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PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Petroleum futures weakened today as uncertainty over US presidential election results continues and with new lockdowns in Germany and France amid surges in new COVID-19 infections, despite further weakness in the US dollar. Today's headline was the US Employment Situation report for October, which was a beat. A 638,000 rise was reported in the nonfarm payrolls, above the 575,000 consensus, and September payrolls were revised up by 11,000. Also supportive, the unemployment rate (U-3) dropped from 7.9% to 6.9%, below the 7.7% expectation. The labor force participation rate saw an increase from 61.4% to 61.7%. The Canadian Labor Force Survey had been expected to show a 50,000 rise in employment for the month of October, and instead showed a larger increase of 83,600. The unemployment rate in Canada fell from 9.0% to 8.9%, while forecasts called for no change. European shares closed mixed as the FTSE 100 edged up 0.1%, while the CAC 40 and the DAX lost 0.5% and 0.7%, respectively. US stock market indexes were trading mixed near the unchanged mark as of this writing with the Dow down 0.2%, whereas the S&P 500 was steady and the Nasdaq had gained 0.1%. The US dollar index was down 0.3%, its fourth session lower. In supply side news, US oil rigs rose by 5 this week to 226, per Baker Hughes.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures extended their losses to a fifth consecutive session despite a tighter market balance expectation next week, stronger heating degree day forecast, and a dip in the rig count. The latest 1-5 day forecast (EC) sees well above-normal temperatures across the eastern half of the country, and the 6-10 day outlook calls for above-normal temperatures on the East Coast but mixed temperatures in the Midwest. The Global Forecast System sees 192 heating degree days over the next two weeks, up from 185 in the prior outlook, but still well below the 261-HDD 30-year average and last year's 333 HDDs during the same period. Refinitiv analysts are seeing total US supply for next week at 96.7bcf/d, down 0.5bcf/d from the previous forecast. With the demand forecast revised up by 0.3bcf/d to 91.8bcf/d, smaller injections of 4.9bcf/d are expected. Also supportive, Baker Hughes reported a drop of 1 in the US natural gas rig count this week, putting it at 71. In the cash market, benchmark Henry Hub prices rose from $2.63 to $2.69/mmBtu and Algonquin citygate prices rose from $0.72 to $0.78/mmBtu, while Transco Zone 6 pricing at the New York citygate fell from $0.65 to $0.51/mmBtu.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures fell 2.3% in a downside session today (lower high, lower low) – inconsistent with our bullish bias. Slow stochastics are overbought but the RSI does not confirm overbought conditions, while candlesticks and the MACD are neutral. We are going to stick to our bullish bias for a bit longer, seeing nearby resistance at the 200-day ma ($1.1729) and then up at the 100-day ma ($1.1857), while $1.1338 and $1.0605 are still seen as nearby support. RBOB futures dropped 2.8% in a downside session. We settled just below $1.0861 support level, and we now see nearby support at $1.0000 and then down at $0.9702 (recent low), while the 200-day ma ($1.1280) and the 100-day ma ($1.2091) are expected to offer resistance. Slow stochastics are overbought, while the RSI is neutral along with candlesticks, and the MACD points lower. We are going to fall back onto the sidelines, awaiting further developments. WTI lost 4.3% in a downside session today with bears taking out the 9-day ma ($37.61). Stochastics are overbought and look set to cross bearishly and the RSI points lower, so we are going to take a neutral stance now, awaiting further developments, noting that a retracement could be possible in the next session after today's drop. We continue to see nearby support at the 200-day ma ($36.68) and then down at $32.64, while $41.49 and $45.27 are expected to offer resistance. Lastly, NYMEX natural gas futures fell 1.8% in a downside session – consistent with our bearish bias which we continue to maintain. Bears took out $2.898 support level, which now becomes nearby resistance, followed by $3.182, while $2.762 and $2.403 are seen offering support.