Market Update 7-15-2022

Overview

Energies are consolidating the move off the multi month lows seen Thursday. Currency and equity values have stabilized. Crude prices have risen today to their best value seen over the past 3 days.

The pullback from almost 2-decade highs in the dollar comes as Fed’s officials dialled down the probability of a full 1 point interest rate hike at the July 27 gathering. Fed officials Waller and Bullard – both hawks – favoured on Thursday a 75 bp rise at the upcoming meeting, adding that markets appear to have overreacted to higher-than-expected inflation figures in June. (FXStreet.com)

Oil prices are also being supported by news from Reuters that a US official said an immediate Saudi oil output boost is not expected.

Oil is stable even as Chinese economic data disappointed. Second quarter growth at 0.4% was the worst since at least 1992, excluding early-2020 when the COVID pandemic erupted. The first quarter reading this year was + 4.8%. Today's data puts the Government's official target for 2022 of 5.5% in doubt. A Reuters poll sees it coming in at 4%, while among firms tracked by CNBC, the median forecast was 3.4% as of late June.

Chinese refinery thruput in June rose to 13.37 MMBPD from May's level of 12.7 MMBPD. But this year's level in June lagged last year's record figure in June of 14.8 MMBPD. (Reuters)

Today is the last trading day for the August WTI options. Current data from the CME for the expiring options does not suggest any major fireworks for today's futures settlement based on the options open interest.

Technicals

Crude oils held assaults Thursday on not only their 200 day moving averages but also their lower bollinger bands on the DC charts. Crude prices yesterday fell to their lowest level since the Russian invasion of Ukraine. The question for us is whether the current situation warrants a return to such values. Physical pricing seen of late suggests that the crude oil market is tighter than it was in late February. Prices along the futures forward curve corroborate that.

WTI spot futures DC basis has its 200 day moving average at 93.56. We see support above that at 94.84-85, which was tested with a low of 94.57. Resistance lies at 97.96-98.05, which was tested with a high of 98.08. Above that resistance is seen at 99.80-88.

Brent spot futures resistance is seen at 103.27-30. Support lies at 98.41-50, which was tested with a low of 98.17. The DC chart 200 day moving average is at 97.21.

August RB support is seen at 3.1495-3.1500. Resistance is seen at 3.2834-39, then at 3.3304-3.3333.

ULSD?for?August?sees?support?at?3.6167-73?and?resistance?at?3.7600-50.

Natural?Gas

Today's NG price declines appear to be weather-related as higher-than-normal nationwide demand downshifts briefly to a more seasonal pattern. "National demand won't be quite as strong today and Saturday as weather systems track across the Great Lakes, Ohio Valley, and Northeast w/showers and comfortable highs of 70s and 80s," says NatGasWeather.com in a research note. But, it adds: "The July 17-28 pattern remains exceptionally hot and bullish as unseasonably strong/hot upper high pressure rules most of the US." (WSJ)

The EIA data seen Thursday was in line with expectations. Storage rose by 58 BCF putting total storage at 2.369 TCF. Storage is 319 BCF/11.9% behind the 5 year average and -252 BCF/-9.6% versus last year's level. Chatter in the market we have heard sees next week's EIA number showing a build in the 30's BCF. This is below the addition last year of 50 BCF and the 5 year average build of 41 BCF.

Cash prices in the Southeast remained firm on Thursday as the heat there and maintenance issues along some pipelines caused some flow restrictions. (NGI)

Is NG being impacted by the following headline seen on Reuters today : "Japan hopes to restart four more nuclear reactors by winter" ???Will European nations follow suit?

Technically, NG has positive momentum, but we wonder if a comment we made 2 days ago is still operative : "Yet, does yesterday's (Tuesday's) selloff suggest a range for spot NG futures prices? Is that range 6.00-6.83 ?" We heard comments yesterday suggesting that the overall picture for NG technically improved with yesterday's move over what some see as key resistance in the 6.83 area. Current value near 6.53 is below all the highs put in this week. Resistance lies at 6.786-6.798, then at yesterday's high of 6.898. Support lies at 6.430-6.438, tested with a low of 6.420. Below that see support at 6.247-6.257.

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