Market Update 03/09/21

Overview

Energies have rebounded today, aided by the recent OPEC decision to keep output restricted, good demand prospects and the Covid-19 bill passage by the U.S. Senate. Monday's price decline for the energies was attributed greatly to the strength of the U.S. dollar, which hit its highest value since late November. (Reuters / WSJ) 

U.S. Treasury Secretary Janet Yellen said on Monday the (Covid-19) aid package would provide enough resources to fuel a “very strong” U.S. economic recovery. (Reuters) U.S. economic data pointed to a continued recovery, as the Commerce Department said wholesale inventories increased solidly in January despite a surge in sales, suggesting inventory investment could again contribute to growth in the first quarter. (Reuters) TSA said 1.3 million air passengers went through their security checkpoints Sunday, the most during a non-holiday period since the pandemic began nearly a year ago. (WSJ) 

People's Bank of China Vice Governor Chen Yulu told Yicai Global that China's money supply would grow only to match GDP growth and the country's central bank did not see a need for major stimulus support in the next five years. The tech heavy Shanghai Shenzhen CSI 300 and Chinext indices fell 2.2% and 3.5%, taking their losses over the last month to more than 20%, amid fresh signs that the government wants to withdraw some fiscal and monetary support. The government’s work report said that deleveraging will be one of five major tasks this year, mitigating the explosion in debt that followed the pandemic. Overall debt has risen by 30% in the last year, according to Bank for International Settlements data, with the corporate sector alone owing over 160% of GDP – more than twice the ratio in the US. (Reuters) 

India has asked state refiners to speed up the diversification of oil imports to gradually cut their dependence on the Middle East after OPEC+ decided last week to largely continue production cuts in April, two sources said. Over 60% of India's imports come from Middle Eastern countries. Sourcing is seen diversifying from Middle Eastern suppliers to oil from Guyana, Russia and the U.S. "We are trying for shorter-term contracts with new countries and sellers,” as per one source in the Reuters report. 

In Asia, the jet fuel cash differential improved, boosted by better regional demand, led by a modest uptick from China and India. The cash differential was seen at a discount of 41 cents, up from -48 cents last Friday, but down from a value of 32 cents seen February 25. (Reuters) 

U.S. coronavirus cases posted the slowest spread since the pandemic began almost a year ago. (Bloomberg) CDC guidance says fully vaccinated Americans can meet safely indoors without masks. (CNBC) 

A selloff in U.S. government bonds extended into a sixth week,as the yield on the benchmark 10-year U.S. Treasury note ticked up to 1.594%, its highest since February 2020. (WSJ) 

Technicals

The market is starting to ask if the rally, now 80% since late October, is starting to run ahead of itself. WSJ reporting cited one analyst who wonders if "higher oil prices will contribute to critical inflationary pain in some emerging markets.” Another analyst was quoted saying "any supply disruptions will have lost the crude stock buffer they had, risking price spikes, irritating customers and potentially damping demand.”

Crude oil and the ULSD contracts have favorable momentum. WTI bumped up against its upper DC bollinger again today. That value lies at 6605. Resistance above that is seen at 6642. Support is seen at 6381-82. 

Brent has support at 6770-75, tested with a low of 6761. Resistance lies at 6969. 

RB support lies at the double bottom from yesterday/today at 2.0338 / 20314. Resistance above comes in at 2.0943-52. 

ULSD support is seen at 1.8988, tested with the overnight low of 1.8945 Resistance is above at 1.9530. 

Natural Gas

NG remains soft as warm weather has weighed on regional pricing. NGI’s Spot Gas National Average shed 25.5 cents Monday to $2.500, but heating needs could further intensify next week. “Most of the U.S. will be cool versus normal,” Natgas Weather says. (NGI) 

Mild weather is seen accelerating the inflow of NG into storage in the Midwest and Northeast. Storage withdrawals could decline further this month amid weaker demand, limiting the upside risk on regional prices going into the summer. Storage withdrawals in the Midwest have dipped to average 3.3 BCFD in March, 4 BCFD below the February average, according to S&P Global Platts Analytics. Northeast demand is slated to slide over the next two weeks to average 21 BCFD, a decrease of about 10 BCFD from the prior 30-day average. While Platts Analytics' latest forecast calls for Midwest storage to enter the summer injection season 141 BCF lower year over year, the most recent weather-driven demand drop suggests it could be much closer to year ago levels than previously anticipated. 

Global natural gas prices weakened on Monday amid bearish weather forecasts. Both the prompt Dutch Title Transfer Facility and the UK’s National Balancing Point gave up last week’s gains, when the European benchmarks were pushed up by cooler temperatures, rising carbon prices, improving crude oil and stronger sentiment in the Asian gas market. Above-normal temperatures are expected across much of the continent next week. JKM has steadily declined in recent weeks. “The move has been driven by a wave of Atlantic Basin supply finally reaching Asia just as China demand declined significantly,” as per Goldman Sachs Research. (NGI) 

Technically, the NG spot futures chart still has a more negative than positive look, although momentum is getting oversold. Support lies below at 2.591-96. Resistance is seen at 2.730-34. 

Disclaimer 

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC, and its affiliates assume no liability for the use of any information contained herein. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy.