Stocks ∆ API · Brent crude oil futures on the ICE for June, peaked early at 26.50 and then crashed, bottoming at 17.51 and closing 6.24 points lower at 19.33. As far as today goes

Monday, September 14, 2020 ◼ [email protected] ◼ © 2020 THE SCHORK GROUP, INC

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Monday, September 14, 2020

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Temperature 6-10 Day

Temperature 8-14 Day

NOAA Outlook

Weekly Review… NYMEX Natural Gas Per last Friday’s CFTC update, the net length held by

hedge funds in the primary NYMEX, ICE futures-and-

options (combined) and swap contracts pulled back by

1.1% from the highest level since the peak of the 2018

heating season, to 314,892 contracts, i.e. the second

highest level since the peak of the 2018 heating season.

On the other side of Wall Street, net length held by prop

desks climbed to 5,102 contracts. Hedge funds (traders

that risk other people’s money) account for 33% of the

market’s length, while prop desks (traders that risk their

own firm’s money) account for 0.5% of the length.

Producers account for 63% of the market’s net length,

with retail traders garnered the remining 4%. Swap

dealers hold all of the market’s net shorts.

According to Baker Hughes, the rig counts in Pennsylvania, West Virginia, and Ohio (Marcellus and Utica shale plays) fell to the lowest combined level, 30 rigs, since May 2005.

Omnium Gatherum

PRICES WERE WEAK LAST WEEK… On Friday, NYMEX

natural gas for October delivery closed at the lowest level,

2.269, since August 03rd, while October WTI failed to

trade above $38 for first time since June 02nd.

Nota Bene: For those of you thinking about switching

from Bloomberg to Refinitiv Eikon… think extra long,

extra hard. For a second day in a row, we were unable

to download our feeds into our data base due to an

“issue” at Refinitiv that is impacting “customers

globally…” (see alert note from Refinitiv, upper left of

this page). As of 11pm Sunday, we could only update

our daily volatility parameters for NYMEX WTI and

natural gas.

If, when, Refinitiv gets around to resolving these

issues, we will update you accordingly. In the

meantime, we are researching alternative data

sources.

SCHORK Daily Technical Trading Bias

Contract NG WTI ICE Brent RBOB ULSD ICE Gasoil

Aug-20 Aug-20 Sep-20 Aug-20 Aug-20 Sep-20

Trend Bearish Bearish Bearish Bearish Bearish BearishAs Of 02-Sep-20 03-Sep-20 02-Sep-20 01-Sep-20 21-Aug-20 02-Sep-20

SCHORK Daily Price Range Probabilistic Model

3rd Resistance 2.428 38.90 47.81 1.3862 1.3232 402.25

2nd Resistance 2.388 38.43 45.92 1.3331 1.2856 389.25

1st Resistance 2.337 37.80 44.50 1.2900 1.2566 380.00

11-Sep-20 2.269 37.33 43.37 1.2339 1.2279 371.75

1st Support 2.244 36.68 42.37 1.2305 1.2110 365.00

2nd Support 2.206 36.21 41.08 1.1946 1.1836 356.25

3rd Support 2.148 35.62 39.48 1.1484 1.1481 344.75

Monday, September 14, 2020 ◼ [email protected] ◼ © 2020 THE SCHORK GROUP, INC

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Last Thursday, the EIA reported the 23rd injection of

natural gas into underground storage of the season. As

of Friday, September 04th, total underground storage for

the Lower 48 climbed to 3.525 Tcf and the year-over-year

surplus narrowed by 17 basis points to 17% or 506 Bcf.

This season’s hitherto refill is up to 1.539 Tcf… which is

23% above the seasonally adjusted trend. We are 70%

of the way through refills, and the market has replaced

88% of the gas that was delivered last winter.

As far as this Thursday’s report goes, the typical injection

is 70 ±22 Bcf and the five-year mean (interpolated) is 77

Bcf. The EIA now expects L48 underground storage to

finish this season at 3.942 Tcf. Cleared futures for the

end-of-season balance on ICE are currently bid at 3.968

Tcf, offered at 3.980 Tcf; we like the over, i.e. we still

like storage finishing the season in excess of 4.0

Tcf.

Bottom line, the looming glut in supply notwithstanding,

the NYMEX term structure, along with the European (TTF)

and Asian (JKM) structures indicate concern regarding a

disconnect this winter between supply and demand. This

is a bullish fundamental.

NYMEX WTI

As of a week ago, prop trading desks upped their net

length in the NYMEX WTI complex by 7.7% from a 2-

month low (and the fourth smallest bullish position since

the spring of 2017) to 204,352 contracts. Whereas back

in early April (the eve of the spot market’s plunge into

negative territory), prop desks accounted for more than

three-fifths of the market’s net length, today these

traders make up around one-third of the length.

