Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
The petroleum complex recovered from early weakness as the crude oil settled near unchanged levels while the products ended mixed. The early selling pressed the January crude down to a test of the September lows near 75.00 before recovering to settle at 80.04.
Reports that OPEC would be considering an output increase of as much as 500 tb/d at their upcoming meeting on December 4th triggered the follow-through selling, with increased Chinese Covid cases over the weekend and strength to the dollar adding to the weakness. Economic concerns remained a background influence as expectations for the next Fed rate increase have shown signs of easing. At mid-session Saudi Arabia denied any plans to increase supply beyond agreed upon targets and prices quickly recovered all their losses into the close.
The bounce today brings initial resistance to the 81.80 level, which would mark a 38 percent retracement of the break since early November. A move above there would then target the 9-day moving average as well as the 50 percent retracement level which arise in the 84.90 to 85.07 range. Limited support should surface near 77.50 with the lows in the 75.00 area marking a key level on a settlement basis.
Natural Gas
Prices worked higher throughout the session as the January contract pushed past the 7 dollar level to end the day with a 50.7 cent gain at 7.223. The combination of strong weekend demand as cold temperatures blanketed the country and signs of a possible cooling trend emerging in the back half of the 15 day forecasts spurred the buying interest. LNG flows were also supportive, as the fourth straight day above 12 bcf coupled with the suggested return of Freeport LNG in a few weeks helped underpin the market. The strong close makes the 100-day moving average near 7.64 the next target on the upside, but with temperatures set to move above normal in the coming week the market likely has difficulty pushing beyond that level until Freeport’s return. Initial support on a pullback emerges at 7 dollars, without much below there until the 6.50-6.55 range.
The next Energy Brief will be published on 11/28/22-Happy Thanksgiving!
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