Market Update 03/29/21

Overview

Energies are higher in what has been a seesaw session overnight. The key news is the fact that the Suez Canal blockade is getting closer to a resolution. Yet, "some leftover downstream ripple effects should be expected" in the oil market, as per a WSJ source. The initial reaction overnight to the freeing of the ship was for lower prices, as supply constraints were seen easing. (Reuters) The likelihood of an OPEC output accord rollover is helping prices. 

Maritime Bunker fuel and jet fuel are seen being supported by the Suez Canal blockage as alternate routes for moving goods are sought. Also, bunker fuel will also be supported because as ships wait, they consume fuel. There were at least 28 crude tankers estimated to be carrying around 26 MMBBL and 24 product and chemical tankers holding around 1 MM metric tons waiting to navigate through the canal, according to cFlow. (Platts) Rates for tankers have risen, boosting the cost of carrying crude. (Bloomberg) 

Today marks the first day of trading of Murban crude oil futures on ICE Abu Dhabi plans to relinquish control over prices of Murban to investors and traders, a major step in efforts to fortify its position in the international oil market. The goal is to make Murban more attractive to refiners in Asia. Some see this as possibly undermining OPEC's hold on oil pricing, as it injects liquidity and transparency to oil pricing. More than 60 refiners in Asian countries including China, Japan and South Korea buy Murban. (WSJ) 

Russia supports a rollover into May of the current OPEC+ output accord, but they are said to be seeking a small increase in their output so as to meet rising seasonal demand. (Reuters) 

The Asian gasoline market is seen being supported by a refinery fire in Indonesia and by rising demand as regional lockdown restrictions are eased, as per Platts reporting. Pertamina says that the 125 MBPD facility in Indonesia should restart in 4-5 days. (Reuters) 

Frdiay's Baker Hughes oil rig count showed an increase of 6 units. 

Friday's CFTC Commitment of Traders Report showed liquidation in RB, ULSD & WTI futures/options during the week that ended Tuesday March 23. WTI length held on CME/ICE fell by a combined 20,649 contracts. RB net length fell by 4,045 contracts and ULSD net length fell by 4,749 contracts. 

Technicals

Momentum for the energy contracts is positive. RB May futures have a rising pattern look. 

May RB futures support is seen at 1.9632-39, then at 1.9530-32, which was tested with a low of 1.9522. Upside resistance is seen at 2.0183-2.0200, then at 2.0302-21. 

ULSD in May sees support at 1.7951-65, then at 1.7810-11. The low overnight is 1.7750. Resistance lies at 1.8308-21, then at 1.8412. The high today is 1.8281. 

WTI May futures see light support at 6029-39. Below this we see support at 5933-43, which held with a low of 5941. 

June Brent has support at 6330-33. The low today is 6301. Resistance is seen at 6534-37. The overnight high is 6534. Above this we see resistance at 6603-09. 

Natural Gas

NG futures are near unchanged as today is the last trading day for the April NG futures contract. 

Friday Baker Hughes reported that the NG rig count remained unchanged. 

CFTC data issued Friday showed money managers added net length in futures/options on the CME. They added 9,130 contracts and thus turned their position to being net long by 6,351 contracts. 

The impact of the Suez Canal blockage is seen supporting LNG prices in Europe as flows from Qatar are slowed. If Qatar is unable to ship through the Suez, it may prefer to sell cargoes to Asian buyers, rather than bear the additional costs and time associated with sending vessels around the Cape of Good Hope. If the Suez blockage lasts for some time yet, it may perversely have the effect of boosting the amount of LNG available to Asian buyers, while cutting that to Europe. If the Suez blockage continues, it may delay as much as 1 MM metric tons of LNG for delivery to Europe. (Reuters) 

NGI cites the return of industrial demand in the Gulf Coast region as supplying support for NG prices. This even as weather demand remains overall bearish, indicated by the NGI’s Spot Gas National Average falling 7.0 cents to $2.215 Friday. 

Tudor, Pickering expects this week's EIA NG storage to show a 12 BCF build. This, they add, would make the cumulative draw for the season 2.17 TCF, 26% ahead of last year and the highest since the infamous winter of 2013/14. Unless supply ramps up, the TPH analysts said Lower 48 stocks could hover around 3.25 TCF by the end of the upcoming injection season. They see summer pricing rising to $3.00-$3.25 to drive coal to gas switching and to force more gas into winter storage.(NGI) 

Technically, the sideways to slightly higher price action persists as volume remains muted, befitting a shoulder season. Volume of NG futures traded on the CME Friday totaled a very low 191,192 contracts. 

May futures have support at 2.600-2.602. The low overnight is 2.597. Resistance lies at 2.657-2.6600, then at 2.697-2.700. 

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.