Market Update 04/07/2020

Overview:

Energies are higher on hopes of OPEC cuts as well as news from Exxon and Continental Resources signaling cutbacks in spending and production.

OPEC has signaled, though, that no deal is possible without U.S. participation. However, President Trump said that OPEC had not pressed him to ask U.S. producers to curb output. (Reuters)

Today, Exxon announced they would cut spending by 30% or $10B. Reuters reporting has eight major oil companies slashing spending for 2020 by 20%. Continental Resources suspended its dividend and will cut output by 30% in April and May. (Reuters)

Enbridge ran their Mainline oil pipeline with 150 mbpd of spare capacity last week as Canadian producers cut output. The Royal Bank of Canada sees Canada cutting as much as 1.7 mmbpd of production as U.S. refiners cut runs and storage nears limits. (Reuters)

Asian cracks from Dubai remain weak. The gasoline crack hit a new low of -$10.96 and the Gasoil crack fell to its lowest level ever at $6.09. (Reuters) Dubai gained ground against Brent in Asian trading as output curbs from the Mideast are expected. June Brent fell to a discount of $1.75 vs. Dubai—down from -$1.09 Monday. However, the Dubai May/June spread weakened to -$1.27–down 27 cents from Monday. (Platts)

Technicals:

Technically, the energies have positive momentum, yet they remain in recent ranges. WTI has resistance at 2913 with support at 2524-28.

Brent resistance lies at 3500 and then 3629 with support at 3250 and then 3094-3102. 

RB support is seen at 6875-80 with resistance at 7574-7600. 

ULSD support lies at 10444-61 (the low today is 10484) with resistance at 10900 and then 11104-20. 

Natural Gas:

NG is up over 7 cents as production cutbacks in crude are seen reducing associated NG output. One firm says that associated gas output was about 31 bcf of the 96 bcf total, while another consultant firm sees NG output down 8-10 bcf by the end of 2021. (WSJ) NGI says the rally today is also being aided by a cooler forecast.

Reuters reports that 4 cargoes of LNG are en route to China from the U.S. as China has waived taxes for importation. These are the first cargoes headed there since March 2019.

Technically, NG is firm as it trades at the highest level seen in three weeks. Resistance lies above at 1854-56. Support lies below at 1755-56–the low overnight is 1747.

The curve has moved bullishly again today. May has gained more than 5 cents on December—now almost 10 cents better vs. December 24 hours ago, testing resistance in the 90.5 area with resistance above that towards 87 cents. The spread has a gap on the daily chart today—that gap is from 92.8 to 93.5

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