energy market report

7/31/2019 Energy Market Report

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Friday, September 30th, 2011 [email protected] © 2011 THE SCHORK GROUP, INC

ENERGY PRICES WERE MIXED YESTERDAY… crude oil

rode the equities higher following initial jobless claims

dropping to the lowest point since April and a better-

than-expected increase in domestic GDP for the second

quarter. Natural gas was not so lucky with a huge 111

Bcf injection from the EIA. As for today, U.S. personal

income is expected to increase by 0.1% in August,

while expenditure is forecast 0.2% higher MoM.

Initial Jobless Claims Lower T han… A Really High Level(See omnium-gatherum p.6)

Chart of the Day: Cumulative Injection vs. Total Storag

(Bcf)

C

EIA ReviewBulls: 0, Bears: 111

By all accounts yesterday’s natural gas injection was expec

to be bearish, with median analyst estimates coming in at

Bcf, 2 Bcf more than the largest injection on record for

reference week (seen back in 2003). In turn the market

trending lower from its open with lows of 3.756 by 10:00

EST. Yet even the bears must have been surprised when

Friday, September 30th, 2011

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www.schorkreport.com

TRADING BIAS DAILY

WTI: NEUTRAL a/o Sep 26 …S- 79.95 R- 84.33 BRN: NEUTRAL a/o Sep 26 …S- 102.23 R- 105.67

NG: BEARISH a/o Aug 17 …S- 3.688 R- 3.806

RB: NEUTRAL a/o Sep 26 …S- 250.59 R- 261.13

HO: NEUTRAL a/o Sep 26 …S- 278.08 R- 287.24

TRADING BIAS WEEKLY

WTI: BEARISH a/o Jun 06 …S- 76.18 R- 83.52

BRN: BEARISH a/o Jun 27 …S- 99.74 R- 108.2

NG: BEARISH a/o Jun 06 …S- 3.568 R- 3.834

RB: BEARISH a/o May 09 …S- 243.35 R- 267.59

HO: BEARISH a/o Jun 27 …S- 268.21 R- 290.95

TRADING BIAS MONTHLY

WTI: BEARISH a/o May 2011 …S- 90.24 R- 133.54 BRN: BEARISH a/o May 2011 …S- 91.85 R- 136.16

NG: BEARISH a/o Oct 2010 …S- 3.25 R- 5.82 RB: BEARISH a/o May 2011 …S- 220.8 R- 357.02

HO: BEARISH a/o May 2011 …S- 264.19 R- 377.15

CRUDE AWAKENINGS

Weather forecast courtesy of

Commodity Weather Group

EIA Estimated Underground Storage (Bcf)

w/e 23-Sep-11

Region StockPrev.Week

% Prev. Year %

East 1,820 1,753 67 3.8 1,860 (40) (2.2)

West 456 445 11 2.5 496 (40) (8.1)

GoM 1,036 1,003 33 3.3 1,047 (11) (1.1)

Total U.S. 3,312 3,201 111 3.5 3,403 (91) (2.7)

Region Capacity 5Yr Avg %

East 2,205 82.5% 1,872 (52) (2.8)

West 558 81.7% 453 3 0.7

GoM 1,340 77.3% 982 54 5.5

Total U.S. 4,103 80.7% 3,307 5 0.2

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EIA reported a huge 111 Bcf injection to total natural gas

storage at 10:30AM EST. In the minutes after the

release, prices were testing lows of 3.685.

The bulls would love to be able to say that the large

injection is simply a function of production coming back

on-line after Tropical Storm Lee/power outage related

disruptions in the Gulf. This is simply not the case – as

drawn in today’s CotD, the cumulative injection for the

first four reports of September comes to 351 Bcf, the

second largest on record, beaten only by 2003. Yet

consider that total storage at the same week in 2003

came to 2.82 Tcf, in 2011 it is 17.45% higher at 3.31 Tcf,

the third highest level on record. When we see the

second largest injection of all time when inventories are

at the third highest level on record, we think bearish.

