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PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Crude oil and refined products futures continued their upward march today despite weakness in US shares, a continued rebound in the US dollar, and another weekly rise in the US rig count. European economic data released this morning were mixed, but the heading item - Eurozone unemployment for November - was better than expected (see Pipeline for details). European shares saw further gains today, with the FTSE 100 up 0.2%, the DAX up 0.6%, and the CAC 40 gaining 0.7%. US shares opened higher, but lost ground later in the session and were trading flat to lower as of this writing. The Employment Situation Report for December was a mixed bag, but the headline nonfarm payrolls figure was a miss. Payrolls, expected to rise by 50,000 last month, instead saw a surprise drop of 140,000. There was a 91,000 upward revision to November payrolls, but this compensates for less than half of the 140,000 miss last month. On the other hand, the US unemployment rate (U-3) held steady at 6.7% rather than rising to 6.8% as expected, and the labor force participation rate held steady at 61.5%. In unsupportive supply-side news, Baker Hughes reported a rise of 8 in the US oil rig count this week, putting it at 275. This is the seventh consecutive weekly gain, over which time the rig count has grown by 44 - but is still well below last year's count of 384 at this time. Rising rig counts have come amid the stronger crude oil futures prices we've been seeing.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures snapped a five-session rally today, falling back slightly amid an uptick in the rig count and a steady degree-day forecast. The Global Forecast System continues to see 443 HDDs over the next two weeks, below the 30-year average of 461 but still well above last year's 364 HDDs. Refinitiv analysts see a tighter market next week than previously, however, as they raised their total US demand forecast by 0.7bcf/d to 127.0bcf/d while trimming their total US supply forecast by 0.2 to 100.6bcf/d, implying 26.4bcf/d withdrawals (versus 25.5bcf/d previously). Taking a regional perspective, however, the outlook for the next two weeks for the northern half of the country remains relatively unsupportive. The 1-5 and 6-10 day outlooks (ECMWF) call for above-normal temperatures in the Northeast and for temperatures in the Midwest to be well above normal. The 11-15 day outlook sees mixed, mostly above-normal temperatures across the country as well. In unsupportive supply-side news today, Baker Hughes reported a rise of 1 in the US natural gas rig count this week, taking it to 84. The count has risen by 9 in the last 5 weeks, and risen in 4 of those weeks. It is, however, still 35 lower than last year at this time.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
NYMEX ULSD futures gains accelerated today, marking a fourth consecutive session higher, with bulls taking out yesterday's high and hitting a new multi-month high of $1.5811 today. This was consistent with our directional bias, which we maintain for now - but we note that the RSI is now deeper into overbought territory and that slow stochastics are close to confirming overbought conditions. Next resistance at today's $1.5811 high, followed by $1.6424, whereas we see nearby support at the 9-day ma ($1.5065) and then down at the $1.4000 mark. We also favored upside chances for RBOB, and futures complied with a 4.0% jump today to take out $1.5000 resistance and test $1.5427 - settling just below the latter. We look to $1.5427 and then $1.6000 for next resistance, with support seen at $1.5000 and then at the 18-day ma ($1.3968). Slow stochastics and the RSI are both overbought, and we could be due for a consolidation or retracement in the coming sessions. WTI futures trade was also kind to our direction view, with prices rising 2.8% in an upside session today. As with RBOB, both the slow stochastics and the RSI are overcooked. We see nearby resistance at today's $52.33 high, followed by $55.58, whereas the $50.54 and then the 9-day ma ($49.31) are seen offering nearby support. Lastly, we noted yesterday that bullish momentum in NYMEX NG appeared to be flagging. Indeed, we saw a 1.1% dip today in a downside session, and the start of what could be a rounded top in the daily candlestick chart. Overbought slow stochastics have crossed for a sell signal - and although there is no confirmation from a very neutral RSI (53.1), we'll fall back to the sidelines looking to see if bears can follow through. We see nearby support at the 100-day ma ($2.630, tested and held up today) and then at $2.403, whereas $2.769 and then $2.898 are our nearby resistance levels.