PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Petroleum futures saw losses of over one and a half percent today as US and European equities fell and as the US dollar strengthened against a basket of currencies, as well as with another double-digit increase in the US oil rig count. European shares saw losses of about one percent or higher, with the FTSE 100 in the UK down 1.0%, the French CAC 40 falling 1.2%, and Germany's DAX falling 1.4%. US economic news this morning was mixed but mostly unsupportive. US industrial production grew 1.6% in December, well above the 0.5% consensus, but the preliminary University of Michigan consumer sentiment index for January saw a sharper than predicted drop to 79.2, the Empire State Manufacturing Index saw a surprise drop to 3.5 this month, and US retail sales saw a sharper than predicted fall of 0.7% last month. Control group sales dropped 2.0%, against a 0.2% predicted uptick. As of this writing, the Dow and Nasdaq had slipped 0.3% lower and the S&P 500 had lost 0.4%. Also unsupportive, the US dollar index had rallied 0.5%. In unsupportive supply-side news, Baker Hughes reported a rise of 12 in the US oil rig count this week, putting it at 287. That's still 368 lower than last year, however.
ULSD Curves with RBOB & NAT GAS DISTILLATE STOCKS
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures turned north today despite a rise in the rig count, a slightly weaker heating degree day forecast for the next two weeks and a slightly looser US market balance expectation for next week, although there were some supportive shifts to the 11-15 day outlook. Baker Hughes reported a rise of 1 in the US natural gas rig count, to 85 this week. The Global Forecast System sees 443 HDDs over the next two weeks, down from 445 previously. This is above last year's 395 HDDs but below the 457-HDD 30-year average. Refinitiv analysts cut their total US demand forecast for next week by 0.6bcf/d to 121.8bcf/d, while trimming their supply forecast by 0.3bcf/d to 99.6bcf/d, implying slightly smaller withdrawals from storage of 22.2bcf/d. Both the Midwest and the Northeast are expected to see well above normal temperatures over the next 5 days according to the latest ECMWF outlook. The 6-10 day outlook sees above-normal temperatures in the Midwest, but some below-normal temperatures in New England. The 11-15 day outlook calls for large deviations below normal for parts of the Midwest and mostly below-normal temperatures on the East Coast, save for much of Maine. Cash natural gas prices were flat to weaker, with Henry Hub benchmark prices holding at $2.82/mmBtu, but with Zone 6 prices at the New York citygate falling 10 cents to $2.70/mmBtu and Algonquin citygate prices dropping 88 cents to $3.02/mmBtu.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures hit a fresh high of $1.6235 but came off and we fell 1.6% today in an outside session with tepid volume. Slow stochastics, the RSI, and candlesticks are bearish, but the MACD, major averages, and ADX all point higher. Given the relatively weak volume and the fact that bears did not take out nearby support, we'll refrain from abandoning the bulls just yet, still looking to the 9-day ma ($1.5716) and then to $1.4000 for nearby support, with nearby resistance at today's high ($1.6235) and then up at $1.6424. RBOB futures also fell 1.6% today in an outside session (higher high, lower low) with a test of the 9-day ma ($1.5171) at the lows. Slow stochastics and the RSI are bearish along with today's candlestick, whereas the MACD, ADX, and major averages point north. We'll wait for a stronger showing from the bears before falling back to the sidelines, favoring upside chances and continuing to look to $1.5756 and then $1.6000 for resistance ,and to $1.5000 and then the 18-day ma ($1.4480) for support. WTI futures fell 2.3%, also testing the 9-day ma at the lows but settling off of those lows. Indicators are quite similar to products, and our view remains the same. We see nearby support at the 9-day ma and then down at $50.54, whereas $53.93 and then $55.58 are seen offering nearby resistance. Natural gas futures rose 2.7% today, inconsistent with our downside bias, but we did see a lower low to go along with the higher high. We'll stick to our guns for now, still seeing nearby support at the 100-day ma ($2.645, tested today and held) and then at $2.403, with $2.769 and $2.898 resistance.