Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
The market traded mixed today with the crude registering and inside day on the charts while the products were able to push to new highs for the recent recovery. The February crude lost 13 cents on the day while the gasoline and heating oil gained 2 and 3 cents, respectively.
Prices strengthened yesterday following the IEA Monthly Report, as the agency surprised the market with a revision of their world oil demand forecast. They increased the outlook by 130 tb/d to 1.1 mb/d. Their estimates remain well below those of OPEC, as the cartel wants to paint a rosier picture while working to reign in production.
The recovery was also goosed yesterday by statements from the Federal Reserve suggesting that rate increases have likely ended with potential cuts in 2024. The ensuing strength to equities and weakness in the dollar rekindled hopes for improved oil demand. Skepticism regarding OPEC’s ability to reign in member production remained in a background as a limiting influence.
With the settlement above the 9-day moving average last two days the near-term bias remains up, with a settlement above the 72.80 level likely to trigger follow through with 75.20 as the next target which would achieve a 38 percent retracement of the break since mid-October. A failure to push higher will find support near 70.80, without much below there to slow a slide until a retest of the lows near 68.00.
Natural Gas
The price recovery that started Wednesday was maintained through the end of the week as the January contract gained 9.9 cents today to settle at 2.491. Fundamentals remained overall negative as short covering made up the lion’s share of buying interest after the RSI remained in the teens for close to two weeks. Potential cooling in the back half of the forecasts offered a glimmer of hope for demand and helped instigate buying interest. Yesterday’s storage report was in line with expectations, showing a 55 bcf draw from stocks. Today’s strength filled the chart gap from earlier in the week with the intraday high at 2.544. Further upside could prove difficult in the absence of colder temperatures, with the 2.60 and 2.75 areas as resistance. A realization of the current fundamental status of the market could lead to a quick return to the contract lows, with minor support arising near 2.38 and 2.32.
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