The root cause of the injection was, simply, continued

strength in production. The EIA reports that productionwas up 0.1% for the week which would place it around

the ~62.85 Bcf/d level. In turn, the Gulf of Mexico region

reported a 33 Bcf injection, 83.33% above the seasonal

average and the largest injection ever seen for this

timestep. Similarly, shale production helped the East

region report a 67 Bcf injection, 52.97% above the

seasonal average and, of course, the largest number on

record.

The demand side was no better, with national electricity

output down by 3.72% WoW, with drops as large as

7.06% in the West Central and South Central regions.From a seasonal perspective, the West Central region

came in 11.70% below last year while the national

average was 6.46% below last year and 4.01% below

seasonal norms. Considering how low output is, the

5.9% YoY deficit in nuclear generation no longer seems

that bullish.

Lower output to a certain degree is to be expected as w

enter the shoulder months – cooling degrees in New

England stand at 3, as compared to 67 at the end of July

But even accounting for seasonal trends temps seem

week. The preceding chart draws the % drop in coolin

degrees between the last week of July and the referenc

week. The seasonal average decline in CDD’s comes t

53.09%, a reasonable number. In 2011 it came t

70.30%. The West North Central was even sharper, wit

a historic drop of 67.46% and a 97.14% drop in 2011.

Put simply, cooling degree days are effectively over fo

the season. At the same time, heating degree days ar

strong, but not large enough on an absolute basis to fue

significant demand – the U.S. average came to 31 HDD

last week as compared to the seasonal normal of 15 HDD

Was there anything encouraging about yesterday’

report? Well, we would love to say the West region saw small injection as CDD’s in the Pacific came in 37.40%

above seasonal norms, but this was not the case

Instead, the West region’s 11 Bcf injection was more tha

double the 5 Bcf seen last year and 2 Bcf above th

seasonal average of 9 Bcf.

In turn, as shown above, basis pricing was weak acros

the board. Every single trading hub reported a dro

between last Thursday and the prior Thursday, with a

average drop of 5.34% and a maximum of 9.15% at th

PJM hub. The bottom line is that we have maintained ou

bearish daily natural gas bias through thick and thin

Nothing in yesterday’s report is inspiring us to change it.




NATURAL GAS

WTI was strong yesterday, breaking away from the rest of

the complex with a 1.15% gain. Keep in mind that WTI

lagged on Wednesday, so yesterday may be a function of

arb traders moving in to balance the cracks, or simply retail

investors who are trading WTI along with the equities or

against the dollar. Meanwhile the front month spread rose

to highs of -0.16, the highest since the November contract

took over as the front month. We would advise watching

today’s personal income/expenditure data. As drawn

below, the percentage of total expenditure on gasoline

rebounded in July.

As far as next Thursday’s EIA storage report goes,

weather-related demand through the Midwest remains

comfortable this week, but is cranked up in the

Southwest. Through the first five days of the reference

week degree-days are up by more than one-third fromthe previous timestep in the Houston market area. As far

as the injection for this week is concerned, we typically

see a number in between 62 and 79 Bcf.

OIL

As far as today goes, weakness below yesterday's 23.6

retrace of 80.66 alerts to our 79.95 inflection lo

Below here we will look towards our 77.75 intra-day.

the other hand, gains above yesterday's 76.4% retrace

82.96 clear a path to our 84.33 inflection high. Throu

here the bulls could run to- and into - resistance at o

86.53 intra-day high.

WTI X Open 80.67 High 83.98 Low 79.64 Close 82.14 Chng +0.93

NAT-GAS X Open 3.793 High 3.837 Low 3.685 Close 3.747 Chng -0.052

As for today, strength above 09/23's 3.772 open open

the door to our 3.806 inflection high. Above here th

bulls will potentially run towards our 3.865 intra-day

Then again, weakness below the 3.700 psych barrier lead

to our 3.688 inflection low. Below here we look fo

offers to hit support at our 3.629 intra-day.

