Market Update 9-14-2022

Overview

Crude and RB are higher, while ULSD is down quite a bit. News is more so negative than positive. API data disappointed. The IEA lowered Chinese demand forecasts. RB and crude prices fluctuated either side of unchanged overnight.

The IEA lowered their 2022 oil demand growth forecast by 110 MBPD, while keeping their 2023 growth forecast unchanged. The IEA lowered their Chinese oil demand forecast for this year. They see demand there 400 MBPD weaker than their last estimate. They see 2022 demand at 15 MMBPD, which is a fall of 420 MBPD from the 2021 level. For next year, they lowered their Chinese demand estimate by 300 MBPD, but they see demand still rising to 16 MMBPD. They offered more positive views in other regards. They see gas to oil switching in Europe boosting oil demand by 700 MBPD during the 6 months to March 2023. They also see Russian oil production falling to 9.5 MMBPD by February of next year, which would be 1.9 MMBPD below the February 2022 level. This is due to the ban on Russian seaborne crude imports that is set to start in December.??(WSJ/Reuters)

The U.S. Labor Secretary is hosting talks in Washington on Wednesday with freight railroad and union officials aimed at heading off a rail shutdown that could happen as early as Friday. The strike threat has so far had the largest impact on prices for ethanol, which is moved primarily by rail, although coal prices have also been supported by the threat. 70% of US ethanol is shipped by rail. With ethanol accounting for about 10%-11% of US gasoline volume, any disruption to getting that fuel to terminals for blending could impact gasoline prices, as per Platts reporting. A rail strike could also disrupt deliveries of crude in the US, primarily North Dakota Bakken crude from the Midwest to refiners on the USAC and USWC. The most recent monthly EIA data shows the Midwest shipping 4.619 million barrels of crude to the USWC in June, and 930,000 barrels to the USAC. (Platts)

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

Crude?Oil????????-0.2/+1.0?????????+6.04

Gasoline???????????-0.6??????????? ?-3.23

Distillate?????????+0.1???????????? +1.75

Cushing???????????n/av??????????? ?+0.1

Runs???????????????Unch???????????? n/av

Crude rallied late Tuesday into today on reports that the Biden administration was mulling crude purchases under $80 to refill the SPR. (Bloomberg)

ULSD prices are down quite a bit today, falling to their lowest level in over a month. Several forces are likely at work here. US CPI data suggests further interest rate hikes, which is seen slowing economic growth. Also, dialing back Chinese demand is not seen as supportive for overall economic activity. Refiners trying to maximize diesel/distillate production is likely also hurting.

Technicals

ULSD support near 3.50 seen this month has been broken. Resistance is seen below that now at 3.4825-50. Support lies near today's low. Support is seen at 3.3290-3.3300. The overnight low is 3.3256.

RB for October has support at the overnight low at 2.4323-57. Resistance lies at 2.5091-2.5112, then at the 2.5200 area.

WTI sees support at 86.18-28, then at 85.06-16, which are the 2 prior sessions' lows. Resistance comes in at 89.03-10.

Natural?Gas

NG is up today. A possible rail strike is supportive as is also the EU deciding not to impose a price cap on Russian natural gas.

Pre-winter coal restocking could be hamstrung by a US rail strike if railroads and labor unions can't agree on a new contract before Friday's deadline, the National Mining Association said in a statement released Sept. 12. Platts reporting added the following re a possible strike : "With less dispatchable coal available, power consumers could see prices soar on the back of near $9/MMBtu Henry Hub bullishness." Nearly 75% of the coal that moved to electric utilities in the first half of 2022, 150 million st of the 202 million st, was moved by rail as the primary transportation method, according to [Energy Information Administration] power plant operations data," . The EIA puts coal fired power generation at 21.1% for this year. (Platts)

TTF prices are up as the EU has decided not to impose a price cap on Russian natural gas pricing. Instead, the EU is proposing windfall profit taxes on energy firms. The EU Commission is proposing to skim off excess revenues from wind and solar farms and nuclear plants. Fossil fuel firms would also face a windfall levy under the EU plans. (Reuters)

NG has positive momentum. Resistance at the 8.48 area has been broken. Resistance above is seen at 8.785, then at 8.913-8.919. Support lies at 8.403-8.406, then at 8.230-8.236.

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