PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Petroleum futures settled mixed today with weakness in the US dollar and a bullish revision to Barclays’ oil price forecast for 2021 likely supporting, while losses in European and US equities were unsupportive. Barclays raised its 2021 oil price forecast by $7/bbl to $62/bbl for Brent and $6/bbl to $58/bbl for WTI, according to Reuters. European shares closed in the red today with the FTSE 100 down 0.1%, the CAC 40 losing 0.2%, and the DAX dropping 0.7% despite generally supportive economic data releases. The European Commission’s Economic Sentiment Index for the Eurozone beat expectations by coming in at 93.4 (vs. 92.3) and the German GfK consumer climate index picked up from -15.5 to -12.9 this month, also beating the -14.0 consensus. In US economic news, durable goods orders rose 3.4% last month, beating expectations at 1.1%. The second estimate of fourth quarter GDP showed a 4.1% increase, matching the Econoday consensus. Weekly initial jobless claims came in at 730,000, well below the Econoday consensus at 815,000 and down from 841,000 the prior week. On the other hand, the NAR’s pending home sales index fell 2.8% in January, while forecasts called for no change. As of this writing, US stock market index futures were seeing losses of between 1.3% (Dow) and 2.6% (Nasdaq). Meanwhile, the US dollar index was down 0.1%, which is supportive for crude oil prices.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures fell further today despite a stronger two-week heating degree day forecast, a looser market balance expectation for next week, and a supportive weekly storage report from the Energy Information Administration (EIA). The EIA reported a 338bcf withdrawal from underground natural gas storage for the week ended February 19, above forecasts at 333bcf. Total storage levels fell to 1.943tcf, which is 13.3% lower than last year and 7.7% below the five-year average for the reporting week. The Global Forecast System raised its heating degree day forecast for the next two weeks from 264 to 274, which is closer to but still well below the 30-year average of 344 and last year's 326 HDDs over the same period. The latest 1-5 day outlook (EC) sees above-normal temperatures across the eastern half of the country. The 6-10 forecast is more supportive with near to below-normal temperatures expected in the Northeast, while above-normal temperatures are seen in the Midwest. Refinitiv analysts now see total US demand of 105.9bcf/d outpacing US supply at 99.0bcf/d next week, implying smaller withdrawals of 6.9bcf/d (compared to yesterday’s forecast at 7.9bcf/d). In the cash market today, prices at the Henry Hub benchmark fell from $2.94 to $2.80/mmBtu, while Transco Zone 6 prices in New York rose from $2.60 to $2.66/mmBtu, and Algonquin citygate prices strengthened from $3.16 to $3.37/mmBtu.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures edged down 0.1% in a thin-volume upside session – consistent with our neutral bias which we maintain. Slow stochastics and the RSI are overbought, while the MACD and major averages are bullish. We continue to see nearby support at $1.8330 and then down at the 18-day ma ($1.7810), with $1.9193 (today’s fresh high) and $1.9509 seen offering nearby resistance. RBOB futures, where we favored upside chances, settled 0.2% lower in an upside session. Slow stochastics and the RSI are overbought, while the MACD points higher and today’s candlesticks are neutral. We are going to stick to our bullish bias for a bit longer, awaiting further developments, still seeing nearby resistance at $1.9000 (tested but held today) and then up at the $2.0000 mark, while the 18-day ma ($1.7316) and $1.6956 are expected to offer support. WTI futures rose 0.5% in an upside session – printing a Doji star shaped candlestick. The RSI is overbought, while stochastics, the MACD, and candlesticks point higher. We are going to remain on the sidelines, seeing nearby support at the 9-day ma ($61.15), followed by $57.21, whereas $63.81 (today’s high) and $66.85 are our nearby resistance levels. NYMEX natural gas futures gapped lower and fell 0.6% in a downside session – consistent with our bearish bias which we are going to maintain. Nearby support is seen at $2.758 and then down at $2.403, with nearby resistance expected at $2.898 and then up at $3.316.