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Energy Brief for Jan 27.23

by market analysts Stephen Platt and Mike McElroy

Price Overview

A surge in Russian Urals loadings for January and early February continued to undercut rally attempts, with today’s outside day price reversal to the downside signaling the potential for further weakness. Reports suggest that loadings from Russia’s Baltic ports are set to rise by 50 percent this month as sellers try to meet strong demand in Asia. Nervousness into the Fed meeting beginning on January 31st remained given the recent stronger than expected economic news in the US and potential for a further interest rate hike. In the background were the sharp inventory increases at Cushing, the delivery point for NYMEX crude. Some caution was also apparent in response to the strength to refining margins, which should lead to increased throughput along with limiting demand.

We expect a modest decline in prices toward the 75-77 area basis March crude. The recent increase in net speculative long positions, the reversal 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. The next full meeting of OPEC+ is not until June. 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 attract selling.

DTN WTI Crude 1.27.23 chart
DTN Nat Gas 1.27.23 chart

Natural Gas

Follow-through weakness saw the March contract trade down to an intraday low at 2.68 yesterday before finding moderate support to end the week at 2.849. The expiration of the February contract caused some volatility into the close, but for the most part trade was restrained today on light volume. Yesterday’s storage report indicated a 91 bcf withdrawl, which was above expectations but unable to shake out any buying interest. The fact that overall storage stands nearly 5 percent above average for this time of year continued to signal ample stocks to cover any demand spikes as winter wraps up. Yesterday’s news that regulators had approved Freeport’s request to begin the restart process offered little support as the timeline before any substantial amount of gas is moving through the facility is likely weeks away. Current ample US and European storage levels mixed with a mild winter will keep pressure on the market unless much colder temperatures begin to surface for February. Further weakness will find support at 2.50, while the upside is more open ended with the 3.05 area as minor resistance and not much beyond there until 4 dollars, which would be 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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