DAILY ENERGY COMPLEX COMMENTARY 12/2/2022 CRUDE ... - StreetSmart Central

DAILY ENERGY COMPLEX COMMENTARY

Wednesday April 05, 2023

DAILY ENERGY COMPLEX COMMENTARY

4/5/2023

Surprise API inventory declines temporarily hold up prices

OVERNIGHT CHANGES THROUGH 6:06 AM (CT): CRUDE -19, HEATING OIL -36, UNLEADED GAS +100

CRUDE OIL MARKET FUNDAMENTALS: Given the massive gap up trade to start the week, it is very surprising crude oil prices have managed to hold gains in the face of a clear deterioration in US economic activity. However, global economic data has held together thereby keeping overall global demand hope in place. Fortunately for the bull camp, yesterday's API report produced a sweep of distinctly supportive inventory decline readings. In fact, API crude stocks reportedly dropped by 4.3 million barrels which is a much larger than expected decline projected for EIA crude oil inventories this morning. While not a major supportive development, crude oil storage in the euro zone (ARA) fell 44,000 barrels last week. Reports of building inflows to short oil funds are expected to continue but are unlikely to drive prices lower without an explosion of risk off headlines. While a 1.1 million barrel per day reduction in global oil production should offset a moderate amount of softening demand, global scheduled data this week appears to be signaling significant demand losses. However, the crude oil trade yesterday stood up against sagging demand signals even though prices were dramatically overbought from a $5 gap higher opening trade on Monday. Perhaps the markets were supported yesterday because of the threat of a North Sea oil worker's strike with is expected today and is scheduled to last 48 hours. This week's Reuters poll projects EIA crude oil stocks to decline by 2.3 million barrels with last week's report showing US EIA crude oil stocks holding a 63.7-million-barrel surplus to year ago levels. The Reuters survey also projects a 0.3% increase in the refinery operating rate, which has remained below yearold levels since the first week of February. The API survey released after yesterday's close showed US crude oil stocks having a weekly increase of 4.35 million barrels which was much larger than trade forecasts. In retrospect, the ability to hold above $80.00 yesterday was impressive given an emerging pattern of soft US data this week. In our opinion, fear of slumping demand will eventually overcome expectations of tighter supply and in turn will knock May crude oil back down into the gap left by Monday's opening. The gap in May crude oil begins at $79.00 and closes with a trade at $75.72.

PRODUCT MARKET FUNDAMENTALS: The bull camp in gasoline failed to stand up to the dramatic deterioration in demand expectations yesterday, as the gap left by the strong Monday opening was almost closed. However, we suspect the gasoline market will derive temporary support from news yesterday afternoon of a 3.97million-barrel decline in API gasoline stocks. With gasoline prices faltering yesterday in the wake of a series of very supportive global fuel demand forecasts, we see prices following through on the downside today. In fact, RBOB futures held the largest net spec and fund long positioning relative to other petroleum markets last week and therefore an extension of demand fear again today should foster a wave of stop loss selling. This week's Reuters poll projects EIA gasoline stocks to decline by 1.7 million barrels and another decline of that size could produce the largest year-over-year deficit reading since 2021. The API survey said that US gasoline stocks had a weekly decline of 3.970 million barrels which was much larger than market expectations. Obviously, the critical support and a pivot point is $2.6931 in May gasoline with a secondary's support/failure price pegged at $2.6632. Not surprisingly, the diesel market filled its Monday morning gap opening trade with the slide yesterday giving the bear camp a technical edge today. This week's Reuters poll projects distillate stocks to decline by 400,000 barrels which will likely serve to add to the year-over-year surplus readings in both distillate and diesel stocks at the EIA. The API survey said that US distillate stocks had a weekly decline of 3.69 million barrels which was significantly larger than trade forecasts. Critical support is $2.6253, and a key failure price is seen at $2.5948 in the May ULSD contract.

Weekly EIA Petroleum Estimates - Week Ending 3/31/2023 - In Million Barrels

High Estimate Low Estimate Stocks Last Week Stocks Change Last Week

Crude Oil

-2.1

-2.5

473.7

-7.3

Distillates

-0.2

-0.6

116.7

o.3

Gasoline

-1.5

-1.9

226.7

-2.9

NATURAL GAS: The most positive development for the bull camp in natural gas is the market's capacity to hold above the $2.00 psychological price level this week. However, a bit of lingering cold in Europe, record US LNG exports and the massive jump in petroleum prices has probably discouraged some would be natural gas sellers. Overnight reports surfaced suggesting one of 3 French liquefied natural gas import facilities shut down by strikes could be restarted today which is more psychologically supportive than supportive from a physical demand angle. This week's Reuters poll projects EIA natural gas in working storage to decline by 10 to 23 BCF. It is likely the North American winter heating season will end with only 3 triple digit weekly withdrawals and potentially with EIA gas in storage running nearly 25% above 5-year average storage levels. With the net spec and fund short positioning in natural grass declining consistently since the February 28th report and given the sideways consolidation action since the last positioning report was measured, it is possible that some would be sellers are losing interest. As indicated already, the $2.00 level offers a thin measure of psychological support for prices. While natural gas prices have not shown significant pressure from deteriorating macroeconomic conditions this week, that should not be ruled out especially if US data becomes cooler, and temperatures become warmer.

