Market Update 2/18/21

Overview

Energies are higher again, boosted by supportive API data for crude oil and distillates. Also helping is the ongoing loss of oil production and refinery disruptions seen in Texas. 

Reuters puts the refinery loss at 4 MMBPD and the oil production drop at 1 MMBPD. 2.7 million people are without power in Texas. The National Weather Service says temperatures will remain near freezing for several more days. This will likely complicate efforts to get the energy grid back to full capacity, and thus will still impact oil and refinery production. Natural gas accounts for half of Texas power generation. It could be weeks before oil production is fully restored, according to Woods Mackenzie. (Reuters) 

The Houston Ship Channel has opened to light traffic, but several other Texas ports remained closed. (Argus Media) 

The rise in oil prices is leading to a flow of diesel from NW Europe to the U.S. At least eight tankers with almost 2.8 MMBBL have been booked. Much of this load is seen heading to the U.S. East Coast. The U.S. East Coast normally gets large volumes of fuel from the Colonial Pipeline system that starts in the Gulf of Mexico.U.S. diesel inventories are at a eight-month low in the East Coast. (Bloomberg) 

API                  Forecast            Actual

Crude Oil          -2.0/-3.4            -5.8

Gasoline          +1.2/+2.2          +3.9

Distillate          -1.6/-2.2            -3.5

Cushing              n/av                -3.0

Runs                -0.2%                n/av

Yesterday, oil prices took a tumble in the early morning when reports surfaced that the Saudis are likely to bring oil production back online come April, thus ending their voluntary curb. The market shrugged that off as the current issues resulting from the weather in Texas are seen having a greater impact. The OPEC+ alliance is likely to keep their oil production cuts at the meeting in early March. (Oilprice.com / WSJ) 

Technicals

The Energies have again set new highs for the recent rally and that puts crude oil on track to be higher for the 12th day out of the last 13. Momentum remains overbought, yet it is hard to say that a top is in place. Although, between ameliorating weather, likely Saudi production increases and diesel fuel flowing to U.S., we see news items that instill some doubt into the bullish argument. 

WTI April futures see support at 6063-64. Resistance lies at 6259-64. 

April RB has resistance at 1.9215-30, whch was tested with the high of 1.9247. Support is seen down at 1.8835-45, then at 1.8642-50. 

ULSD April futures have support at 1.8250-63, then at 1.8105-15 as per the 60 minute chart. Resistance lies above at 18513-26 via weekly data. The overnight high is 1.8504. 

Natural Gas 

NG spot futures are down about 7 cents as demand is seen falling back as the weather ameliorates in the Southwest. Platts Analytics data shows total US gas demand, including exports, falling to 109 BCFD over the next week, down from the current 137 BCFD level. 

Overall, daily U.S. natural gas production is down by roughly 19% from the end of last week to 71.9 bcf per day on Wednesday, according to preliminary Eikon data. Governor Greg Abbott directed Texas natural gas providers not to ship outside the state until Sunday. U.S. gas pipeline exports to Mexico dropped to 3.8 BCFD on Wednesday, down from an average over the past 30 days of 5.7 BCF. Oil and gas production is expected to stay offline through Friday, as per an energy analyst at BTU Analytics. Hence, she adds, natural gas prices could continue to top triple digits before the weekend. (Reuters) 

Wednesday Henry Hub next day cash prices finished trading up $6.65 on the day to a record-high $23.61/MMBTU. Some regional prices remained very high as evidenced by prices at the Katy Hub in Houston trading around $216/MMBTU Wednesday, though this was down from $359 just one day prior. (Platts) 

The freeze has also sent Canadian natural gas exports to the United States soaring to levels last seen in 2010, said IHS Markit analyst Ian Archer Canadian imports remained near a three-year high at 7.7 BCFD. (Platts) 

The modest easing in demand allowed LNG feedgas deliveries to rise on Wednesday, hitting 6.3 BCFD. They had been running between 10 and 11 BCFD recently. (Platts) 

Today's EIA NG storage number is forecast to show a draw of 251 BCF as per WSJ survey. This compares favorably to last year's -141 BCF and the 5 year draw of 142 BCF. 

Technically, NG seems to have hit some decent resistance with yesterday's 3.316 high, testing highs in the 3.315-3.320 area seen last October as per the March daily chart. Above that we see resistance at 3.346 and then at the 3.393-3.396 highs seen on the DC chart from last November. Support comes in at 312-3130, then at 3049-3052. Momentum seems poised to turn negative. The sharp fall from yesterday's high seems somewhat damaging. 

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