Market Update 4-25-2022

Overview

Energy prices are down hard due to interest rate fears, economic slowdown worries and concerns over Chinese Covid cases. ULSD is the strongest contract again today amid concerns over global distillate supplies.

The following quote seen on Reuters today sums things up well : "It seems that China is the elephant in the room. The tightening COVID-zero restrictions in Shanghai, and fears Omicron has spread in Beijing, torpedoed sentiment today." "The Covid situation in China appears to be moving in the wrong direction with Beijing seeing a spike in cases over the weekend." , as per a quote seen on the Dow Jones wire.

Recent comments from Federal Reserve members have led to market expectations of a 50-basis-point hike at the May 3-4 FOMC meeting, which would be the first such move since 2000. Some Fed officials — including San Francisco President Daly and Chicago President Evans — have said that a couple of 50-basis-point hikes are possible this year." (Yahoo Finance) The dollar is higher today on the back of the prospects for higher rates in the U.S.

Rystad Energy analysis sees global oil demand falling this year by 1.4 MMBPD to 99.6 MMBPD, and it is not seen recovering until 2023. (Platts)

Reuters in an article today describes how the sharp rise in NG prices, which is a key input cost, has caused some European refiners to cut runs, particularly distillate-producing units. This contributed to a sharp fall in distillate inventories worldwide, putting a premium on production of diesel and jet fuel.

The?Baker?Hughes?rig?count?issued?Friday?rose?by?1?unit.

CFTC data issued Friday showed little change for WTI and ULSD positions held by money managers in the week ended Tuesday 4/19. RB net length rose by 2,861 contracts during the same period.

Technicals

Momentum remains negative. Support for WTI near $100 and in RB near 3.20 have been broken.

WTI spot futures see support at the 95.17-95.32 area. Resistance lies at 99.76-88, then at 101.01-102.12.

June RB support comes in at 3.1218-49. Resistance is seen at 3.2140-55, then at 3.2775-3.2810.

June ULSD support lies at 3.5030-35, then at 3.4818, which is the overnight low. Resistance is seen at 3.580-10, then at the overnght high at 3.6255.

Natural?Gas

NG seems immune to the weakness in the energies as prices are near unchanged. A slight chill is seen in the U.S. this week, leading to some demand increase, followed by less demand due to warmer weather next week, (WSJ) There is a slight loss of production (1.2-1.5 BCF/d) in the Bakken region due to a blizzard there, which is possibly supporting NG today. Next day Henry Hub cash prices,though, have weakened this morning from Friday's level. Cash prices are now near $6.30 versus Friday's level of $6.45.

TTF prices are higher today supported by cooler weather forecasts for the coming weeks in Europe and by reduced flow from Norway and fear of reduced Russian flows. Over the weekend, the head of the Ukraine state owned company Naftogaz said that one-third of gas volumes shipped via Ukraine to Europe could be lost due to Russian forces in recently occupied territories, and Moscow’s troops are disrupting operation of pumping stations. Yet, the reduced flows are being countered by higher LNG imports into Europe. Imports in April are already 30% higher than a year ago. (Bloomberg)

The?Baker?Hughes?rig?count?seen?Friday?rose?by?1?unit.

CFTC data issued Friday showed money managers pared their net length in NG futures/options on the CME by 3,983 contracts in the week ended Tuesday 4/19, bringing their total net lentgh to 21,619 contracts.

Technically NG still has a stepladder down look despite today's perceived firmness. Momentum remains negative. Friday's settlements somewhat reversed Thursday's movement along the curve. The May 2022 through February 2023 portion of the curve dropped by between 42 and 47 cents, while the April-October 2023 strip fell by "only" 25-27 cents. June NG futures, now the most traded month, have support at the lows of Friday and today at 6.56 and then 6.471. Resistance comes in at the overnight high at the 6.832-6.844 area.

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