discussed trying to pass a smaller, more targeted aid package focused on vaccine funding, and the White House has signaled it is prepared to negotiate. 

Friday's DOE data disappointed for crude supplies. They rose by 4.352 MMBBL. Estimates were calling for a draw of between 1.2 and 2.5 MMBBL. Crude exports fell by 760 MBD to 2.251 MMBD. Imports of crude into the U.S. fell by 194 MBD to 6.045 MMBD. The crude stockpile build was concentrated in the Gulf Coast region, where supplies rose by 5.594 MMBBL. Refinery runs rose by 0.5% to their highest percentage level since March, according to Reuters. Refineries operated at a rate of 82.5%. Product demand rose. Gasoline demand rose by 580 MBD to 8.112 MMBD. Gasoline demand was still behind the levels seen the past 2 years of 8.662 and 8.868 MMBD. Distillate demand was up 212 MBD to 3.821 MMBD. This compares to the past 2 years demand of 4.389 and 4.668 MMBD. Gasoline was supported Friday post stats as stockpiles dropped by 0.259 MMBD. This was a surprise as stocks were forecast to build by 2.1 to 2.7 MMBBL. The build in distillate supplies of 0.457 MMBBL was slightly better than expected. 

Friday’s Baker Hughes oil rig count showed an increase of 2 units. This was the 9th straight increase. 

CFTC data issued Friday showed money managers added net length in WTI, ULSD & RB in the week ended Tuesday 1/19. WTI length rose by 7,348 contracts on ICE/CME combined. RB net length rose by 827 contracts. ULSD net length rose by 6,042 contracts. Additions of new longs in ULSD were the cause.

Technicals

Momentum is neutral for the RB March daily and the Brent DC contracts. But, it points lower on the ULSD March daily and WTI DC charts. As suggested last week, resistance seems to be building.

For WTI. the 53.13-16 area provides resistance. Support lies at 5144-50, then at 5044-48.

Brent seems to be struggling over $56. Today's high is 55.99. Above this, we see resistance at 5657-64. Support lies at 5448-49.

For March ULSD, the 1.60 area seems to be setting up as resistance. We see resistance at 1.6033-43. Support lies at 1.5570-75. 

March RB support is seen at 15282-93, then at 15064-89. Resistance lies at 15621-34. The high overnight is 15696. 

Natural Gas

NG gapped higher over the weekend as weather models showed "solid demand gains.” (N G I ) The February contract, which expires Wednesday, retreated earlier this morning to fill the gap to a tee. The high Friday was 2.504. That is today's low at present. The March contract high seen Friday was 2.511, while today's low is 2.498.

The Baker Hughes NG rig count seen Friday rose by 3 units.

CFTC data issued Friday showed that money managers reduced their net length in futures/options on the CME by 16,893 contracts in the week ended Tuesday, January 19. This reduction was a function of both longs being shed and shorts being added. 

The EIA NG data seen Friday was positive. Storage fell by 187 BCF. This beat estimates by about 10 to 15 BCF. Storage is now only 36 BCF over year ago levels. But, it remains 198 BCF over the 5-year average.

Technically, NG still has negative momentum, but seems stuck in the range seen over the past almost 2 months. As we wrote 2 weeks ago, spot NG seems stuck between the high $2.30's and near $2.80. For today, the March contract has support at 2.493-2.498. The latter is the overnight low. Below this, we see support at 2.459-2.462.  Resistance lies at 2.596-2.606, then at 2.641-43.

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