Market Update 9-7-2022

Overview

Crude and ULSD are lower, while RB is slightly higher. Crude oils made fresh monthly lows overnight on recessionary fears and concerns over Chinese Covid lockdowns, then tried to rally back to being up for the day as President Putin is threatening to cut off energy supply.

The European Union proposed a price cap on Russian gas on Wednesday hours after President Vladimir Putin threatened to halt all supplies if they took such a step, raising the risk of rationing in some of the world's richest countries this winter.?Credit rating agency Fitch said on Tuesday the halt of the Nord Stream 1 pipeline has increased the likelihood of a recession in the euro zone. (Reuters)

Concerns remain in the face of the expected rate hike by the ECB tomorrow. The Euro remains weak versus the dollar.

Gasoline prices at the pump in the U.S. have fallen for an 85th day. They stand at $3.764. Yet, RB is higher, likely due to strength in the transatlantic arb, as per Quantum Commodities.

In a sign of the weaker tone in the crude market over the last month, the Saudis yesterday lowered their OSP to Asia for their flagship A-Light crude by $3.95 to a premium of $5.85 over the average of the Oman and Dubai benchmarks. Prices to NWEurope and the Med for A-Light were slashed by $2.00.

The DOE petroleum statistics will be released tomorrow at 11 AM Eastern Time.

Technicals

The pattern continues of negative momentum for crude oil and ULSD, while being neutral for RB. Price action has not quite signaled a low in place for crude as yet, though momentum will be near oversold in a day or so basis the DC charts for crude oil.

WTI support on the DC chart is seen at the overnight low at 85.01-08. Below that support lies at 82.94-99. Resistance comes in at 88.38-41, then at 89.63-66.

RB support comes in at the overnight low at 2.3807-19 and then at the low seen last week at 2.3501 on the DC chart. Resistance comes in at the prior 2 sessions' highs at 2.4978, then at 2.5299.

October ULSD sees support at 3.5000-3.5050. Resistance lies at 3.6150-75, then at the 3.6620-35 area.

Natural?Gas

NG has tested below $8 again today after a late day selloff below $8 Tuesday as the EPA said it has denied a request from LNG exporter Cheniere Energy Inc. to exempt turbines at its two U.S. Gulf Coast terminals from a hazardous pollution rule, regarding methane emissions. Cheniere warns that the EPA rules may disrupt gas supplies. (Reuters/Bloomberg)

NG has also suffered due to rising U.S. production and the easing of TTF prices from record highs over recent days. TTF prices are down today as the EU will pursue radical steps including price caps and a clawback on power and oil companies’ excess profits as it tries to stop its energy crisis from becoming an economic catastrophe. The EU is set to consider emergency power-use cuts. (Bloomberg)

Technically NG has fallen to a fresh nearly one month low. One colleague suggested yesterday that spot NG futures may test the key $7.50 level. Momentum remains negative. Volatility was very high this morning as prices fluctuated in a 50 cent range over several minutes on high volume. Algorithmic programs are being cited as the cause for the sharp spike in volatility. The 50 day and 100 day moving averages on the DC NG chart have been tested today. The 50 day moving average is 7.963 and the 100 day moving average is 7.875. Chart based support at 7.750-7.753 was tested with a low today of 7.751. If pierced, support below that lies at 7.623-7.625. Resistance comes in at the 8.267 area. The high today is 8.299. Above this we see resistance at 8.403-8.417.

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