Market Update 3-21-2023

May Crude is up $1.11??May RB is up 1.75 cents?????May ULSD is down 0.8 cents

Overview

Energies are being boosted by the stronger equity markets, as asset classes feel a bit better about the banking contagion. The next focus for investors is the decision by the U.S. Federal Reserve on whether and by how much to raise interest rates when it concludes its two-day meeting. (Reuters)

U.S. crude oil exports to Europe hit a record high in March, due to a wide WTI to Brent discount in January which prompted many spot deals for the cheaper U.S. crude, analysts and tanker-tracking firms told Reuters this week. The U.S. has shipped so far in March a record 2.1 MMBPD on average of crude oil to Europe, according to estimates cited by Reuters. In January, the WTI Brent arb was as wide as $7. Current valuation is near $5.85.

The Brent/Dubai cash spread crunched to a six-month low, as Asian markets were seen more resilient in the face of the banking crisis compared to western benchmarks. The Brent/Dubai cash spread for May delivery was assessed by Quantum at just $0.02/b on Monday, versus $0.52/b in the previous session, although Brent/Dubai has largely been in decline since the start of the year with the spot spread at over $4/b in early January.

Quantum Commodities details the fact that gasoline and Gasoil time spreads in Europe have risen to their best values in 4 months. Refined products continue to prove more resilient than crude, with European road fuel markets tightening as strikes in the French downstream oil sector combine with seasonal stock drawdowns and firmer demand. Backwardation on ICE gasoil April-May futures was up to around $34/mt earlier this week from $31.50/mt at Friday’s London cash close, nearly double the $17.25/mt a week earlier. Notable is the seeming peaking action in the April May Gasoil spread in the attached chart.?The Eurobob oxy E5 gasoline April-May swaps were up to $15/mt backwardation from around $8/mt a week earlier. Backwardation in both markets rose this week to their widest since last November, when similar French industrial action caused widespread disruption to regional supply.

Hedge fund manager Pierre Andurand speaking about the crude price drop on Tuesday, said it was speculative and not based on fundamentals. He also said oil will hit $140 a barrel by the end of the year. (Reuters)

Today?is?the?last?trading?day?for?the?April?WTI?crude?futures.

Technicals

Momentum is turning positive from oversold condition in the crude oils and RB. ULSD looks poised to do the same in the next day or 2.

WTI for May has support at 65.79-89 and resistance at 69.83 and then at 70.94-71.10.

Brent?spot?futures?have?support?at?71.67-86?and?resistance?at?76.89-91.

RB for May sees support at the overnight low area at 2.4710-21. Resistance lies at 2.5802-23.

May?ULSD?sees?support?at?the?2.5038?area?and?resistance?at?2.5910-34.

Natural?Gas-?April NG?is?down?5.3?cents

The current malaise in NG and TTF pricing was synthesized in comments made by Citadel's head of commodities : "European prices would have fallen below Euro 40 even without the current situation in the markets. Gas is bearish in both Europe and N America as we have had a mild winter and an oversupply."

The weather today in the U.S. Northeast is set to be very mild and the weather demand from a key consuming area -Texas - does not look supportive. Houston, Austin and Dallas are all expected to have highs in the 70s and 80s for the next 14 days straight, according to The Weather Channel. That will neither spur cooling nor heating demand. One colleague has told us for weeks that he will turn bullish when Dallas has temperatures over 90 degrees, which he says would spur A/C load.

TTF futures prices in Europe have fallen today to their lowest value since July 2021. Storage is high. And yesterday, the European Commission proposed extending for a year an emergency measure to curb gas demand. The measure is set to expire and the Commission is asking EU countries to extend it for a year further until April 2024.?They are suggesting a voluntary target to curb their gas demand by 15% versus their 2017-2022 average consumption. The target was due to expire at the end of March. (Reuters) Europe's gas storage facilities are just under 56% full currently – a historic high for the time of year. Low gas prices could stimulate higher demand through some industry scaling up production and as a result of coal-to-gas switching. (Natural Gas World)

Chart activity shows NG continuing to drift lower as overnight prices fell to their lowest since Feb 22. The break of 2.220 support sees no real support then until 2.095. Resistance comes in at 2.420-2.427. Momentum remains negative although in a day or 2 it looks like momentum will be oversold.

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