PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
The complex rallied today amid news that OPEC+ has agreed to roll over their output cuts into April, a missile attack at a Saudi Aramco facility, and supportive economic data from the US, despite losses in US and European equities and strength in the US dollar. Reuters reported that OPEC+ has agreed to keep oil output levels unchanged in April, according to two sources. Russia and Kazakhstan have been allowed modest production increases under the deal of 130kb/d and 20kb/d, respectively. Saudi Arabia said that it would extend its voluntary output cuts of 1mb/d that would gradually phase out of in coming months. Also in the news, Yemen’s Houthi forces fired a missile at a Saudi Aramco facility in Jeddah, according to a Houthi military spokesman. There was no immediate confirmation from Saudi authorities. US economic data released today were supportive. Fourth quarter US nonfarm productivity was revised up from -4.8% to 4.2% year-on-year, beating the Econoday consensus at -4.7%. Factory orders growth of 2.6% in January also beat expectations at 2.0%, and November orders were revised up from 1.1% to 1.6%. Weekly initial jobless claims rose from 736,000 to 745,000, but they didn’t reach the 760,000 consensus. European shares closed flat to lower today with the CAC 40 steady, while the DAX fell 0.2% and the FTSE 100 lost 0.4%. US stock market indexes were seeing losses of between 0.7% (Dow) and 1.7% (Nasdaq), as of this writing. Also unsupportive for crude oil prices, the US dollar index was up 0.5%.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures fell further today amid a weaker two-week heating degree day forecast, a tighter market balance expectation for next week, and an unsupportive weekly storage report from the Energy Information Administration (EIA). The EIA reported a 98bcf withdrawal from underground natural gas storage for the week ended February 26, well below forecasts at 136bcf. Total storage levels fell to 1.845tcf, which is 13.1% lower than last year and 8.8% below the five-year average for the reporting week. The Global Forecast System cut its heating degree day forecast for the next two weeks from 295 to 287, which is below the 30-year average of 316, but above last year's 256 HDDs over the same period. The latest 1-5 day outlook (EC) sees well above-normal temperatures in the Midwest, while below-normal temperatures are seen on the East Coast. The 6-10 forecast is less supportive with well above-normal temperatures expected across the eastern two thirds of the country. Refinitiv analysts now see total US demand of 105.1bcf/d outpacing US supply at 98.8bcf/d next week, implying slightly smaller withdrawals of 6.3bcf/d (compared to yesterday’s forecast at 6.4bcf/d). In the cash market today, prices at the Henry Hub benchmark fell by one cent to $2.86/mmBtu, while Transco Zone 6 prices in New York rose from $2.73 to $3.02/mmBtu and Algonquin citygate prices jumped from $4.04 to $8.25/mmBtu.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures added 3.3% in an upside session (higher high, higher low) with bulls taking out the 9-day ma ($1.8613) resistance level along the way. Slow stochastics have crossed bullishly in neutral territory and the RSI and candlesticks are bullish, while the MACD is neutral. We are going to take a bullish stance now, seeing nearby resistance at $1.9193 (recent high) and then up at $1.9695, while the 9-day ma and $1.8330 are expected to offer support. RBOB futures, where we were bearish, rose 2.4% in an outside session (higher high, lower low) – not so consistent with our bias. Slow stochastics crossed bullishly in neutral territory and candlesticks look neutral as well, while the RSI is still overbought. We are going to fall back onto the sidelines, seeing nearby resistance at $2.0000 (tested today) and then up at $2.1108, whereas $1.9050 and the 18-day ma ($1.8175) are seen as nearby support levels. WTI futures jumped 4.2% in an upside session today – inconsistent with our bearish bias. Bulls took out the 9-day ma ($61.85) resistance level and tested but failed to take out $63.81 (R2). With neutral slow stochastics and the MACD, as well as bullish RSI, we fall back onto the sidelines, awaiting bullish confirmation. We look to the 9-day ma and $59.47 for support, while $63.81 and $64.86 (today’s high) are our nearby resistance levels. Natural gas lost 2.5% in a downside session today, taking out the 100-day ma ($2.783) and the $2.758 support level along the way. Slow stochastics, the RSI, and the MACD are all neutral, so we are going to remain on the sidelines. We now see nearby support at $2.403 and then down at $2.000, with $2.758 and $2.898 seen as nearby resistance levels.