Market Update 12/7/20

Overview

Energy prices have retreated as Covid-19 concerns resurface. Also hurting prices is a Reuters report about the U.S. imposing sanctions on at least a dozen Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong. China protested saying the U.S. was interceding in China's domestic affairs. 

Strict new measures related to the coronavirus were announced in California, Germany, and South Korea. (Reuters) In California 30,000 new infections were reported on Sunday—a single-day record for the state. Hospitalizations hit another record in the U.S. (WSJ)

Iran has instructed its oil ministry to prepare installations for the production and sale of crude oil at full capacity within three months, state media said on Sunday. (Reuters)

Chinese crude imports in November rose by 10% from October. November saw China import 11.08 MMBD. This was down by 0.8% from year ago levels. China's product exports in November fell by 14.5% from October. They were 32.2% below the 2019 level. (Platts)

Baker Hughes reported Friday that the oil rig count rose by 5 units. This was the 11th rise in the past 12 weeks. (Reuters)

CFTC data issued Friday showed that money managers raised their net length in WTI by a total of 6,255 contracts on ICE/CME combined. ULSD net length rose by 5,882 contracts due to shortcovering. RB net length was shed by 5,276 contracts.

In Asia, the Jet/Kerosene and Gasoil markets both firmed. The Kerosene market was supported by heating demand—notably from Japan. The Gasoil market was said to be firming as VLCCs move product out of the region and lower Gasoil exports from China are foreseen in December. (Platts)

Technicals

Technically, the energies have positive momentum. 

WTI support is seen for January at 4527-31. The overnight low is 4536. Below this, we see support at 4466-73. Resistance lies at the high from Friday at 4668 and then at 4756-57.

RB is the weakest link today as the restrictions in California are seen affecting one of the largest gasoline demand areas. Support for January RB is seen at 1.2438-45. The 1.2438 price is the low seen today. Support below that lies at 1.2236-39. Resistance above comes in at 1.2820 and then at the recent highs at 1.2960-67. 

January ULSD support lies at 1.3792-93. Its resistance comes in at 1.4201.

Natural Gas

NG futures are sharply lower as CWG reduced their weather forecast by 13.5 HDDs. 

Baker Hughes reported Friday that the U.S. NG rig count fell by 2 units in the latest period.

CFTC data seen Friday showed money managers having added to their net length in the week ended December 1st. Net length rose by 13,461 contracts due to short-covering.

Technically, NG is still soft as it trades at a two-month low. The spot futures have support at 2.373, which is the top of the gap seen on the DC chart. That gap goes down to 2.176. Support below 2.373 is seen at 2.275-2.284. Resistance above lies at 2.462-66 and then at 2.505-08. There is some support technically via the January daily chart. That chart shows a RSI indicator below 30. A reading below 30 indicates oversold conditions. The daily chart shows its lower bollinger intersecting at about 2.45. These two indicators could cause some to cover short positions, but the technical picture overall does not suggest anything bullish.  

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