PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Petroleum futures strengthened today along with equities, following a statement by the FDA on the Johnson & Johnson coronavirus vaccine and stronger than expected fourth-quarter German economic growth, as well as encouraging US economic data. The gains came despite bearish weekly US crude oil and gasoline stock data in the EIA report. The report was supportive for distillates. See our DOE Report for details. The DAX climbed 0.8% higher today following the upbeat German economic news, while the FTSE 100 gained 0.5% and the CAC 40 added 0.3%. In US news, new home sales accelerated from an upwardly-revised 885,000 pace in December to 923,000 in January - well above consensus at 855,000. New US coronavirus case counts have also been falling sharply since early January, with the 7-day moving average falling from 255,000 cases to 70,000 cases. Also encouraging, the FDA says Johnson & Johnson's one-shot COVID-19 vaccine appears safe and effective in trials, with a 66% efficacy rate in preventing moderate to severe COVID-19 and 100% effective at stopping hospitalization 28 days after vaccination. It could be approved for emergency use as early as this week. As of this writing, the Nasdaq was up 0.8%, the S&P 500 had climbed 1.2% higher, and the Dow had rallied to 1.4% gains.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures weakened some today, with a further downgrade to the heating degree day outlook and loosening picture of next week's US market balance likely weighing on trade. The Global Forecast System cut its two-week HDD forecast from 296 to 264, further below the 30-year average of 348 and last year's 326 HDDs during the same period. The latest 1-5 and 6-10 day ECMWF forecasts call for above-normal temperatures across the eastern half of the country, with especially large deviations above normal in the 1-5 day period. Consistent with this, Refinitiv analysts cut their total US demand forecast for next week by 2.9 to 106.2bcf/d, and with the supply forecast revised up by 0.5 to 98.3bcf/d, withdrawals of just 7.9bcf/d are expected. This is in sharp contrast to the week ended last Friday, during which analysts polled by Reuters see a 333bcf withdrawal (47.6bcf/d) amid the disruptions to Gulf Coast operations and the rare cold temperatures in the region. This is well above last year's 145bcf withdrawal and also the 120bcf five-year average. The EIA report is due tomorrow morning.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures rose 2.0% in a low-volume upside session today – hitting a fresh high of $1.9089. Slow stochastics look set to cross back into overbought territory and the RSI is still overbought, while the MACD, major averages, and candlesticks point higher. We are going to remain on the sidelines, awaiting further developments, seeing nearby resistance at today’s high of $1.9089 and then up at $1.9509, while $1.8330 and the 9-day ma ($1.8287) are expected to offer support. RBOB futures added 2.2% in an upside session – consistent with our upside bias which we maintain. RBOB also saw a fresh high of $1.9000, which is our nearby resistance level, followed by the $2.0000 mark, whereas the 18-day ma ($1.7138) and $1.6956 are our nearby support levels. WTI gained 2.5% in an upside session today, not so consistent with our neutral bias. The RSI is overbought, while slow stochastics, the MACD, and candlesticks are all bullish. We are going to remain neutral for a bit longer, awaiting further bullish confirmation, seeing nearby resistance at $63.37 (new high) and then up at $66.85, with the 9-day ma ($60.56) and $57.21 seen offering support. Lastly, natural gas futures lost 0.9% in a downside session (lower high, lower low) – consistent with our bearish bias. We continue to favor downside chances, still seeing nearby support at $2.758 and then at $2.403, while $2.898 and $3.316 are expected to offer resistance.