Market Update 04/07/21

Overview

Energies are higher after spending much of the overnight lower. Prices are being buffeted by slightly disappointing API data versus upbeat economic forecasts. 

The IMF yesterday raised their 2021 global economic growth forecast to 6.0%. This is up 0.8% from their last estimate seen in October, 2020. They also raised their 2022 estimate by 0.2% to 4.4%. (Platts) 

The EIA, in its Short Term Monthly Outlook out yesterday, raised their oil price forecast. WTI is seen averaging $58.89 this year. Last month they had forecasted $57.24. WTI is seen averaging $56.74 in 2022, up from last month's forecast of $54.75. The EIA reduced their U.S. crude production forecast for 2021 by 110 MBPD to 11.04 MMBPD. Output in 2022 is seen at 11.86 MMBPD, down from last month's projection of 12.02 MMBPD. The EIA sees U.S. retail gasoline prices averaging $2.78 this summer. The retail gasoline price hit a near 2-year high of $2.87 on March 22. But, the EIA sees prices at the pump dropping to $2.62 by September. Higher refinery production and an increase in supply of crude from OPEC should help ease prices at the pump. 

API                      Forecast              Actual

Crude Oil              -1.4/1.6              -2.62

Gasoline                -0.9                  +4.55

Distillate              +0.6                  +2.81

Runs                    +1.1%                n/av

Cushing                n/av                  -0.1

ING says that if the DOE has a similar gasoline build, it would be the largest increase since April of last year. 

Technicals

Energies remain in their recent range. The range-bound argument is underscored by the neutral momentum indicator for the WTI & Brent futures contracts. 

WTI spot futures have support at 5885-86, tested with a low today of 5878. Below this, we see support at 5763. Resistance lies above at 6086-90, then at 6134-36. 

RB spot futures see support at 1.9550-75, then at 1.9370-75. Resistance lies at 2.0050, then at 2.0202-14. 

ULSD May futures see support at 1.7760-76, tested with a low of 1.7768. Below this, we see support at 17625-30. Resistance comes in at 1.8256-64. 

Natural Gas

NG is up slightly as it has a double bottom from yesterday/today at 2.453-2.458. Near term low demand weighed on prices Tuesday. NG spot futures settled at their lowest level since January 22. (WSJ) 

Current estimates for this week's EIA storage data show a build between 21 and 23 BCF. The 5-year average for the period is +8 BCF, while last year saw an increase of 30 BCF. 

The EIA, in its Monthly report, said they see U.S. dry NG production steady versus last month's forecast at 91.4 BCFD. 2022 is seen with output of 93.29 BCFD, which is up from last month's forecast of 92.8 BCFD. Prices for NG in 2021 are seen averaging $3.04, which is down 10 cents from last month's figure. Prices are seen averaging $3.11 in 2022, down by 5 cents from last month's estimate. The EIA upped their NG demand figure for 2021 to 82.93 BCF/D from 82.5 last month. 2022 demand is seen at 82.07 BCF/D, versus last month's 81.6 BCF/D forecast. 

Technically, the price action is not bullish the past few sessions, but we see a few items that indicate a possibly overly bearish sentiment having risen. The spot futures are butting up against the lower DC bollinger, which intersects at about 2.454. Also, open interest for NG futures on the CME rose by 16,977 contracts Monday. It looks like mostly new shorts in the May through August contract months. 

The May/July spread has a mean reversion set up from yesterday. It settled at 16.2 cents. The lower bollinger lies at 15.5 cents and momentum is getting near oversold for May versus July. 

Spot NG futures have support at the double bottom, then at 2.422. Resistance is light at 2.523-26. Better resistance lies at 2.565-68. 

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.