3.6

3.8

4

4.2

4.4

4.6

3 0 - J u n

6 - J u l

1 1 - J u l

1 4 - J u l

1 9 - J u l

2 2 - J u l

2 7 - J u l

1 - A u g

4 - A u g

9 - A u g

1 2 - A u g

1 7 - A u g

2 2 - A u g

2 5 - A u g

3 0 - A u g

2 - S e p

8 - S e p

1 3 - S e p

1 6 - S e p

2 1 - S e p

2 6 - S e p

NYMEX NG November '11 Daily

75

80

85

90

95

100

105

3 0 - J u n

6 - J u l

1 1 - J u l

1 4 - J u l

1 9 - J u l

2 2 - J u l

2 7 - J u l

1 - A u g

4 - A u g

9 - A u g

1 2 - A u g

1 7 - A u g

2 2 - A u g

2 5 - A u g

3 0 - A u g

2 - S e p

8 - S e p

1 3 - S e p

1 6 - S e p

2 1 - S e p

2 6 - S e p

NYMEX CL November '11 Daily

Daily Bias: NEUTRAL

Daily Bias: BEARISH




LIGHT ENDS

MIDDLE DISTILLATES HEATING OIL X Open 281.90 High 288.12 Low 280.25 Close 282.66 Chng -0.05

ICE Brent

Heating oil prices were effectively flat yesterday, settling

0.02% lower. Traders may have been encouraged by the

Kansas City Fed manufacturing activity index, which was

expected to remain flat at 3 in September but instead doubled

to 6. The heating oil crack dropped below its 50 day MA

yesterday, but was inching higher in after-hours trade. We

expect increased volatility today as the contract for Octoberdelivery goes off the board.

As for today, strength above yesterday's 284.19 pivot high

builds a bridge to our 287.24 upper inflection point. Once

crossed, the bulls should run towards our 291.82 intra-day

high. Then again, weakness below yesterday's 280.25 low

print signals momentum to our 278.08 inflection low. Below

here we will look for offers down to our 273.50 intra-day low.

Despite a severe correction in initial jobless claims andencouraging personal consumption data for the second

quarter, RBOB fell by 0.65% yesterday. Yet the low print of

254.96 was well above our 254.41 lower alert and our 251.74

inflection low. Combined with an encouraging DOE report, we

will look for the RBOB crack to remain above its 200 day MA

of $25.15 in the short term.

As far as today goes, weakness below 09/22's 252.44 low

print alerts to our 250.59 inflection low. Below here we look

to our 245.31 intra-day. On the other hand, a rebound above

yesterday's 258.34 pivot high opens the door to our 261.13

upper inflection point. Above here the bulls should bidtowards our 266.41 intra-day high.

Brent X Open 103.00 High 105.82 Low 102.35 Close 103.95 Chng +0.14

RBOB X Open 256.50 High 261.72 Low 254.96 Close 255.86 Chng -1.67

Prices in London were flat yesterday, an unpleasant surprise for

sellers of the WTI – Brent spread. As mentioned in yesterday’s

note the spread was selling off in the after-hours Wednesday to

lows of -24.00. Instead, the crack settled yesterday at -21.81,

the third consecutive settle above the 50 day MA. Next stop forthe technicals? The 100 day MA of -20.235.

As far as today goes, strength above 09/27's 104.77 open

opens the door to our 105.67 inflection point. If crossed, we

will look for bids to our 107.38 intra-day. On the other hand, a

drop below 09/28's 103.23 low print alerts momentum to our

102.23 inflection low. Below here we will look for offers

towards our 100.52 intra-day.

