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Energy Brief for Jan 30.23

by market analysts Stephen Platt and Mike McElroy

Price Overview

The market followed through on weakness seen Friday, as an early rally attempt reflecting optimism toward Chinese economic growth and reports of a drone attack in Iran failed to maintain upside momentum. Instead, concerns over improved Russian availability along with the potential for further interest rate hikes in the US, Britain and the EU continued to soften the strong bullish sentiment from managed traders seen over the past 6 weeks. Nervousness that OPEC will maintain their current policy along with reports Saudi Arabia was considering a further reduction in the OSP for March deliveries due to weak demand also undercut bullish sentiment and encouraged more pronounced profit taking.

As we indicated on Friday, we expect a modest decline in prices toward the 75-77 area basis March crude. The recent increase in net speculative long positions, the continued weakness today, and the failure to close above the 100-day moving average at 80.10 could attract technical selling pressure. On the supply side, availability is improving as indicated by the recent recovery in US crude inventories, good Russian availability in Asia, and an easing of tightness at Cushing. In the background were reports that OPEC was unlikely to change policy on February 1st when the Joint Ministerial Monitoring Committee meets.

Although nervousness persists ahead of the product embargo and import ban by Europe and the G-7 respectively on February 5th, the seasonal pullback in demand as we move into the 2nd quarter, along with improving availability from OPEC+ members, should foster ideas that availability is improving. The increase in inventories at Cushing is symptomatic of this improvement and will be watched in the DOE report scheduled for release on Wednesday.

The release is expected to show crude inventories decreasing by 1 mb, while gasoline is estimated higher by 1.0 and distillate lower by 1.8 mb. Refinery utilization is predicted to show an increase of .5 to 86.6 percent.  

DTN Crude Chart 1.30.23
DTN Nat Gas Chart 1.30.23

Natural Gas

Natural gas continued its struggles to start the week, with a gap down overnight probing out new lows for the move, followed by sideways trade for the remainder of the session. The March contract ended with a loss of 17.2 cents at 2.677. Bearish weather runs yesterday initiated the selling pressure, with the 15 day outlook on the US model losing over 50 bcf in demand. The cold temperatures currently being experienced across much of the US have done little to support prices, even with production showing losses due to scattered freeze-offs. This is due to the current ample storage situation and briefness of the cold, with forecasts expecting a turn back to above normal temperatures by February 5th. The 2.50 level in March remains solid support on further slippage, while a bounce will find minor resistance near 3 dollars, with little beyond there until the 4-dollar area, which marks a 38 percent retracement of the collapse since mid-December.

The authors of this piece do not currently maintain positions in the commodities mentioned within this report.

Charts Courtesy of DTN Prophet X, EIA, Reuters


Learn more about Stephen Platt here

Learn more about Mike McElroy here

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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