The information provided in this market update is general market commentary provided solely for educational and informational purposes. The information was obtained from sources believed to be reliable, but we do not guarantee its accuracy. No statement within the update should be construed as a recommendation, solicitation or offer to buy or sell any futures or options on futures or to otherwise provide investment advice. Any use of the information provided in this update is at your own risk.
PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Crude futures fell today amid rising Libyan oil production, continued coronavirus-related fears, losses in European equities, and strength in the US dollar. Reuters reported that Libya’s National Oil Corporation (NOC) and France’s Total discussed the NOC’s efforts to raise production capacity and increase production rates to the highest levels, as well as expanding investments of the French company in Libya. Libya’s oil production has reached 1.25mb/d, according to a statement by the NOC. In US economic news, weekly initial jobless claims rose from an upwardly-revised 711,000 to 742,000, while the Econoday consensus called for a dip to 710,000. On the other hand, the Philadelphia Fed Manufacturing Index for November fell from 32.3 to 26.3, while forecasts called for a sharper decline to 24.5. Existing US home sales figures for October were also supportive. Sales accelerated from an upwardly-revised 6.570m and to a 6.850m annualized pace, while expectations called for a drop to 6.470m. European shares closed in the red today with the CAC 40 down 0.7%, the FTSE 100 losing 0.8%, and the DAX falling 0.9%. US stock market indexes were trading mixed, as of this writing, with the S&P 500 and the Nasdaq up 0.1% and 0.6%, respectively, while the Dow was down 0.2%. The US dollar index was up 0.1%, after a five-session slide, which was unsupportive for crude oil prices.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures turned back south today amid a looser market balance expectation for next week, a weaker two-week heating degree day forecast, and a bearish weekly storage report from the Energy Information Administration (EIA). The EIA reported a 31bcf injection into underground natural gas storage for the week ended November 13, well above forecasts at 15bcf. Total storage levels rose to 3.958tcf, which is 8.0% higher than last year and 6.2% above the five-year average for the reporting week. Refinitiv analysts now see total US demand of 99.9bcf/d outpacing US supply at 98.8bcf/d next week, implying withdrawals of just 1.1bcf/d (compared to yesterday’s forecast at 2.9bcf/d). The Global Forecast System cut its heating degree day forecast by 10 to 271 for the next two weeks, which is well below both the 30-year average of 335 and last year's 311 HDDs over the same period. The latest 1-5, 6-10, and 11-15 day outlooks (EC) all see above-normal temperatures in both the Midwest and the Northeast. In the cash market today, prices at the Henry Hub benchmark fell from $2.55 to $2.37/mmBtu, Transco Zone 6 prices in New York dropped from $2.51 to $1.73/mmBtu, and Algonquin citygate prices tumbled from $4.51 to $1.81/mmBtu.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures rose 0.5% in an inside session (higher low, lower high) – consistent with our neutral/bullish bias. Slow stochastics, candlesticks, moving averages, and the MACD all point higher, while the RSI is neutral, so we are going to remain neutral/bullish. We continue to see nearby resistance at $1.3054 and then up at $1.3500, while the 100-day ma ($1.1910) and the 200-day ma ($1.1544) are seen offering support. RBOB futures gapped lower overnight but strengthened intraday to settle flat – consistent with our neutral view. We remain neutral, seeing nearby support at the 200-day ma ($1.1131) and then down at $1.0310, while the 100-day ma ($1.2030) and $1.2546 are expected to offer resistance. WTI futures also gapped lower and rose intraday to settle only 0.2% lower. Stochastics and the RSI are neutral, along with candlesticks, while the MACD is bullish, so we remain neutral for now. We continue to look at $43.78 and $45.27 for resistance, whereas the 100-day ma ($40.50) and the 200-day ma ($36.21) are our nearby support levels. Finally, NYMEX natural gas futures dropped 4.4% in a downside session – with bears taking out the 50-day ma ($2.675). Slow stochastics are oversold but the RSI does not confirm oversold conditions (38.8). The MACD is neutral and looks set to cross the zero line and become bearish. We are going to remain neutral for a bit longer, seeing nearby resistance at the 50-day ma and then up at $2.762, while $2.403 and then the 200-day ma ($2.076) are expected to offer support.