Market Update 11-23-2021

Overview

Energy prices are up now, despite the White House having announced that the U.S. will release 50 MMBBl of oil from its SPR. The barrels are set to hit the market in mid to late December. The release will be through sales and loans. India has pledged to release 5 MMBBL. The release is seen being further aided by China, S.Korea, Japan & Britain, according to the White House statement today. (Reuters)

The White House detailed that 32 MMBBL will be an exchange over the next several months, releasing oil that will eventually return to the SPR in the years ahead and 18 MMBBL will be an acceleration into the next several months of a sale of oil that Congress had previously authorized. As of November 12, the SPR had a total of 606.1 million barrels of crude oil, following a drawdown of 11.6 million barrels in October. (WSJ)

Yesterday, Goldman reiterated their belief that 4th quarter prices for crude will rise to $85. They say that in the past 4 weeks there has been a structural deficit of 2MMBPD in supply. Goldman points to the fact that OECD crude and Atlantic basin product suppplies are at 7 year lows. (Platts) It is worth adding that the concerted SPR release if it totals 100 MMBBL would equal basically one day's global demand, thus underscoring many analysts' comments that the SPR release is not addressing any structural issues.

The headline initially yesterday from the IEF of OPEC+ reassessing their oil output increase was later clarified. The head of the IEF said that he sees OPEC+ staying the course, unless disrupted by unforeseen external factors. (Reuters) Today the UAE Energy minister said that he sees no need for OPEC+ to deviate from their planned 400 MBPD output increase for January. OPEC+ is set to meet in 9 days (December 2). He says OPEC+ will stay the course even if there is a SPR release, though a looming oversupply in the first quarter will bear watching. (Platts)

Royal Dutch Shell is set to halve their crude processing this year at their large Singapore refinery. The refinery has the capacity to process 500 MBPD of crude oil. The reduction is in an effort to reduce emissions. Fuel exports will be reduced. The refinery will be testing new chemical feedstocks. (Reuters)

Technicals

Momentum has turned positive for the products and is poised to do so on the Brent DC chart. Prices have risen dramatically off the lows seen the past 2 sessions.

Spot WTI resistance is seen at 7942-48 and support lies at 7530-37, which are the lows from friday and today.

January RB support is seen at 2.1885-2.1905. Resistance lies at 2.2526-39.

January ULSD support is seen at 2.3160-70 and resistance at 2.3980-2.4000.

Natural Gas

NG has risen back over $5 on the spot futures as demand was added back in the overnight forecast, according to NatGasWeather. (WSJ)

Platts reports that yesterday spot gas prices in the Northeast rose to their highest seen since February as winter has arrived in the region. NYC Transco Zone 6 pricing hit $7.30 and Algonquin Citygate (New England area) rose to $9.64, which Platts says was double the price seen Friday. Below average temperatures are seen lasting through the first week of December, as per Platts reporting. But worries over future supply has seen winter month pricing drop back quite a bit recenty from highs seen in October. NYC Transco Zone 6 peak winter pricing is seen in the mid-$6's for December and low $10's for January/February, which is off 20% from the highs. The drop is seen as a function of the increase in Appalachian regions' production to record levels.

Tomorrow is the expiration of the December NG options. Preliminary data from the CME shows the $5.00 strike as the one with the most open interest for nearby options. The $5.00 call has 10,944 contracts open as of Monday close, while the $5.00 put has 13.446 contracts open. This may assist to drive prices towards $5.00 at settlement tomorrow. The release of the EIA NG storage data at Noon tomorrow will have an impact as well.

One colleague texted us yesterday:" watch out below ". We would agree with that assessment if and when the spot futures close below the 4.713 low seen about one week ago. Momentum is negative for the spot futures on the DC chart. Support lies at 4.820-4.830, then at the aforementioned low at 4.713-4.725. Resistance at 5.046-47 has been pierced. Next resistance lies at 5.171-5.183.

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