PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Petroleum futures tumbled lower today, led by WTI which fell for a fifth consecutive session - with losses accelerating sharply today as we dropped 7.1%. Losses today occurred amid mostly lower trade in US equities and continued strength in the US dollar, despite gains in European shares. In European economic news, the Bank of England kept its monetary policy unchanged, as expected. The bank rate remains at 0.10% and QE purchases are still at Stg895bn. European stock markets closed higher today with the CAC 40 edging up 0.1%, the FTSE 100 adding 0.3%, and the DAX gaining 1.2%. In US news, weekly initial jobless claims rose from an upwardly-revised 725,000 to 770,000, while forecasts called for a dip to 700,000. On the other hand, the Philadelphia Fed Manufacturing Index for this month came in at 51.8, well above expectations at 24.0. As of this writing, US stock market indexes were trading mixed with the Dow up 0.4%, while the S&P 500 was down 0.6% and the Nasdaq had lost 1.7%. The US dollar index continued higher and was up 0.4%, which is unsupportive for crude oil prices.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures continued lower today amid a bearish weekly storage report from the Energy Information Administration (EIA), a weaker two-week heating degree day forecast, and a moderating temperature outlook. The EIA reported an 11bcf withdrawal from underground natural gas storage for the week ended March 12, well below forecasts at 17bcf. Total storage levels fell to 1.782tcf, which is 12.4% lower than last year and 5.0% below the five-year average for the reporting week. The Global Forecast System cut its heating degree day forecast for the next two weeks by 3 to 217, which is well below both last year’s 241HDDs over the same period and the 30-year average of 258. The latest 1-5 day outlook (EC) sees above-normal temperatures in both the Northeast and the Midwest. The 6-10 forecast is also unsupportive with above-normal temperatures expected across the eastern half of the country. Refinitiv analysts now see total US demand of 100.0bcf/d outpacing US supply at 98.6bcf/d next week, implying larger withdrawals of 1.4bcf/d (compared to yesterday’s forecast at 0.7bcf/d). In the cash market today, prices at the Henry Hub benchmark rose from $2.50 to $2.60/mmBtu, Transco Zone 6 prices in New York fell edged up by one cent to $2.27/mmBtu and Algonquin citygate prices strengthened from $2.51 to $2.76/mmBtu.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures dropped 6.4% in a high-volume downside session today – consistent with our bearish bias. Bears took out the 18-day ma ($1.8929) and $1.8330 support levels, and now we look to the 50-day ma ($1.7492) and $1.7000 for support, while $1.8330 and the 9-day ma ($1.9149) are our nearby resistance levels. We are going to remain bearish, noting that a retracement could be possible after a drop of this magnitude. RBOB futures, where we were neutral/bearish, lost 5.0% in a downside session with bears taking out the $2.0000 and 18-day ma ($2.0043) support levels. Slow stochastics and candlesticks are bearish, while the RSI is oversold and the MACD is neutral. We are going to continue to favor downside chances, noting that a retracement could be possible in the next session. We now see nearby support at $1.8973 and then down at the 50-day ma ($1.7571), with $2.0000 and $2.1700 (recent high) seen as nearby resistance levels. Similar to products, WTI tumbled 7.1% in a downside session – inconsistent with our neutral view. We are going to side with the bears now, noting that there could be a retracement in the following session. The $63.75 support level was taken out today, and this becomes our nearby resistance level, followed by $66.68, whereas $59.67 and $57.21 are expected to offer support. Finally, natural gas futures, where we were bearish, fell 1.9% in a downside session today – printing a hammer-shaped candlestick. Slow stochastics point higher now, while the RSI is still bearish, along with the MACD. We are going to stick to our bearish bias for a bit longer, still seeing nearby support at $2.403 and then down at $2.000, while $2.758 and $2.898 are expected to offer resistance.