Energy Brief January 2

by Archer Financial Services | Jan 02, 2019
by Steve Platt and Mike McElroy

Price Overview

crude oil chart
The complex recovered from overnight weakness as solid buying throughout the day session pushed prices up over 3% intraday in crude oil and products.  Levels faded slightly as the day ended with February crude oil settling at 46.54, up 1.13 on the day, and the February RBOB and heating oil up 2.35 and 2.12 respectively.

The early weakness was the result of poor Chinese PMI numbers released overnight, which coupled with news of decreased import allowances for Chinese refiners stoked concerns over a global economic slowdown.  Support emerged as the US day session got under way as firming in equities offered initial support, followed by indications that Saudi Arabian crude oil exports had decreased in December in advance of the agreed cuts that were to start in January.  Despite the positive session, the increased volatility that we have seen recently with steep price declines minimizes the impressiveness of the bounce.

We remain long February RBOB crack at 8.80, risking 7.80, with an upside objective of 11.50- 12.00.  In February crude we would look for resistance to be seen in the 47.50-48.00 area and would favor the long side on pullbacks toward the 43.80 level.  The DOE report is scheduled for release on Friday at 10.00 a.m.

Natural Gas

natural gas chart

Buying interest finally emerged in the natural gas just above the 2.90 level basis February as the market found trendline support from a series of lows going back to December of 2017.  Weather reports have remained mild into mid-January and despite today’s uptick another test of this area appears likely near term.  This weeks EIA report is expected to show a 64 bcf build against a 5 year average of 107.  The report will be released a day late on Friday at 9:30 a.m. due to the New Year’s holiday.  We are long the March from 2.85 on Monday’s recommendation, risking 2.79 with an upside objective in the 3.15-3.20 area. 

Charts Courtesy of DTN Prophet X

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