Market Update 04/15/2020

Overview:

Energies are lower as the monthly report issued today by the IEA market highlighted worries over demand loss due to the virus and storage capacity is starting to be strained. Also, the API data was disappointing.

The IEA sees global demand down 9.3 mmbpd YOY. April's demand is seen down 29 mmbpd YOY, May’s demand is down 23 mmbpd and June’s demand is down 15 mmbpd. Q2 demand is seen down 23.1 mmbpd. Refinery throughput is seen down 7.6 mmbpd in 2020 from 2019 levels and will be lower by 16 mmbpd in Q2 with products building by 6 mmbpd in that time.

Crude oil output is seen dropping by 12 mmbpd in May due to the OPEC+ accord.

The IEA sees the oil market going into a deficit in the second half of 2020 due to output cuts from non-OPEC of 3.5 mmbpd (notably the U.S. & Canada) adding to the OPEC cuts and a return of oil demand. Oil movement into SPR storage worldwide could total 200 mmbbls, possibly taking 2 mmbpd off the market. The second half deficit could be 4.7 mmbpd. Still, the IEA caution that oil storage could be full by mid-year. (IEA.org)

Storage for oil products in Europe is becoming strained, evidenced by a growing number of tankers holding jet fuel and gasoline at sea in the ARA area. Low water levels on the Rhine forcing barges to run at 50% capacity is also contributing to the backlog of product. (Reuters)

Jet fuel and Gasoil cash differentials in Asia hit 14-year lows. Gasoil is seen at -$3.10–down from -$2.69 Tuesday. The Jet differential is seen at -$3.63 vs. -$3.38 a day earlier. (Reuters)

The ARA, the 0.1% barge cracking margin and the cash Gasoil in the Mediterranean hit record lows. European demand for Gasoil in April and May is seen as "horrible,” as demand for heating wanes. Cracking margins will only improve as travel restrictions are lifted, one source was cited as saying in a Platts article. Run cuts in the Mediterranean have totaled 1.819 mmbpd, or 12% of the global 14 mmbpd drop seen in early April. (Platts)

Dubai's premium to Brent widened in Asia as Middle East cuts help the sour grade and demand for lighter grades is being hurt. The Brent Dubai EFS fell to -$2.34. It was at +41 cents last Thursday when euphoria over OPEC cuts boosted flat prices. The weakening of lighter crudes vs. heavier ones is also being reflected in OSPs from ADNOC. Murban is being offered via OSP at a small discount to Upper Zakum for the first time ever. Murban is richer in naphtha, which is used for gasoline blending. (Platts) 

API                  Forecast              Actual

Crude oil           +11.1/+11.7       +13.1

Gasoline            +6.3                   +2.2

Distillate            +1.5                   +5.6

Runs                 -2.5%                  n/av

Cushing              n/av                  +5.4

Technicals:

Technically, the energies remain on the defensive with WTI and ULSD making fresh lows for the move of the past month. Momentum remains negative for crude and ULSD with RB DC momentum poised to turn negative. 

ULSD may be supported for now as it attacks the lower DC bollinger, which intersects at about 9350. Resistance via chart congestion lies there at 9343-62. Support may be found at 8825-45 from weekly data from 2004. The low today is 8996. 

RB May futures have resistance at 7574-7600, tested with an overnight high of 7643. Support lies at 6990-7005. 

WTI support lies at the double bottom on the DC chart at 1920-27 (1920 is today’s low ). Below that, support comes in at 1856 via weekly data from 2002. 

Natural Gas

NG is down slightly today with demand fears and fear of impending large storage injections. An NGI headline reads: “Triple-Digit Storage Builds Possible Within Weeks.”

Technically, NG is soft with momentum pointing lower and the spot price having fallen below the mid-DC Bollinger band and price action of the past few sessions showing a stepladder down look. Support at 1611-1612 has been tested overnight with a low of 1607. Resistance is seen at 1679-1680.

The front end spread in Ng has a double bottom at 17.8-17.9 cents, seemingly finding support there. This is the widest for the May/June spread since 2009. 

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