Market Update 2/5/21

Overview

Energies continue their inexorable march higher. Demand hopes, OPEC supply cuts and a U.S. stimulus package are still the market drivers. 

Saudi Arabia kept their OSP to Asia unchanged for March. One week ago a Reuters survey of some Asian refiners was calling for a modest drop of 16 cents for the OSP for their flagship A-Light crude. Some market participants expected cuts across all OSPs given the softening demand among Asian economies due to the coronavirus outbreak leading to a dip in domestic production. (Platts) The Saudis raised prices to all other destinations. Prices rose by 10 cents to the U.S., by $1.40 to NW Europe, and by $1.30 to the Mediterranean. The price hikes to these regions were seen highlighting the improving demand and tightening market fundamentals according to WSJ reporting. 

The Asian crude market seems to be questioning ongoing demand for Middle Eastern crudes due to refinery maintenance and pandemic worries, besides the threat of arbitrage barrels from other regions, such as West Africa, Brasil and the Mediterranean. (Platts) 

Global equities were said to be near record highs, as per Reuters reporting. The S&P 500 rose 1.1% to a record Thursday after news that weekly jobless claims declined from the previous week. (WSJ) 

The U.S. Non-Farm Payroll issued today showed 49,000 jobs were added. This was right in line with Reuters and WSJ surveys which were calling for an increase of 49,000/50,000 new jobs. However, revisions to December and November figures shed 159,000 jobs. The dollar fell due to the report while crude rose. 

Technicals

Prices have risen to fresh highs today. Momentum is now overbought for ULSD and RB and the RSI indicator is overbought for all the energies. Yet, there is nothing in the price action that signals a top in place. And we refer to our comment of 2 days ago that mentioned that a bull flag on the DC WTI chart suggests a possible move to $59. 

WTI spot futures have support at 5526-30. Resistance lies at 5748-55 from DC values from November 2019. The DC high bollinger intersects at about 5611. 

RB spot futures support is seen at 1.6490-95, then at 1.6360-70. Resistance comes in at 1.6786-1.6800. 

ULSD March futures see their support at 1.6775-85 vis a vis the 60 minute chart. Resistance above comes in at 1.7400-05 from congestion seen on the DC chart going back to June 2019. 

Natural Gas

NG has risen to its best spot futures price since November 13 pushing back over $3. The NGI headline today reads "Astonishing colder weather models propel prices" higher. 

Yesterday's EIA data was on the lower end of expectations. Storage drew by 192 BCF, which was just below survey estimates calling for -193/-199 BCF. Storage is now 41 BCF over a year ago levels and 198 BCF over the 5-year average. However, the market rallied in the latter half of the day due to the impending cold. 

The next 2 weeks' data is seen shrinking the 5-year average surplus by nearly 150 BCF. Platts Analytics sees next week's data showing a draw of 181 BCF. That compares to the 5-year average of -125 BCF. The data for the week ending February 12 is set to show a draw of 230 BCF, Platts Analytics says. This is better than the 5-year average draw of 142 BCF. Platts goes further to forecast that end October storage this year may only get to 3.1 TCF That would be 600 BCF below the 5-year average and 800 BCF below the level seen at the end of October last year.

NG futures have positive momentum. Resistance in the 3.051-57 area was tested with a high of 3.057. Above this we see resistance at 3.087-3.091. Support is down at 2.950-55, which was tested with an overnight low of 2.953The only drawback to the supportive picture is that the DC upper bollinger intersects at 3.029. 

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