260

270

280

290

300

310

320

330

3 0 - J u n

6 - J u l

1 1 - J u l

1 4 - J u l

1 9 - J u l

2 2 - J u l

2 7 - J u l

1 - A u g

4 - A u g

9 - A u g

1 2 - A u g

1 7 - A u g

2 2 - A u g

2 5 - A u g

3 0 - A u g

2 - S e p

8 - S e p

1 3 - S e p

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2 1 - S e p

2 6 - S e p

NYMEX HO November '11 Daily

Daily Bias: NEUTRAL

240

250

260

270

280

290

300

3

0 - J u n

6 - J u l

1 1 - J u l

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4 - A u g

9 - A u g

1 2 - A u g

1 7 - A u g

2 2 - A u g

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3 0 - A u g

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8 - S e p

1

3 - S e p

1

6 - S e p

2

1 - S e p

NYMEX XB November '11 Daily

98

100

102

104

106

108

110112

114

116

118

120

122

4 - J u l

7 - J u l

1 2 - J u l

1 5 - J u l

2 0 - J u l

2 5 - J u l

2 8 - J u l

2 - A u g

5 - A u g

1 0 - A u g

1 5 - A u g

1 8 - A u g

2 3 - A u g

2 6 - A u g

3 1 - A u g

5 - S e p

8 - S e p

1 3 - S e p

1 6 - S e p

2 1 - S e p

2 6 - S e p

Brent CO November '11 Daily

Daily Bias: NEUTRAL

Daily Bias: NEUTRAL




Following a record breaking 67 Bcf natural gas injection i

the East region, PJM West prices dropped sharpl

yesterday. However, the low print of $38.75/Mwh wa

just above our lower price regression of $37.203/Mwh.

Additional pressure was likely put on prices by a tin

2.04% increase in natural gas burn rates. Nuclea

generation in Region 1 stands 1.6% above last year, th

only region to report a YoY surplus. Further, generatio

as a percentage of capacity stands at 93% in region 1

the highest of any region and a stark contrast to the 78%

level in Region 2.

In turn, on-peak spot prices at the Cinergy Hub decline

by $2.61/Mwh as compared to the $3.86/Mwh drop see

at the PJM. On a national level nuclear generation stand

5.9% below last year but, as discussed above anevidenced by the large injection, mild temps have led to

commensurate decrease in demand.

ELECTRICITY RECAP

PRICE PATH

TETCO M3 natural gas prices dropped to $4.000 yesterda

the third lowest value for the entire month. This was m

by a more-than-commensurate decrease in electric

prices. In turn, the 10K spark spread dropped in

negative territory for the first time since September 19

Keep in mind we have seen serious support at t

$40.00/Mwh level recently, thus our regression rang

between $46.483/mwh and $36.403/Mwh.