For the first time since May, hedge funds cut their

exposure of net length of the market from three-fifths, to

just over half. As of last Tuesday, their bullish position

fell by 17.6% to a five-month low of 269,488 contracts.

Small retail investors accounted for around 7% of the

market’s length last week. Swaps dealers and producers

account for the market’s net shorts with a respective split

of 91/9.

Last week, the Baker Hughes Canadian crude oil rig count

was unchanged for a third straight week at 19. The count

is 63 rigs below a year ago, 82 rigs below the seasonal

trend and 26 rigs below-normal, i.e. below the bottom of

the seasonally adjusted range. In the U.S., the oil and

gas rig count fell by 1, to 180. Five weeks ago, the count

troughed at an all-time low of 172, and prior to that, the

count had fallen to a new all-time low in 14 out of 15

weeks.

Per last Wednesday’s update from the EIA, NYMEX stocks

of the three major futures contracts—WTI, RBOB, and

ULSD—rose by 1.2 MMbs from a 19-week low to 124.35

MMbs. The year-over-year surplus narrowed by 24 basis

points to 25.7% or 25.45 MMbs. A large build in crude oil

stocks offset a large draw in gasoline stocks. Crude oil

stocks at the NYMEX hub at Cushing, jumped to a 4-

month high of 54.35 MMbs. Inventories are 14% above-

normal with a 38% year-over-year surplus.

NYMEX Products

As of September 04th, EIA gasoline inventories in the East

(inclusive of the NYMEX delivery complex around New

York Harbor) fell for a fifth straight week as tanks have

been purged to now make room for the RVP rollover.

Over the last ten weeks, the year-over-year disposition

has morphed from a 16.65 MMb (28%) surplus, to a 3.23

MMb (5.1%) deficit.

The seasonal purge aside, gasoline demand has been

wretched over the prior two weeks. Demand through

the Labor Day holiday (the end of the summer

driving season) fell to a 3-month low of 8.39

MMb/d… which is around 700 Mb/d below normal.

The year-over-year surplus in PADD 1 distillates

(inclusive of the NYMEX market area) rose to 46.7% or

20.61 MMbs. What is more, inventories are 16% above

normal. This helps to explain why NYMEX November

ULSD continues to trade at/near a life-of-contract high

discount to the December market.

Weakness in the NYMEX curve notwithstanding,

demand for distillates has been resilient. At the end

of May, demand dropped to the lowest level, 2.72 MMb/d

since April 1999. Since then, demand has risen on

average by 2.3% per week and has since climbed back

into the seasonally adjusted band of 3.70 ±0.32 MMb/d.

Demand shall continue to increase as we transition to the

fall harvest and the uptick in pre-holiday intermodal

traffic.

Monday, September 14, 2020 ◼ [email protected] ◼ © 2020 THE SCHORK GROUP, INC

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October gas peaked at 2.407, troughed at 2.305 and

settled within 2 ticks of our 2.321 second daily support

at 2.323, down 8.3 cents.

As far as today goes for October gas, a drop below 2.224 alerts

to weakness towards our 2.206 second support point. Below

here, we look for support at our 2.148 third level of support.

Then again, strength above 2.337 opens the door to our 2.388

second level of resistance. Through here, we will look for

resistance to hold at 2.428.

NYMEX WTI October High 38.18 Low 36.93 Close 37.30 Chng -0.75

October WTI peaked at 38.18 and settled at 37.00,

bottomed within 2 cents of our 36.91 first daily

support and settled 0.75 points lower at 37.30.

As far as today goes for October WTI, a drop below 36.68 alerts

to weakness towards our 36.21 second support point. Below

here, we look for support at our 35.622 third level of support.

Then again, strength above 37.80 opens the door to our 38.43

second level of resistance. Through here, we will look for

resistance to hold at 38.90.

NYMEX NATURAL GAS October High 2.407 Low 2.305 Close 2.323 Chng -0.083

TS Sally bearing down on the Sabine Pass

The East is swimming in gas!

Monday, September 14, 2020 ◼ [email protected] ◼ © 2020 THE SCHORK GROUP, INC

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ICE GASOIL November High 334.50 Low 324.25 Close 329.00 Chng -1.75

November gasoil peaked at 334.50 and bottomed 0.50

points below our 323.75 first daily support and settled

1.75 points lower at 329.00

As far as today goes for November gasoil, a drop below

322.38 alerts to weakness towards our 314.33 second

support point. Below here, we look for support at our

304.10 third level of support. Then again, strength above

336.24 opens the door to our 345.05 second level of

resistance. Through here, we will look for resistance to

hold at 356.55.

SCHORK Weather Demand Recap

PJM and NOAA’s 6-10 Day forecasts… Hard to get bullish here!

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