Market Update 3-9-2023

Crude?is?up?73?cents?????Rb?is?up?75?points??????ULSD?is?up?50?points

Overview

Energies are higher, as they take a breather after the sharp declines seen the past 2 sessions. The news wires still have a negative narrative citing concerns over higher interest rates and the possibility of a recession. They say that this outweighs the positive that could be derived from the unexpected draw seen in crude in the DOE's.

The DOE statistics were on the surface somewhat supportive with crude oil supplies drawing by 1.694 MMBBL versus a forecast build of a little over 0.5 MMBBL. The crude draw broke a string of 10 weeks of builds. But, with crude exports falling by 2.267 MMBPD, the crude draw does not quite make sense. And again this week, it is an adjustment to supply that makes for the difference. This week, the EIA reduced supply by 384 MBPD, which equates to a draw of 2.688 MMBBL for the week.?Crude production was lower this week. The EIA ,though, explained that the drop in production is an adjustment to weekly data based on their Monthly data. Thus, this week’s domestic crude oil production estimate incorporates a re-benchmarking that lowered estimated volumes by 51 MBPD, or 0.4% of this week’s estimated production total. Gasoline supplies fell by 1.134 MMBBL, a little less than expected. Gasoline demand fell by 550 MBPD to 8.562 MMBPD. This is below the prior 2 years' data by 400 and 160 MBPD. Distillate demand continues to lag behind prior years by quite a lot, continuing the weeks long trend. This week demand fell by 321 MBPD to 3.514 MMBPD. The prior 2 years' demand was near 4.5 MMBPD. Distillates supplies are now 7% below the 5 year average; in mid to late January that deficit was 20%.

At CERA Week, Angola's secretary of state for oil and gas said that there was no need for OPEC to increase oil output to make up for Russia's 500 MBPD cut. (Reuters) This reinforces other comments heard this week from OPEC members that they will not be increasing output in the near future.

China's Producer Price Index fell in February by 1.4% after dropping by 0.8% in January. Investing. com interprets this as signaling that manufacturing activity in China is running well below capacity.

China is seen reducing gasoline and diesel exports in March by quite a bit from the pace seen the first 2 months of the year. Refinitiv says March diesel exports will fall to 120 MBPD and gasoline exports will drop to 82 MBPD. The first 2 months of the year saw them average 446 MBPD and 152 MBPD, respectively. The drop is seen due to increased domestic demand, refinery maintenance and lower refining margins in the region. India, though, has raised their gasoline and diesel exports. February saw diesel exports of 470 MBPD, which were the highest since December 2021. Gasoline exports rose to 314 MBPD in February, which were the best seen since April of last year. (Reuters)

Bloomberg details increased buying interest from large Chinese state owned refiners for Russian ESPO and Urals crudes. They are competing with Indian and Chinese teapot refiners. The increased buying interest has seen the crudes gain about $2 in value versus Brent over the last month. ESPO blend is seen valued at $6-$7 discount to ICE Brent. The Urals blend is worth $10 less than Brent. More importers are said to be getting more comfortable buying Russian crude as the sellers handle more of the shipping and insurance issues, as well as the transactions being done more in non-dollar denominated currencies. This may be partially why S&P Vice Chairman sees Russia maintaining crude production longer than many had expected. Bloomberg reports that the 4 week average ( in the period ending March 3) of Russian shipments to Asia of 3.1 MMBPD?were the most since Bloomberg began tracking such shipments in 2022.

The CFTC issued its report yesterday for money managers' positioning in futures/options in energies for the week ended Feb.14. WTI length rose by 13,150 contracts. RB length rose by 1,382 contracts. ULSD length rose by 3,471 contracts.

Technicals

Momentum remains negative. although when looking at the crude oil and ULSD DC charts, they show a market that has been range bound for over 3 months.

WTI spot futures have a double bottom from yesterday/today at 76.11-16. Support below that lies at 75.55. Resistance comes in at 77.83-85, then at 78.57-59.

ULSD spot futures see support at 2.7162-78, then light at 2.700. Resistance comes in at 2.8090-95.

RB support is seen at 2.6542-83 and resistance at 2.7090-2.7135, then at the 2.7570 area.

Natural?Gas-?NG?is?up?6.3?cents

NG prices are higher today as "Freeport LNG is showing stronger flows, although tightening will [also] need to come from other areas, such as lighter production or stronger residential/commercial demand," says NatGasWeather.com in a research note. (WSJ)

Freeport says that they have received regulatory approval to bring on their last liquefaction train. Freeport says that the 2 trains currently in operation had reached production levels in excess of 1.5 BCF/d. At full capacity, Freeport is seen capable of producing 2.14 BCF/d of gas for export. The facility ran at an average of 1.9 BCF/d from Jan.2021 through May 2022 as per EIA data.

The EIA storage data is seen as a draw of 79 to 81 BCF. This compares to last year's draw of 126 BCF and the 5 year average draw of 101 BCF.

We failed to add yesterday with regard to the STEO, the EIA sees NG demand in the first quarter being below the amount of NG production they foresee.?If the projection holds, it will be the first time on record that the U.S. produced more natural gas than it consumed during the winter quarter.

The CFTC report seen yesterday for the week ended Feb. 14 showed money managers reduced their net short position by 2,875 contracts to a total of 67,463 contracts. The spot futures for NG did not bottom until a week after the date of this report. So the next 2 data reports from the CFTC will be of great interest to see how much the move off of the low was a function of short covering by speculators.

Technically NG has negative momentum, but looks to have carved out support when looking at the lows of the 3 prior sessions bunched up at 2.506/2.532. Below that we see support at 2.410-2.415. Against that backdrop is the double top from yesterday/Tuesday at 2.694-2.698. Above that resistance is seen at 2.773-2.780.

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