6 K

7 K

8 K

9 K

1 0 K

1 1 K

1 2 K

$15.00

$10.00

$5.00

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

2 9 - A u g

3 0 - A u g

3 1 - A u g

1 - S e p

2 - S e p

6 - S e p

7 - S e p

8 - S e p

9 - S e p

1 2 - S e p

1 3 - S e p

1 4 - S e p

1 5 - S e p

1 9 - S e p

2 0 - S e p

2 1 - S e p

2 2 - S e p

2 3 - S e p

2 6 - S e p

2 7 - S e p

2 8 - S e p

2 9 - S e p

Tetco M3 Spark Spread Surface

1 0 K

1 1 K

1 2 K

1 3 K

1 4 K

$10.00

$5.00

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

3 1 - A u g

1 - S e p

2 - S e p

6 - S e p

7 - S e p

8 - S e p

9 - S e p

1 2 - S e p

1 3 - S e p

1 4 - S e p

1 5 - S e p

1 9 - S e p

2 0 - S e p

2 1 - S e p

2 2 - S e p

2 3 - S e p

2 6 - S e p

2 7 - S e p

2 8 - S e p

2 9 - S e p

Pennsylvania Railcar Coal Dark Spread Surface

0.E+00

1.E+06

2.E+06

3.E+06

4.E+06

5.E+06

6.E+06

7.E+06

8.E+06

5 / 2 5

5 / 2 8

5 / 3 1

6 / 3

6 / 6

6 / 9

6 / 1 2

6 / 1 5

6 / 1 8

6 / 2 1

6 / 2 4

6 / 2 7

6 / 3 0

7 / 3

7 / 6

7 / 9

7 / 1 2

7 / 1 5

7 / 1 8

7 / 2 1

7 / 2 4

7 / 2 7

7 / 3 0

8 / 2

8 / 5

8 / 8

8 / 1 1

8 / 1 4

8 / 1 7

8 / 2 0

8 / 2 3

8 / 2 6

8 / 2 9

9 / 1

9 / 4

9 / 7

9 / 1 0

9 / 1 3

9 / 1 6

9 / 1 9

9 / 2 2

9 / 2 5

9 / 2 8

D e k a t h e r m s / d

a y

Natural Gas Burnt in NPCC Region by Sector

Residential Sector

Power Sector

35

85

135

185

235

6 / 2 9

7 / 5

7 / 8

7 / 1 3

7 / 1 8

7 / 2 1

7 / 2 6

7 / 2 9

8 / 3

8 / 8

8 / 1 1

8 / 1 6

8 / 1 9

8 / 2 4

8 / 2 9

9 / 1

9 / 7

9 / 1 2

9 / 1 5

9 / 2 1

9 / 2 6

9 / 2 9

ICE PJM West On Peak Real Time Daily

Close

30 day MA




Yesterday the Department of Labor released the latest

weekly initial jobless claims, which analysts were

expecting to come in at 420K, just below the previous

week’ s 423K level. Instead, they dropped to 391K, the

lowest point since April 2011.

While we recognize this is an improvement, we hardly find

it encouraging. The chart below draws average initial

jobless claims between 2003 and 2007 on a monthly basis

against claims for 2011 (with a non-zero axis). Initial

jobless claims may be at their lowest level since April but,

like congratulating the most stable inmate at the insane

asylum, this is a heavily modified compliment.

OMNIUM-GATHERUM

towards our 866.25 intra-day. On the other handcontinued strength above yesterday's 907.75 hig

print clears a path towards our 914.25 uppe

inflection-point. Above here we will look for bid

towards our 930.25 intra-day.

Given the strong front month crack we were looking for a

draw in gasoil inventories at the ARA hub yesterday, instead

PJK Services reported a 28 K tonne increase. This strikes us

as bearish and the markets did not disagree – gasoil sold off

1.02% yesterday. Mogas inventories dropped 116 K tonnes.

As for today, offers through yesterday's 23.6% retrace of

883.75 alert to follow-through momentum towards our

882.25 inflection. We will look for weakness below here

ICE GASOIL

Instead, yesterday’s strength in the equities was likely due

the second quarter GDP data. Personal consumption rose

0.7% as compared to the 0.4% expected by analysts, w

total GDP rose by 1.3% as compared to the 1.2% expecte

Yet for the energy complex the data was less th

encouraging. Expenditure on gas and energy fell by 2.1%

the quarter despite a small 0.52% decline in pric

Meanwhile motor vehicles saw a 7.1% QoQ drop. This he

explain the weakness seen in front month RBOB, which

1.19% yesterday as compared to WTI’s 1.15% gain.

fairness, traders are likely liquidating their positions in

October RBOB contract due to expiration today, yet even

November RBOB contract was weak yesterday.

Instead, much of yesterday’s GDP growth was due to

services sector– medical care saw a 0.7% QoQ gain w

housing saw a 0.5% gain. On a discretionary le

recreation services saw a 2.2% gain, an encouraging sign

consumer health.

All told, yesterday’s GDP data was bullish on the head

level, but on the breakdown puts a damper on Wednesda

encouraging DOE report for the products. Thus we maint

our neutral daily bias.

1010.5

1111.5

1212.5

1313.5

1414.5

1515.5

1616.5

1717.5

18

16-Sep 19-Sep 20-Sep 21-Sep 22-Sep 23-Sep 26-Sep 27-Sep 28-Sep 29-Sep

ICE Brent-Gasoil Crack Spread

840

860

880

900

920

940

960

980

1000

4 - J u l

7 - J u l

1 2 - J u l

1 5 - J u l

2 0 - J u l

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1 5 - A u g

1 8 - A u g

2 3 - A u g

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3 1 - A u g

5 - S e p

8 - S e p

1 3 - S e p

1 6 - S e p

2 1 - S e p

ICE Gasoil October '11 Daily

Daily Bias: NEUTRAL




Monday 09/26 - Ethanol futures for December delivery

weakened for a third straight week along with heavy

losses in the gasoline and corn markets. The contract

finished at $2.435/g or 5.1% below the prior Friday’s

close. The CBOT crush averaged an unremarkable$0.32/g, however, the crush between prompt f.o.b.

ethanol in Chicago and the bid for №2 yellow corn in

Chicago has doubled over the last two weeks to $1.03/g.