TODAY'S MARKET IDEAS: While we expect crude oil prices to fall in the wake of a wave of soft global data in the coming sessions, it is possible that API and EIA storage data will provide "temporary" support. Ultimately, we think a full week of disappointing US economic data will puncture energy demand hopes and allow petroleum markets to correct overbought technical conditions created by the gap up explosions on Monday. When the US energy demand hope balloon is punctured, we suspect the gasoline market will lead the petroleum complex lower. However, the crude oil market has the most overbought classic chart set up with that massive gap up on Monday potentially creating a major pivot in market sentiment. In other words, the failure to hold $79.00 in May crude oil could result in a sudden cascade of stop loss selling and a slide below $77.50.

NEW RECOMMENDATIONS: None.

PREVIOUS RECOMMENDATIONS: Long March natural gas $6.50/$7.70 bull call spread at 0.150.

OTHER ENERGY CHARTS:

ENERGY COMPLEX TECHNICAL OUTLOOK:

Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.

CRUDE OIL (MAY) 04/05/2023: Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The near-term upside objective is at 82.83. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 81.64 and 82.83, while 1st support hits today at 79.45 and below there at 78.43.

HEATING OIL (MAY) 04/05/2023: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's close above the 9-day moving average suggests the short-term trend remains positive. The upside closing price reversal on the daily chart is somewhat bullish. It is a slightly negative indicator that the close was under the swing pivot. The next upside objective is 275.85. The next area of resistance is around 272.36 and 275.85, while 1st support hits today at 263.16 and below there at 257.44.

RBOB GAS (MAY) 04/05/2023: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a slightly negative indicator that the close was lower than the pivot swing number. The nearterm upside target is at 283.31. The next area of resistance is around 278.82 and 283.31, while 1st support hits today at 270.00 and below there at 265.67.

NATURAL GAS (MAY) 04/05/2023: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The market's short-term trend is negative as the close remains below the 9-day moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 2.201. The next area of resistance is around 2.147 and 2.201, while 1st support hits today at 2.057 and below there at 2.022.

DAILY TECHNICAL STATISTICS

14 DAY

14 DAY

9 DAY 14 DAY

SLOW

SLOW

CLOSE

RSI

RSI

STOCH D

STOCH K

ENERGY COMPLEX

CLAK23

80.55 74.53

65.49

70.75

84.71

CLAM23

80.56 74.58

65.57

70.90

84.75

HOAK23

267.76 57.97

52.31

55.73

64.35

HOAM23

262.84 59.51

52.77

52.04

62.60

RBAK23

274.41 66.08

60.82

76.28

82.20

RBAM23

269.69 67.08

61.20

75.03

82.73

NGAK23

2.102 35.78

37.39

11.35

12.22

NGAM23

2.340 36.32

37.96

11.29

10.84

Calculations based on previous session. Data collected 04/04/2023

Data sources can & do produce bad ticks. Verify before use.

4 DAY M AVG

77.75 77.82

2.63 2.58 2.70 2.65 2.13 2.37

9 DAY M AVG

74.36 74.47

2.61 2.55 2.66 2.60 2.19 2.43

18 DAY M AVG

72.44 72.55

2.60 2.54 2.59 2.54 2.36 2.59

45 DAY M AVG

75.50 75.54

2.70 2.65 2.62 2.58 2.57 2.79

60 DAY M AVG

76.55 76.58

2.76 2.71 2.63 2.59 2.73 2.92

DAILY SWING STATISTICS

Contract

Support 2

ENERGY COMPLEX

CLAK23

Crude Oil

78.42

CLAM23

Crude Oil

78.47

HOAK23

Heating Oil

257.43

HOAM23

Heating Oil

254.09

RBAK23

RBOB Gas

265.67

RBAM23

RBOB Gas

261.86

NGAK23

Natural Gas

2.021

NGAM23

Natural Gas

2.268

Calculations based on previous session. Data collected 04/04/2023

Data sources can & do produce bad ticks. Verify before use.

Support 1

79.44 79.47 263.15 258.83 270.00 265.71 2.057 2.302

Pivot

80.63 80.64 266.64 262.10 274.49 269.81 2.111 2.343

Resist 1

81.64 81.64 272.36 266.84 278.82 273.66 2.147 2.377

Resist 2

82.83 82.81 275.85 270.11 283.31 277.76 2.201 2.418

This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited.

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download