Market Update 3-14-2022

Overview

Energies are much lower with WTI leading the way as peace talks between Russia and Ukraine are seen progressing.

Russian state-controlled news agency RIA reported that ongoing talks have made "substantial progress" and a "joint position" could be reached soon, while Ukraine said it is willing to negotiate but will not surrender or accept any ultimatums. (Quantum Commodities)

Prices may also be suffering due to lockdowns being instituted in China due to the latest Covid outbreak. The Chinese daily new case load figures have hit two-year highs. (Reuters) This has led analysts to reduce their Chinese oil product demand forecasts. Platts quotes analysts who see a 4% drop from prior demand estimates. Jet fuel demand is seen being hampered. Gasoil demand for shipping industrial products is seen being reduced, as will be gasoline demand for urban transportation.?(Platts) Today Chinese equities in Hong Kong fell the most since 2008. Besides the Covid lockdowns, the equities suffered due to a report citing U.S. officials that Russia has asked China for military assistance for its war in Ukraine. Even as China denied the report, traders worry that Beijing’s potential overture toward Vladimir Putin could bring a global backlash against Chinese firms, even sanctions. (Bloomberg)

India is considering taking up a Russian offer to buy its crude oil and other commodities at discounted prices with payment via a rupee-rouble transaction. (Reuters) A Russian oil and gas company has allowed Chinese buyers to receive oil without providing letters of credit, so as to bypass Western sanctions. (Reuters)

The down move today in energy prices comes even as news surfaced of Iran accepting responsibility for a missile attack on a U.S. consulate complex in northern Iraq over the weekend. Iran said it was retaliation for an Israeli strike in Syria that killed two members of its Revolutionary Guard earlier this week. The attack drew harsh condemnation from the Iraqi government, which called it a “violation of international law and norms”. (ABC News)

The?Baker?Hughes?oil?rig?count?seen?Friday?showed?a?rise?of?8?units.

CFTC data issued Friday showed money managers shed a great deal of longs in options/futures in RB & ULSD in the week ended Tuesday March 8. RB net length fell by 12,666 contracts, while ULSD net length fell by 10,889 contracts. Money managers' WTI net length held on ICE/CME combined rose by 2,531 contracts.

Technicals

Momentum is negative as WTI sank to its worst price since the steep rise began at the beginning of the month.

Support for spot WTI futures lies at 100.50-55. Resistance comes in at 110.25-30.

April RB has a double top from Friday/today at 3.3186-3.3250. Support is seen at 3.1270.

ULSD for April has support at 3.2075. Resistance lies at 3.4665-85 via the 60 minute April chart and then at?3.5229.

Brent?for?May?sees?support?at?105.60-79?and?resistance?at?113.91.

Natural?Gas

NG is being dragged down by the easing of worries in Europe over supplies, but also by the impending drop in U.S. demand. EBW analysts see this week's demand falling by 30 BCF/day from last week. The demand fall is being offset some by the drop recently in U.S. NG production. Bloomberg said output was below 92 BCF/d Friday. This was down from 93 BCF/d seen much of the week and down from the prior week's level of 95 BCF/d. EBW sees production rising this week as freeze-offs ease. (NGI)

Russian?gas?flows?to?Germany?were?seen?steady?early?Monday.?(Reuters)

European and UK gas inventories are seen ending the season at 265 TWh , this is up from a projection of 257 TWh one week ago and 238 TWh one month ago. Lower worries over supply are reflected in the July 2022/January 2023 spread premium in TTF pricing that has narrowed to just under Euro 18/Mwh from a value one week ago of +72 Euro/Mwh. (Reuters)

The Baker Hughes NG rig count issued Friday showed an increase of 5 units.

CFTC data regarding money managers' positions in options/futures in NG on the CME showed they added more net short contracts in the week ended Tuesday March 8. They increased their net short position by 13,030 contracts to a total of 15,426 contracts.

Technically NG has negative momentum as Friday's CME futures volume again was light suggesting a lack of interest in establishing new positions and a lack of conviction on price direction. We see NG spot futures currently stuck in an overall range from 4.30 to 4.94. For today, support comes in at 4.497-4.507, which was tested with a low of 4.506. Resistance lies above at 4.793-4.797.

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