Market Update 3-22-2023

Crude is +25 cents?????May RB is +1.94 cents????May ULSD is +4.86 cents

Overview

Energies are higher led by ULSD. Crude oil stocks rose, while a small draw was forecast, while Distillate supplies fell a bit more than anticipated and gasoline supplies fell a bit less than expected. The crude build weighed on crude prices overnight.

We suspect that all eyes are on the Fed's decision due out at 2 PM EST today. Will they raise rates? By how much? And maybe more importantly than all that --what will Fed Chair Powell say at his press conference?

Reuters cited interest rate fears for the drop in crude prices overnight. Further price weakness followed an unexpected rise in UK inflation in February, raising fears of further interest rate hikes a day before the Bank of England announces its latest interest rate decision.

The heads of 3 large trading houses commented that they see oil prices moving higher. Trafigura's and Vitol's heads spoke of underinvestment as supporting crude prices in the medium term. Vitol's head said that a more immediate issue is Russia's difficulty in selling all of the refined products it exported before February 5th, when European sanctions kicked in. "There's a whole bunch of products that are parked up looking for customers, not creating extreme concerns or shortages because the market is adequately supplied," Mr. Hardy said. "But as we go through the second quarter we're expecting a pretty significant rebound in aviation demand, and obviously summer is always a period of greater demand for gasoline." Gunvor's head sees Chinese demand gains helping tighten supplies. Vitol's head also cited China as showing signs of rebounding :?Mr. Weir pointed to a rebound in air travel, as well as an uptick in Trafigura's metal sales into China, as evidence of strength in the country's economy. (WSJ)

API?????????? ??Forecast????????Actual

Crude?oil?????-1.5/-1.55???????+3.262

Gasoline??????-1.4/-1.44???????-1.09

Distillate???? -1.3/-1.53???? ?-1.84

Cushing????????-0.498????????? ?-0.8

Runs??????????? +0.7%??????????n/av

Russia, on Tuesday, announced it will extend the current 500 MBPD output cut on crude oil until the end of June, although ship-tracking data so far indicates volumes so far this month have only fallen by around half of that target. (Quantum Commodities)

ANZ analysis suggests that U.S. shale output may be curtailed somewhat as regional banks tighten credit conditions. (Reuters)

CFTC data issued Tuesday for the week ended March 14th showed a very large drop in WTI length held by money managers. Net length fell by 58,593 contracts on ICE/CME combined. This came as a result of a combination of shorts added and longs reduced. RB net length fell by a large amount as well. Net length dropped by 11,845 contracts as longs were sold. ULSD positioning saw net length added. Money managers added 3,810 contracts.

Our suspicion that the front end Gasoil spread may have peaked looks premature. We suspect that the ongoing issues in France may be supporting front end Gasoil values even as the French government is taking action. Several French refineries were still blocked from delivering products on Tuesday after two weeks of strikes, disrupting production and power supply, while attempts to requisition workers at the Fos depot sparked scuffles with police. The French government has taken steps to order workers to resume operations at the Fos depot operated by Gas Depots of Fos, the Transport minister said. Fights broke out at the Fos site after the requisition order. Strategic reserves of fuel have been utilized "in a targeted manner" since the beginning of March, the French energy ministry said. (Reuters) Total has halted its 247 MBPD Normandy refinery, whilst the remainder of Total and Exxon refineries are all operating below capacity, ING reports.

Technicals

Momentum?is?positive?for?the?energies.

WTI spot futures see next resistance at 70.94-71.10. Support lies at 67.89-94. Notable to some degree is the increase of almost 5,000 contracts in WTI open interest on the CME from yesterday's activity, even as April going off the board saw open interest there drop by over 16,000. We suspect new length was added.

May RB sees support at 2.4712-21. Resistance lies at yesterday's high at 2.5321-55 and then at 2.5564-88. We note the double top in the April June RB spread from Monday/Tuesday with momentum having turned negative. First support comes in at 750.

ULSD has a bit of a stepladder up look. Resistance for May ULSD lies at 2.6289-92, then at the 2.66 area. Support is seen at today's low at 2.5438-67. CME data for yesterday's trading shows a marked increase in open interest for May and June, which we see as new length.

Natural?Gas?-NG?is?down?8.5?cents

NG is lower today after yesterday's surprising late day rally. Today's setback is a reality check given weather demand has been dialed back in overnight forecasts.

The rally seen Tuesday was qualified as a "dead cat bounce" and a "bear market bounce". We suspect that end of day market on close buy orders were the culprit. The May Trading at Settlement market traded +5/+6 in the close, indicating some strong buy interest. The volume of TAS contracts traded for May was large at 25,542 contracts, reinforcing the notion of market on close buy interest. This notion is supported further we feel by open interest data from the CME for Tuesday's session. Total open interest rose by nearly 21,000 contracts, with large increases in May through August.

Barchart.com cites a colder forecast for the rally seen Tuesday. We also saw a comment from Tudor. Pickering analysts that may have been a catalyst for the rally. "Our channel checks with both private and public operators firmly suggest gas directed rigs will be cut in the Haynesville, Eagle Ford and Anadarko basin over the coming quarter... We think it is one of the key factors long-only accounts are looking for," Tudor Pickering says in a research note. Their analysis was aimed to a fair degree at setting up attractive buying opportunities for shares of natural gas companies. (WSJ)

TTF had a key upside reversal yesterday basis the April spot futures daily chart. Prices dipped below 40 Euros early in the day Tuesday for the first time since July 2021, but closed above the prior day's high at 42.4 Euros/Mwh. ANZ Bank offered the following reasons for the uptick in TTF pricing : "Traders' focus returned to supply issues amid disruptions at a liquefied natural gas facility in Angola and technical difficulties at the Freeport LNG export terminal, the bank noted. These were exacerbated by risks of strikes in Britain's oil and gas sector in the coming weeks." (MT Newswires)

CFTC data issued for NG positioning by money managers on the CME showed they covered short positions in the week ended March 14. They reduced their net short position by 15,757 bringing their total net short position down to 17,965 contracts. This is the smallest net short position held by money managers since the week ended June 10 2022.

Technically, NG still has negative momentum, although in a day or 2 it will look oversold. Support for the spot futures is likely at the low from yesterday at 2.127. Resistance lies up at 2.420-2.427.

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