Market Update 2/22/2021
Overview
Energy prices are higher as some concerns linger as to how fast U.S. production will come back on stream. Product prices are lagging as, as of February 21, full or near-full refinery shutdowns have been reported at several refineries, according to the Department of Energy.
Oilfield crews will probably take several days to de-ice valves, restart systems and begin oil and gas output. It could take 2 weeks for the restart of 2 MMBPD of crude production .(Bloomberg) U.S. Gulf Coast refiners are assessing damage and may take up to three weeks to restore most of their operations, analysts said, as they are hampered by low water pressure, gas and power losses. (Reuters)
On the negative side, reports have OPEC+ possibly raising production by 0.5 MMBPD at their meeting next week, added to the likely return of up to 1 MMBPD of voluntary Saudi crude cuts. But, Saudi Arabia and Russia are seeing things dfferently heading to the meeting. The Saudis are urging caution, while Russia wants a supply increase. (Bloomberg)
Goldman Sachs raised their Q2 & Q3 Brent price forecasts by $10 to $70 and $75 respectively. They cited better than expected demand and continued depressed supply. Last week, UBS raised their 2nd half 2021 forecast to $68.
WSJ reporting cites coronavirus cases in the US have fallen 70% since an early January peak, as per the CDC, and that's starting to trigger more oil and fuel demand.
Friday , Baker Hughes reported that the U.S. oil rig count fell by 1 unit, falling for the first time in 13 weeks.
CFTC data issued Friday shows money managers covered shorts in WTI. The net length total rose by 16,219 contracts on CME / ICE combined in the week ended Tuesday Feb. 16. Positions in RB & ULSD held by money managers were little changed as per the CFTC report.
Today is the last trading day for the WTI March futures.
Technicals
Momentum points lower. But, there could be an argument for range bound prices, given that crude prices have rebounded well over the lows of the prior 4 sessions.
WTI for April has support at 5934, then at 5877-82. 5877 is the overnight low. Resistance above comes in at 6078, then at 6129-31 via 60 min data.
Brent for May sees resistance at 6311-19, then at 6412. Support lies below at 6214, then at 6139. The overnight low is 6180.
April RB sees support at 1.8645-46. Resistance above is at 1.9060.
ULSD for April sees resistance at 1.8311 and support at 1.7905.
Natural Gas
NG prices are 10 cents lower as temperatures in Texas are expected to remain moderate throughout the week, according to the Departement of Energy. WSJ reporting also cites the rebound in NG production for today's pullback. In addition, they cite profit taking after NG spot futures had risen the past 4 weeks.
NatGasWeather.com says the seven-day outlook for nationwide gas demand is down to "Moderate" from "High" last week. The longer-range weather forecasts into mid-March also look bearish, especially compared to February.(DJI)
Tudor,Pickering says “…Latest data show supply now sitting at 85 Bcf/d, up from the lows of 70 Bcf/d but still around 5 Bcf/d below pre-storm levels of around 90 Bcf/d.” ( N G I )
Friday, Baker Hughes reported that the U.S. NG rig count rose by 1 unit.
CFTC data seen Friday showed money managers raised their net length in NG futures/options on the CME by 4,504 contracts in the week ended Tuesday Feb. 16.
March NG options expire tomorrow. The $3.00 strike on the CME has the most open interest. The calls have 22,248 contracts and the puts have 8,787 contracts outstanding. No other nearby strike has any significant open interest on the CME.
Technically, NG looks soft having broken support near 2.91. We see support below in the 2.822-2.823 area. Resistance above comes in at 2.956-2.962. The latter is the high overnight.
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