Explore Special Offers & White Papers from AFS

Energy Brief for Mar 1.23

by market analysts Stephen Platt and Mike McElroy

Price Overview

The petroleum complex continued to trade mixed, as early support developed on signs the Chinese economy is recovering following the release of their Purchasing Managers Index (PMI). The index rose to 52.6 in February, the highest level since April of 2012. The reaction to the news was muted by caution in advance of the DOE report after the API report showed a large 6.1 mb increase in crude inventories yesterday. The DOE report showed a stock increase of only 1.2 mb, and total stocks of crude and products falling by 3.0 mb. Although the report brought out some buying, it failed to be sustained as caution developed in response to reports that OPEC members increased their production by 150 tb/d in February. Nigeria showed the largest increase of 100 tb/d. Nevertheless,  OPEC+  is still producing as much as 875 tb/d below target. 

The DOE report indicated crude inventories built by 1.2 mb, putting commercial inventories at 480.2 mb compared to 413.4 mb last year. Stocks at Cushing rose .3 mb to 40.7. Gasoline stocks declined by .9 mb while distillate built by .2. Refinery utilization was stable at 85.8 percent. Net export levels of crude and products continued to rise, reaching 3.1 mb against 2.2 last week. Disappearance surprisingly showed improvement reaching 20.4 mb despite adverse weather conditions impeding travel last week.

The DOE report was encouraging, bolstering ideas that support in the $74-$75 range will continue to hold, aided by Chinese news suggesting their recovery is progressing. Although the move higher in interest rates remains a source of concern economically and on possible strength to the dollar, the direction of the US economy that it reflects could be a harbinger of more constructive demand prospects overall. Today’s statistics should help support ideas that we will be moving into a deficit position later this year, and provide the basis for values to advance into resistance near the 81.00 level on the prompt WTI crude.

Natural Gas

The market continued to have an upside bias, with the April contract tacking on 6.4 cents today to settle at 2.811. The recovery is being supported by two main factors, the steady return of Freeport export capacity and the maintenance of below normal temperature expectations into the middle of March. After two months of poor demand, the potential swing to some semblance of normalization has helped to flush out profit taking and ease trade concerns over taking a long stance. In the background were cooler temperatures in Europe, where a similar mild winter had helped storage levels there reach ample levels as well. The push through 2.80 now puts the next upside target at 3 dollars. Any extension beyond there would need the cooler forecasts to materialize, and would target the 3.36 level, which marks a 38 percent retracement of the break since mid-December. A retrenchment should find initial support in the 2.53-2.50 area.

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.

Latest News & Market Commentary

Explore Special Offers & White Papers from Archer Financial Services

Get Started

Contact Stephen Platt Today