Market Update 3-3-2023

Crude?is?down?$1.22???Rb?is?down?4.25?cents???ULSD?is?down?4?cents

Overview

The market remains stuck in the tussle between Chinese demand hopes and interest rate concerns. At present, the interest rate woe seems to be winning when looking at the fall in energy prices.

The 10 year German Bund yield rose today to its highest level since 2011. ECB President Lagarde said interest-rate increases may need to persist beyond a planned half-point move in two weeks’ time. She said policymakers will do everything to return inflation to the 2% target. Yesterday, the February Eurozone inflation reading came in at 8.5%. The market now believes that another 50 point hike is very likely in May, in addition to March's proposed hike. (Bloomberg/Reuters)

The down move in prices today comes despite a very positive Services sector PMI reading out today from China. The Services sector reading for February was 55.0, up from January's level of 52.9. The increase is being attributed to the relaxation of Covid restrictions that started in December. This is seen as boosting customer demand and also leading to a "solid increase in employment", as per Reuters reporting.

Platts reports that Chinese teapot refiners took in 9% less feedstock imports in February. This is seen due to planned maintenance to occur in March, as well as the desire to wait for government guidance at this weekend's key political meeting. But, on a barrels per day basis, February imports were still slightly higher by 0.8% from that of January as it has only 28 days. The bpd amount in February was 3.97 MMBPD.

Technicals

"Volatility continues to be suppressed and it’s not just in oil markets but across most commodities,” reads a comment from an analyst.

RB has a mean reversion on the DC chart after spending the past 2 sessions over the upper bollinger band. That band lies currently at about 2.7070. Chart based resistance lies at 2.6755-71 and then at yesterday's high at 2.7073-90. Support comes in at 2.6235-56, which are the lows from Wednesday and today. Below that support is seen at 2.5966-90.

ULSD?spot?futures?see?support?at?2.7920-47?and?resistance?at?2.8750-55.

WTI spot futures have support at 75.47-55 and resistance at 77.83-85. The overnight high is above that at 78.31.

Natural?Gas?-?NG?is?up?7.2?cents

NG seems supported at present by colder than normal weather in mid-March and by a slight pick up in feed gas demand to LNG export plants. Oddly, yesterday's bullish EIA number was mostly ignored. At current, HH next day cash valuation is near $2.70, which we believe currently translates to a spot futures price near $2.80. NatGasWeather says : "two main weather forecasting models "held a colder than normal pattern setting up over most of the US March 8-16 for stronger than normal demand". (WSJ)

The following comment seen in Platts reporting has great weight when looking at the tone for NG pricing going forward :?"One of the things the market is going to be looking at in the coming weeks is US rig counts to see if there's going to be an impact on production." This is especially of import seeing as the lower demand shoulder season is upon us in a few weeks.

The EIA NG storage data issued yesterday showed a draw of 81 BCF, beating all estimates we saw, most of which were in the mid 70's. Total storage fell to 2.114 TCF. Yet, the surplus to last year rose?to 451 BCF (+27.1%) and to the 5 year average to 342 BCF (+19.3%). Platts reports that the surplus has widened in 7 of the past 8 weeks. One firm posed the question as to whether the end of season NG storage level could fall to 1.8 TCF. That prospect seems a bit remote as the 5 year average decline in storage for the period to the end of injection season is 240 BCF. A similar withdrawal amount to the seasonal average would put the storage total near 1.875 TCF.

Natural gas demand in China is likely to grow this year as the economy recovers, but whether the country's imports of LNG rebound will depend on spot prices, an executive of PetroChina International said. As China's economic activity ramps up following the end of lockdowns, its domestic LNG demand could increase by 10% this year, the IEA has said. (Reuters)

TTF spot futures prices have fallen today to their lowest value since August 2021.?Argus Media cites a warm winter, high prices having curtailed industrial demand and a steady supply of LNG as leaning on prices. EU gas storage inventories stood at 62% of capacity on the morning of 27 February, well above previous years.

NG spot futures have momentum that is getting near overbought on the DC chart basis. There is currently a double top from yesterday/today in spot NG futures at 2.863/2.860. We see light resistance at the 2.93 area via the April daily chart. Best resistance lies up at the $3 area. Support lies at 2.705-2.710 via the 60 minute chart for April. Below that we see support at 2.554-2.568.

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