PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Crude futures turned higher today, following two sessions lower, with weakness in the US dollar index likely providing some support, despite mostly lower trade in equities. The Ifo Survey showed a larger than expected improvement in the business climate this month, but the DAX nevertheless shed 0.3%. The CAC 40 in France fell 0.1% and the FTSE 100 in the UK lost 0.2%. As of this writing, the Dow was up 0.4%, but the S&P 500 was down 0.2% and the tech-heavy Nasdaq had lost 1.4%. Meanwhile, the US dollar index was down nearly 0.4% - its third session lower. Also supportive, Goldman Sachs Commodities Research raised its Brent crude oil price forecasts for next quarter and the following quarter by $10/bbl to $70/bbl and $75/bbl, respectively, citing expectations for a widening oil market deficit as demand rises more quickly than supply.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures on NYMEX lost ground today with a loosening picture of the US market balance, and with a moderating near-term temperature outlook. The Global Forecast System slashed its two-week Heating Degree Day forecast by over 20 percent, from 383 to 301 - back below the 30-year average of 355 and also below last year's 326 HDDs during the same period. Consistent with this, Refinitiv analysts cut their total US demand forecast by 10.1bcf/d to 107.7bcf/d from 117.8bcf/d this week. Refinitiv sees total US demand falling by just 0.6 to 89.0bcf/d next week, implying withdrawals of 18.7bcf/d (versus a forecast of 28.2bcf/d this week). Taking a regional perspective, the latest 1-5 day ECMWF outlook sees large deviations above normal temperatures in the Midwest, and above-normal temperatures across the eastern half of the country. Cash natural gas prices came down at Henry Hub and at the Algonquin citygate following the recent price spike. Henry Hub prices dropped down from $8.56 to $4.96/mmBtu and Algonquin prices fell from $9.05 to $6.82/mmBtu, but New York Zone 6 pricing strengthened from $6.14 to $6.64/mmBtu. The 6-10 day outlook calls for near to above-normal temperatures in the Midwest and the Northeast.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures - where we were neutral - gapped lower over the weekend but then shot up 2.0% today, taking out nearby $1.8330 resistance and settling not too far south of the recent $1.8653 high, which is next resistance (followed by $1.9509). We remain sidelined, seeing support at $1.8330 and then down at the 9-day ma ($1.8006). Volume behind today's trading was strong. Both the RSI and slow stochastics are overbought, whereas the MACD, major averages, and ADX point higher. We favored upside chances for RBOB futures, and they complied by also strengthening today, gaining 1.9% in an upside session and also settling not terribly far from recent highs. We continue to see that $1.8486 high offering nearby resistance, followed by $1.9000, whereas $1.6956 and then the 18-day ma ($1.6807) are seen offering nearby support. As with ULSD, both slow stochastics and the RSI are signaling overbought conditions, but other indicators point higher. We continue to favor upside chances for now. We abandoned WTI bulls on Friday, taking a neutral stance. WTI futures gapped lower over the weekend, but then shot up 3.8% today. We remain neutral, continuing to expect nearby resistance at the recent $62.26 high, followed by $66.85, whereas the 9-day ma ($59.69, taken out today) and then $57.21 are seen offering support. We abandoned NG bulls on Friday, falling to the sidelines, and price continued lower today with a 3.8% drop in a downside session. Slow stochastics and the RSI are falling with plenty of room below, and candlesticks are bearish as well. Major averages and the MACD still point higher. We see flat to lower prices, looking to $2.898 and then $2.758 for support, with $3.316 (recent high) and then $3.500 resistance.