Morning Update 02.17.21

Overview

Energies, led by RB, have forged to fresh multi-month highs this morning as concerns remain about U.S. crude oil and product output. 

Crude prices dipped overnight in Asia on the back of a stronger U.S. dollar and a potential output increase come April. OPEC+ meets to set policy on March 4. “If nothing changes until March we’ll surely propose to add more oil to the market,” a Russian source said, adding a 500 MBD increment was worth discussing even though demand recovery estimates still look shaky given continued lockdowns. “We anticipate the Saudis will not release the 1MMBD of voluntary cuts at once.” (Reuters) 

A winter storm warning remains in effect until 6 AM CST for inland areas of Southeast Texas, which include Houston and Galveston.(Weather.com) It will not be until next Tuesday that temperatures in that region return to normal. "There's a possibility of power outages even beyond the length of this storm," a key official in Houston warned. The storm has knocked about a third of the state's generating capacity offline. Over 4 million people in Texas were without power as of late Tuesday, including 1.4 million people in the Houston metropolitan area. A quarter of homes in Dallas were dark. (Reuters) 

The U.S. deep freeze will wreak havoc on oil and gas production for several days if not weeks, as freeze offs and loss of power have disrupted operations. Some wells were disconnected by the power company or have had rotating outages. Permian wells produce prolific amounts of water, so production streams can easily freeze in surface valves. At others, oil haulers stopped picking up oil due to road conditions. Hazardous travel conditions limit the accessibility to repair equipment. (Reuters) 

ANZ and Citigroup analysts estimated at least 2 MMBD of U.S. shale oil production has been curtailed. Citi estimated a cumulative production loss of around 16 MMBBL through early March. (Reuters) 

Oil producer Kuwait Petroleum Corp (KPC) is in talks to shorten its annual supply deals with some customers in India and Japan to nine months this year to meet demand from its new refinery. (Reuters) 

Iran has warned it would curtail the international monitoring of its nuclear activities next week, including ending daily access to its main nuclear sites, if the U.S. doesn't lift economic sanctions. Iran gave itself some wiggle room on implementation, telling the United Nations atomic agency to prepare for its restricted access "in due time." (DJI) 

Today is the last trading day for the March WTI crude oil options. 

Technicals 

Crude oil is up for the 11th session in the past 12 days. Momentum is overbought, but the energies have yet to signal a top in place. 

WTI for March sees resistance at 6242-52, then at 6334-38. Support lies at the high from Frdiay at the 5982-86 area, then below that at 5932-37. 

We have switched to April for the products for technical numbers as volume is much greater in the 2nd month than the front month. RB for April has resistance at 1.9215-30 from weekly data. The daily chart sees its bollinger band intersect below that in the 1.8975 area. The overnight high is 1.9050. Support is seen below at 1.8700-10, then at 1.8565-80. 

ULSD for April sees its resistance at 1.8513-26, then at 1.8680-95. Support lies at 1.7975-80, then at 1.7845-50.

Natural Gas

NG is near unchanged today as treacherous weather was expected to grip much of the United States through Friday. (Reuters) 

Tudor Pickering analysts say this natural gas "pandemonium" may reveal a more lasting supply-demand imbalance that could eventually send futures prices toward $3.50 or $4. (WSJ) Tuesday Henry Hub prices rose by $10.955 to average $16.955. (N G I ) 

Possibly lost in the sharp rise in regional NG prices seen in recent days is the impact the energy cost increase is having for industrial customers, causing some to seek alternative, lower-cost options. (WSJ) This is similar to what happened in Asia recently, where utilities sought alternative fuel sources when NG prices skyrocketed to record levels. "Any available gas is being prioritized for heating rather than for electricity generation, further exacerbating the shortage for electric generation in Texas.” (Marketwatch) 

The American Gas Association said 151.7 BCF of natural gas was delivered in the United States on Sunday and 149.8 BCF was delivered on Monday, setting a record for demand over the two-day period. NGI’s Spot Gas National Average rose by $18.800 Tuesday from Friday’s levels to $80.760. (NGI) 30 pipelines were said to have declared force majeure. Around 7 BCF of production had been curtailed because of freeze-offs, according to EBW. Much of that was concentrated in the Permian Basin. Feedgas deliveries for LNG export were also impacted dropping to 7.70 BCF Tuesday, down from 916 BCF on Friday, according to NGI data. 

Technically, NG has positive momentum. Support in the 3.051-3.057 area held overnight wth a low of 3.049. Below that support lies at 2.982-87. Resistance is seen at 3.157 via the 60 minute chart and then at the high seen yesterday at 3.214. 

Disclaimer

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