Market Update 03/04/2020

Overview

Energies are higher as OPEC works towards cutting output for the 2nd quarter between 600 mbpd and 1 mmbpd and is possibly going to extend current cuts until the end of the year. (Reuters)

API data seen last night was supportive as crude built less than expected and gasoline drew more than anticipated.

API                   Forecast             Actual

Crude oil            +3.1 /+3.3          +1.7

Gasoline              -1.8                   -3.9

Distillate              -1.7                   -1.7

Cushing                n/av                 -1.4

Runs                   -0.2%                 n/av

Chinese gasoline exports in March are seen at possible record level as domestic supply there has risen. However, refinery maintenance and a pickup in demand in China are seen supporting the gasoline market in Q2. One analyst sees Asian gas cracks back to $7-$8 by the end of Q2 from current $5-$6 value. (Reuters)

Morgan Stanley and Goldman Sachs reduced their oil price forecasts for 2020. Morgan Stanley sees Brent averaging $55 down from prior $57.50 forecast and sees WTI down to $50 from $52.50. They lowered their oil demand forecast by 300 mbpd to an increase of 500 mbpd in 2020. (Reuters) Goldman lowered their Brent outlook to $45 in April—down $8 from prior forecast. They see end-of-year 2020 pricing at $60 versus the prior $65 outlook. They see 2020 oil demand contracting by 150 mbpd versus prior expectation for an increase of 550 mbpd. (Platts)

European refiners are reducing runs ahead of maintenance season as jet cracks have fallen to levels not seen since September 2016. Asian excess jet fuel is seen making its way towards Europe. Diesel cracks in Europe remain weak. Refiners may move turnarounds forward and/or resell their crude barrels out in the face of reduced runs. Demand for jet is seen staying weak. American Airlines and Delta suspended service to Milan on Tuesday. (Platts)

In Asia, the May cash futures Dubai spread fell to -27 cents Wednesday from -4 cents Tuesday as demand remains weak. Though, trading for May barrels has been slow as market participants wait for the May OSP's by Mideast producers to be announced. (Platts)

Technicals:

Technically, the energies have positive momentum as they currently are having inside days:

WTI has spot futures' resistance is at 4866-78 and then at 4942-47. Support is seen at 4647 and then 4588.

RB April contract has support at 15185-15200 and then at 14963-75. Resistance is seen at 15725-39 and then 15925-30.

ULSD for April sees support at 15138 and then 14809. Resistance is seen at 15766-73 and then at 16064-68.

Natural Gas:

NG is up 3 cents as it remains firm with Thursday's storage number seen as a draw of more than 100 bcf with WSJ saying the draw is expected to exceed the average. Note, the 5-year average is -106 bcf for this week.

The up move in prices comes even as the forecast is seen warmer, after a cold shot of air this weekend. (WSJ) The up move comes even as feedgas Tuesday was down to 7.19 bcf—the least in the last 18 days and the 2nd lowest amount in the past 45 days, as per Genscape data. (NGI)

Technically, NG has positive momentum and tested yesterday's high of 1.839, reaching 1.844 today. We see resistance just above at 1.854-56 with support seen at 1.795-1800 (the low is 1785). Support below that is seen at 1750-1756.

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