PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Petroleum futures settled in the red today amid mixed and mostly lower trade in US equities, despite weakness in the US dollar and gains in European shares. Reuters reported that OPEC president Diamantino Azevedo said that the global oil market is rebalancing and oil prices are relatively stable but stated that “due to the pandemic situation… and new waves arriving, we could have a situation of smaller demand due to confinements.” He also added that vaccinations would certainly increase demand. OPEC+ is expected to meet on Thursday to discuss a production increase of as much as 1.5mb/d. In European economic news, the flash February Harmonized Index of Consumer Prices (HICP) for the Eurozone rose 0.9% year-on-year, below expectations at 1.0%. The underlying HICP rose 1.1% y/y, matching forecasts. The DAX closed 0.2% higher, the CAC 40 added 0.3%, and the FTSE 100 rose 0.4%. In North American news, Canadian GDP for December rose 0.1%, below the Econoday consensus at 0.3%. On the other hand, GDP for the fourth quarter rose 2.3%, beating the 1.9% forecast. As of this writing, US stock market indexes were mixed with the S&P 500 down 0.1% and the Nasdaq having lost 0.7%, while the Dow was up 0.1%. Supportive for crude oil prices, the US dollar index was down 0.3%, after its recent rally.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures continued higher today despite a moderating temperature outlook and a looser US market balance expectation for next week. The Global Forecast System kept its heating degree day forecast for the next two weeks at 279, which is well below the 30-year average of 324, but above last year's 256 HDDs over the same period. The latest 1-5 day outlook (EC) calls for below-normal temperatures in the Northeast, while mixed temperatures are expected in the Midwest. The 6-10 day forecast is less supportive as above-normal temperatures are expected in both consuming regions. Refinitiv analysts now see total US demand of 102.2bcf/d outpacing US supply at 100.1bcf/d next week, implying withdrawals of just 2.1bcf/d. In the cash market today, prices at the Henry Hub benchmark rose from $2.66 to $2.70/mmBtu, Algonquin citygate prices jumped from $3.30 to $6.50/mmBtu, and Transco Zone 6 prices in New York strengthened from $2.38 to $2.84/mmBtu. According to a Reuters poll of analysts, estimates for the weekly EIA petroleum inventory report for the week ended February 26 call for a 1.9mb drop in US crude stocks amid a 4.1 percentage point predicted increase in the nation’s refinery utilization rate. Distillate stocks are expected to fall by 2.9mb and gasoline stockpiles are expected to drop by 2.1mb. API petroleum inventories for the same week are due this afternoon at 4:30.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
NYMEX HO futures shed 0.6% in a thinly-traded downside session today, with nearby 18-day ma support ($1.8075) holding on a settlement basis. We saw a Doji star candlestick pattern printed today, which can precede a reversal, but at the same time slow stochastics and the RSI both have room to fall and, again, volume was thin. Accordingly, we'll stick to our downside bias for now, still seeing 18-day ma ($1.8075) and then $1.7000 support, with $1.8330 and then the 9-day ma ($1.8541) as nearby resistance. We noted yesterday that futures often work to close the gap in a front-month switch, and so we kept to a downside bias for RBOB. Futures edged down 0.3% today in a downside session, the RSI remains overbought, and slow stochastics look bearish. Meanwhile, the MACD and major averages point higher. We remain bearish, seeing $1.9050 and then 18-day ma ($1.7814) support, with $2.0000 and then $2.1108 resistance. WTI futures trade today was more solidly in line with our views, as futures fell 1.5% in a downside session, following a test of nearby 9-day ma resistance ($61.28) at the highs. Bears contended with nearby $59.47 support but failed to take it out on a settlement basis. We continue to favor downside chances, continuing to keep an eye at $59.47 and then $57.21 for support, whereas the 9-day ma and then $63.81 remain nearby resistance. We fell back to the NG sidelines yesterday, abandoning the bears, and the decision seems to have been the right one as futures rose 2.2% in an upside session today. Slow stochastics are bullish, and the RSI is neutral with plenty of room in both directions. Major averages still point weakly higher, while the MACD is neutral. We'll await bullish confirmation, staying neutral for the moment. Nearby resistance is expected at $2.898 and then at $3.316, whereas $2.758 and $2.403 are our nearby support levels.