Energy Brief for Mar 20.23
by market analysts Stephen Platt and Mike McElroy
The market continued to struggle with macro issues involving global banking concerns early in the session. The May crude oil made a new low for the move at 64.36 before recovering to end with a gain of 89 cents at 67.82 after broader markets experienced a relief rally. The products also rebounded, with gasoline gaining just over 3 cents and the heating oil up by a penny.
All eyes are on the Federal Reserve and the action they take this Wednesday. Current sentiment is pointing to a 25-point increase in rates, which has trade concerned that it will exacerbate the likelihood of a recession. In the background were labor strikes in France that have shut-in refinery activity and backed up crude. Underlying support continues to emanate from ideas that SPR purchases are possible at the low current prices.
The spike low and recovery in values could mark a near term reversal, with initial resistance in the 70-dollar area and then at the 9-day moving average, currently near 71.84.
Wednesday’s DOE report is expected to show crude oil inventories lower by 1.4 mb, while gasoline and distillates are estimated to decrease 1.4 and 1.5 mb respectively. Refinery utilization is estimated to have improved .8 to 88.2 percent.
Prices traded higher overnight as weekend forecasts saw minor cooling and US demand was set to peak as cold temperatures blanketed much of the country. The positive tone could not be maintained as the day session got underway, with new lows for the month reached multiple times throughout the session. The large storage overhang and continued failure of Freeport to show improved flows fueled the negative sentiment. As attention turns to the May contract, today’s action, with prices trading down to 2.324 intraday before settling with a loss of 11 ½ cents at 2.331, brings the contract lows near 2.25 within striking distance, with a failure there pointing to a test of 2 dollar support. Previous support near 2.50 should slow any recovery in prices, with the 9-day moving average near 2.60 after that more formidable resistance.
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.