Market Update 04/21/2020
Overview:
Energies are lower as the problem of oversupply and lack of storage remains in focus. Crude oil and ULSD made fresh multi-year lows overnight. June WTI was down more than $8.50 at its worst, hitting a low of $11.79. June Brent was down over $7.40 at its worst, the low being $18.10. June ULSD hit a low of 7567, down almost 16 cents from settlement.
June WTI is seen being under pressure going forward in the same way that was seen in May futures, as storage is seen filling at the Cushing WTI delivery point in the coming weeks and the storage crunch is not seen abating for a few months. May WTI futures expire today after trading yesterday as low as -$40.32. Currently, they are worth about -$4.
Yesterday, President Trump said that he is mulling limiting Saudi crude imports into the US to help the "battered" oil industry. (Reuters)
Space in the US SPR is seen being filled either by government purchases for strategic reserve purposes (though that prospect is not certain as funding from Congress is needed) or by the SPR space being leased out to oil companies. (Reuters)
DJI is reporting that the Saudis are considering reducing oil production before the May starting date for the recent OPEC+ accord.
Genscape is forecasting that Cushing crude storage will rise by 9% for the week ended April 17th, bringing supplies there to 61 mmbpd. Capacity is 76 mmbbls. (Reuters) A Platts survey is estimating crude supplies increasing 13 mmbbls in this week's API/DOE data.
Technicals:
Technically, the energies remain in a defensive mode, yet they are trading below their lower Bollinger bands, which may provide some support. ULSD looks to have its downside momentum waning. We also lean to a close over 21.65 prior low on the spot Brent chart being a somewhat helpful signal.
WTI June futures have support at today's low of 11.79. Resistance comes in at yesterday’s June low of 20.19. The lower daily Bollinger intersects at about 19.70.
June Brent support lies at 18.10 (today's low) with resistance seen at 2452-68. The lower Bollinger here comes in at about 21.60.
June RB support is seen at 6013 and then 5793 with resistance lying at 6947-54. The daily chart's lower Bollinger comes in at 59.90.
June ULSD has support at 8090 (via a 60-minute chart) and then at today's low of 7567. Resistance lies above at yesterday's low of 9126. The lower Bollinger lies here at about 8990.
Natural Gas:
NG is down 3 cents. The spot futures contract is showing a double top from yesterday/today at 1.970-1.974. Yesterday's rally was seen as a function of the sharp crude price drop and the belief that NG output will fall as crude output gets shut in. NGI also attributed the rally to chilly air lingering in the forecast the next few days.
The issue of takeaway capacity in NG was highlighted again yesterday as Waha/Permian Basin NG prices hit a record low below negative -$7 due to maintenance on a key pipeline, which will see takeaway reduced by 0.36 bcf from April 21st to April 30th. (Platts)
Preliminary open interest data from the CME shows a large increase in NG futures open interest from Monday's activity, which we suspect is more so new length. Increases were notable in the December 2020 through May 2021 contract months.
Technically, NG looks stable to firm, but there are two negatives to the picture: the double top at 1970-74 and the upper Bollinger intersecting at the 1965 area. Momentum is positive and support is seen at 184-1855 (tested with a low of 1851). Support below that is seen at 1820-1825.
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