Market Update 03/22/21

Overview

Overnight energy prices suffered as European lockdown issues weighed. Nearly a third of French people entered a month-long lockdown on Saturday, while Germany plans to extend its COVID-19 lockdown into a fifth month, according to a draft proposal. India reported the most COVID-19 cases and deaths in months on Monday and authorities reintroduced some curbs. (Reuters) 

US WTI Midland crude deals have fallen as Asian buyers favor Dubai-linked crude grades. West African crudes are very distressed as there is a lot of crude there unsold. Demand from Asian refineries was slowing as most have already fulfilled their requirements for May barrels. (Platts) 

India’s crude oil imports fell by the most in four months in February, as demand slowed due to rising fuel prices and as the country faces a resurgence in COVID-19 cases and potentially fresh restrictions. Crude imports were 3.99 MMBPD in February. This was down 18.3% year on year. Fuel consumption in February was the lowest since September. (Reuters) 

Saudi Aramco's CEO on Sunday said that global oil demand is on track to reach 99 MMBPD by the end of 2021 thanks to ramped-up coronavirus vaccination programs. Demand in 2019 was 100 MMBPD. (Reuters) 

Iran’s Supreme Leader Ayatollah Ali Khamenei, meanwhile, said his country was in no hurry to revive the nuclear deal, although he reiterated that Tehran was still prepared to return to the original terms of the agreement once the U.S. has lifted sanctions. (Bloomberg) 

Friday's CFTC report shows money managers added length in WTI , RB and ULSD in the week ended 3/16. WTI Crude length rose by 2,332 contracts combined on ICE/CME. RB net length rose by 7,062 contracts. Distillate length rose by 2,696 contracts. 

Friday's Baker Hughes oil rig count rose by 9 units. The total count is the highest in 10 months. The oil-rig count has risen 15 of the past 16 weeks, but the increases have been relatively small and drilling activity remains less than half of pre-COVID levels in early 2020. The increase has had little effect on US oil production, which remains below 11 MBPD versus nearly 13 MBPD when the coronavirus pandemic began. (WSJ) 

Technicals

April WTI futures expire today. Momentum points lower for the energies, but prices have stabilized for now. 

May WTI futures see support at 6036-44, which was tested with a low of 6035. Below this we see support at 5901-09. Resistance above is seen at the double top of today/Friday at 6180-84. Above that we see resistance at 6267-71. 

May ULSD support is seen at 1.7940-51, just below the overnight low of 1.7965. Resistance is seen at 1.8311-26. 

RB May futures have their support at 1.9115-35. The overnight low is 1.9164. Resistance comes in at 1.9530-32, then at 1.9793-1.9811. 

Natural Gas

NG futures are a bit softer as spring weather has set in over much of the U.S. 

Notable to us is the fact that money managers have turned their net long position in NG futures/options on the CME to a net short position as per the CFTC report issued Friday. Money managers shed 58,326 contracts of length and were net short 2,778 contracts as per Tuesday 3/16. 

Friday's Baker Hughes NG rig count was unchanged. 

Friday's LNG feed gas volumes reached 11.8 Bcf, which is better than prior record high of 11.65 BCF we saw registered last Wednesday. (NGI) 

The surprising strength of US natural gas production looks poised to continue this coming summer. Oil prices hovering near $60/barrel and rates of return across major US oil plays are healthy enough to incentivize new drilling. A sample of the major dry gas producers in the Northeast and Haynesville reveals they have hedged roughly 70% of their 2021 natural gas production at $2.70/MMBTU, 10 cents/MMBTU above the current summer strip. This should help keep most operators immune to the recent dip in prices and ensure production momentum seen the past few months, especially in the Haynesville, continues most of the summer. (Platts) 

The sideways nature of NG futures prices seems underscored to us by the very light volume seen Friday on the CME. Volume was 237,241 contracts. Momentum is now positive. Support at 2478-79 was tested on the low. Below that we see support aat 2.421-2.422. Resistance above is seen at the triple top at 2.561-66. 

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.