Market Update 2/4/21

Overview

Energies are forging ahead, making new highs for Brent crude and RB. The fundamental news remains positive. 

Wednesday OPEC+ released a statement stating they had achieved 100% compliance in January. This is in addition to the comment they made that they see oil stockpiles returning to the 5-year average by June. Also, the day before, a document seen by Reuters showed that OPEC+ expects the oil market to be in deficit throughout 2021, peaking at 2 MMBD in May. (CNBC/Reuters) 

Yesterday, Iraq announced they produced 3.807 MMBD of crude oil in January. This is below their quota amount of 3.857 MMBD. (Platts) 

The market was also bolstered by news that Democrats in the U.S. Congress took the first steps toward advancing President Joe Biden’s proposed $1.9 trillion coronavirus aid plan without Republican support. (CNBC) 

Teapot refiners in China boosted their crude impiorts in January by 35% from December as new import quotas kicked in turn of the year. Some of the January imports were from floating storage held since December as they had used up their 2020 quotas. February imprts are seen easing as product demand is seen slowing ahead of maintenance season, and due to the slower period associated with the Lunar New Year. This year's January imports were up 25% versus year ago levels. (Platts) 

The DOE stats seen yesterday showed crude supplies fell by only 0.994 MMBBL, while gasoline built more than expected and distillate supplies were little changed in contrast to forecasts that had called for a draw. The crude draw came even as net U.S. crude imports rose by 1.315 MMBD. 

Product demand fell. Gasoline demand fell by 63 MBD to 7.77 MMBD. This compares to the past 2 years' demand of 8.933 and 9.073 MMBD. Distillate demand fell by 102 MBD to 4.198 MMBD. This is below the past 2 years' demand figures of 4.211 and 4.673 MMBD. U.S. crude supplies are now at their lowest level since last March. (CNBC) 

Yesterday, Bloomberg reported that China's crude supplies are at their lowest level in a year. December's imports were low while refinery runs were high. Crude supplies are still 16% higher than a year ago. 

The only negative news item that we have seen today is a plaintive cry from the Indian oil minister that rising oil prices could hurt a global economic recovery. India imports about 85% of its oil needs and half of gas demand. (Reuters) 

Technicals 

The highs have not been signaled yet on the basis of price action, even as the contracts continue to trade over their upper DC bollinger bands. RSI's are above the overbought level of 70. 

The DC upper bollinger for WTI intersects at 5539. There is a double top from yesterday/today at 5633/5625. Above this, resistance lies at 5684-92 Support is seen at 5526. The RSI here is 71.6. 

RB has its upper DC bollinger intersecting at about 1.6428. The RSI is 73. Resistance lies at 16613-22, tested with a high of 16615. Support is seen at 1.6293-1.6313. 

ULSD has resistance at 1.7050, the high seen yesterday. Support lies at 1.6775-85 via 60 min chart congestion. The RSI here is 73. The Upper DC bollinger lies at 1.6852. 

Natural Gas

NG is up slightly as we await the EIA storage data today. Most estimates we have seen are bewteen -193 and -199 BCF. This compares favroably to last year's -155 BCF and the 5-year average of -146 BCF. The next 2 weeks' figures are seen very strong as well, as the forecast remains “solidly cold and bullish,” as per NatGas Weather. (NG I) 

Two colleagues have proffered a bullish sentiment. One colleague pegged support yesterday at the 2.757 level, saying that he was bullish. Another colleague suggests that the "upside potential could be substantial.” We are reminded of the polar vortex of 2014, which sent prices skyrocketing "topping $135 in the New York and New Jersey area due to pipeline issues.” (CNBC) Could we see something similar again?

Technically, NG has positive momentum. Our first support at 2.730-2.732 was almost tested overnight with a low of 2.734. Resistance above comes in at 2.894-2.899. 

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