Market Update 1/28/21

Overview

Energies are lower as coronavirus concerns and slower vaccine rollouts are dampening enthusiasm. The concerns overwhelmed what should have been a better performance in light of the very strong draw on crude supplies seen in the DOE data. 

Wednesday's late day fall back in energy prices mirrored that seen in equities as concerns were heightened about the virus. (WSJ) A White House adviser said that it may take months before all who want can get vaccinated. The Fed Chairman said that the economy's path depends on the virus. He also said that global disinflationary forces remain in effect. "The pandemic still provides considerable downside risks to the economy." (WSJ)

The DOE data was supportive for crude oil with a large draw of 9.91 MMBBL. This came as crude imports fell by 978 MBD to a 12-week low of 5.06 MMBD. Crude exports rose quite a bit as well adding to the draw in supplies. Exports rose by 1.104 MMBD. The draw on crude in the Gulf region was 6.427 MMBBL. U.S. crude production fell by 100 MBD. 

Gasoline stocks built more than expected. They rose by 2.469 MMBBL. Gasoline demand fell to 7.833 MMBD. This compares to the last 2 years' demand of 8.793 and 9.564 MMBD. Distillate supplies fell in-line with expectations. Stocks fell by 0.815 MMBBL. Demand rose by 479 MBD to 4.3 MMBD. This compares to 2019's 4.122 MMBD and 2020's 3.901 MMBD demand levels. 

Refinery crude inputs fell by 39 MBD to 14.721 MMBD. Refinery demand typically sees much larger declines in late January and operators begin to idle capacity for shoulder season maintenance. EIA data shows a typical decline of net crude inputs of around 600 MBD over this period, and the relatively weak pullback seen last week pushed net inputs to just 8% behind the 5-year average, the weakest deficit since the week ended March 20. Notably, USGC net inputs were the strongest since late March after climbing 110 MBD to 8.11 MMBD as margins continued to edge higher. (Platts)

Crude supplies are now 5% above the 5-year average. Distillates are +8%, while gasoline supplies are 3% below the 5-year average.

Technicals

Momentum points lower for crude oil and ULSD, while the momentum in RB is nearly overbought.

Spot WTI has a double top from Tuesday/Wednesday at 5325-30. Support below is seen at 5182-85.

April Brent futures show their double top at 5609-19. Support below lies at 5489-94, which is just below the low overnight of 5497. Below this we see support at 5440.

March RB support is seen at 1.5490-1.5500. Resistance lies at 1.5839-44.

Natural Gas

February NG settled at 2.760, which is the best spot valuation since December 22nd. February traded as high as 2.773, getting close to the upper end of the range ($2.80), we see as in force currently. The strength in spot futures capped the largest three day percentage gain since Thursday, October 1, 2020. (WSJ)

The EIA data due out today is forecast to show a draw of 138/139 BCF as per news wire surveys. This compares to last year's draw of 170 BCF and the 5-year average of -174 BCF. NGI estimated that inventories would finish the current withdrawal season at 1,859 BCF.

Platts has 2 separate articles detailing the demand uptick and price rises associated with the current cold snap in the Midwest and Northeast. The articles also point out that the strong demand seen currently could well tip storage of NG in these areas into a deficit relative to year ago levels in the coming week(s). There is also the possibility for freeze offs in some production areas in the U.S. associated with the current cold.   

The rise in futures prices the past few days has lagged values seen in the cash market. NGI’s Spot Gas National Average continued its own multi-day rally, surging 52.0 cents to $3.370 on Wednesday. 

NG export volumes have rebounded this week. They were above 11 BCF on Wednesday and near record levels, after fog last week had cut export volumes. (NGI)

Technically, March, now the front month, sees resistance at 2730-32 and then at 2770-73. Support below lies at 2.589-2.595. Momentum is positive. 

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