According to the DOE, for the week ended September

16th, gasoline demand in the U.S. ticked up by 11 bps to

8.86 MMb/d. Demand over the last four weeks

averaged an anemic 8.99 MMbbl/d, i.e. a ten-year

low. Meanwhile, discretionary gasoline blending

(conventional + ethanol) rose for the first time in three

weeks as economics continue to skew their way. Over the

last four weeks discretionary blending accounted for five-in-nine gallons of the entire gasoline pool.

As go the biofuel Ag feedstocks, in Chicago the amount of

CBOT corn futures owned by money managers dropped

for a second straight week and fell to a two-month low.

Per the CFTC week ended Tuesday, September 20th, the

amount of speculative length fell by 12.13% to 247,010.

In New York, speculative money in the NYBOT/ICE sugar

market fell by an even larger 12.149%. The net length o

sugar futures in the hands of money managers dropped to

a five month low of 114,143 contracts.

After hitting a life-of-contract high at the end of AugustChicago corn futures for December delivery have plunge

18% to 638.50. As far as this week goes, offers throug

619.00 alert to follow through weakness towards ou

599.50 weekly inflection point. Below here we will loo

for offers towards our 582.75 weekly top. Otherwise,

rebound through 678.75 cautions for renewed strengt

towards our 709.25 upper inflection point and then to ou

734.75 intra-week low target.

As far as Mar-12 sugar goes, last Friday the marke

plunged 1.8% below our 24.46 intra-week low. As far a

this week goes, offers through 22.80 alert to followthrough weakness towards our 21.81 weekly inflectio

point. We will look for weakness below here towards ou

20.99 intra-week low. Otherwise, a rebound throug

26.14 clears a path towards our 27.76 upper inflectio

point. We will look for strength through here towards ou

29.14 intra-week high.

BIOFUELS

WEEKLY OUTLOOK (September 26th to 30th)

Henry Hub… weakness below the week ending 10/22's 3.613 high print alerts to our 3.568 inflection low. Belowhere we will look for offers to our 3.435 intra-week. On the other hand, a rebound above last week's 3.761 pivot

high opens the door to our 3.834 inflection high. Once crossed, the bulls should run towards our 3.967 intra-week

high. WTI… strength above the week ending 08/26's 82.42 open should send the bulls towards our 83.52 inflection

high. Above here they will likely hit resistance at our 87.18 intra-week high. On the other hand, a correction below

last week's 77.55 low print leads to our 76.18 inflection low. Below here we look for offers to our 72.52 intra-week.

Brent… strength above last week's 106.61 pivot point opens the door to our 108.20 inflection high. Above here the

bulls will run to (and in to resistance at) our 112.43 intra-week high. On the other hand, a drop below the week

ending 02/18's 100.73 low print alerts to our 99.74 inflection low. Below here the floor falls through to our 95.51

intra-week low. RBOB… strength above last week's 265.90 pivot high clears the path to our 267.59 inflection high.

If the bulls break through here they could hit resistance around our 279.70 intra-week high. On the other hand, a

correction below the week ending 02/18's 246.20 low print alerts to our 243.35 inflection low. Below here we look

for offers to our 231.24 intra-week low. Heating Oil… strength above last week's 286.50 pivot point opens the

door to our 290.95 inflection high. Above here we look for bids to our 302.31 intra-week. Then again, a correction

past 08/09's 270.20 low print alerts to our 268.21 inflection point. Below here the bears should claw to our 256.85

intra-week low.

A note about the Ibis: The Ibis folklore has it that other birds look to the Ibis for leadership. The Ibis uses its

instinct to detect danger. It is the last sign of wildlife to take shelter before a hurricane hits, giving warning that

danger is imminent. As the storm passes the Ibis is the first to reappear, a sign the clear skies are

approaching.

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