Market Update 04/23/21
Overview
Energies are down slightly after being higher most of the overnight. The market is being buffered by differences in regional activity globally.
The market took hope from European news. The IHS Markit flash PMI for April was better than expected. At 53.7, it hit its best value in 9 months. This was up from March's reading of 53.2 and beat the Reuters estimate of 52.8. Also helping fuel optimism in Europe is news that France is lifting domestic travel restrictions and will reopen schools on Monday. (Reuters)
Countering the European optimism is the concern due to India and Japan struggling with Covid-19. In Japan, a state of emergency has been imposed in Tokyo and Osaka and two other prefectures in an effort to curb a surge in coronavirus cases during the upcoming Golden Week holidays. Tougher restrictions such as banning restaurants and bars from serving alcohol and asking major commercial facilities to temporarily close will be in place from Sunday through May 11. The emergency declaration covers roughly a quarter of Japan's population of 126 million and about a third of its economy. (Kyodonews) In India, the state refiner, Indian Oil Corp., is seen having reduced runs to 95% of capacity, down from 100% at this time last month. Domestic fuel demand in India is seen "faltering.” (Platts) As a result, Inidan refiners are not seen buying spot Mideast crude cargoes for June or July, as their needs will likely be met by full contractual volumes coming from Saudi Arabia and other Mideast suppliers. The Dubai market structure has seen weakness as a result of the sentiment. The front month cash versus front month swap in the Dubai market has fallen to an 8-week low. Mideast producers will likely have to lower their OSPs for June. In India, jet fuel and diesel output may be dialed back as international plane travel is being restricted and as large construction projects get put on hold to avoid large work crowd environments. Platts Analytics expects April Indian oil demand to fall by 225 MBPD from March and a further slide of 325 MBPD may be seen in May.
The OPEC head called upon member states to engage in diplomatic talks with the U.S. to discuss the disadvantages of an anti-trust bill that was porposed this week. The OPEC Secretary General hinted that U.S. overseas interests, assets and personnel could be at risk. (Reuters)
On the bright side, the jet fuel crack from Dubai crude is valued at the best in 2 months in Asia as "pockets of demand" are seen, led by China. The crack was valued at $5.69. On March 18, its value was $3.25. The cash jet fuel differential was seen at -6 cents today. This is well above the -42 cent valuation seen on March 18. However, the crack is still 40% below its 5-year seasonal average and may suffer due to the issues seen in Japan and India. (Reuters) In Europe, gasoil stockpiles held in the ARA have fallen to a 1-year low.
Technicals
Energies remain soft with momentum pointing lower.
WTI spot futures have support at 6038-39. Resistance is seen at 6253-63
June RB futures support lies at 1.9653-65, then at 1.9440-60. Resistance comes in at 2.0026-29, then at 2.0136-55.
ULSD for June has support at 1.8397-1.8408. Resistance comes in at 1.8775-90, just above the overnight high of 1.8769.
Natural Gas
NG is near unchanged. NGI cites the underlying "improving gas macro,” which seems to be the impetus for the rally seen yesterday.
The EIA data showed a build of 38 BCF, beating most expectations. This is the 5th straight week that we have seen storage beat WSJ survey estimates. Storage is now 251 BCF below year ago levels, but still 12 BCF over the 5-year average. The surplus to the 5-year average is likely to turn to a deficit come next week. Platts Analytics is forecasting a build of 1 BCF for next week's data. The 5-year average for the period is +67 BCF.
The statistics this week were likely supported by strong exports to Mexico, improved power burns and NG output falls in the Southeast and Texas, according to Platts.
Technically, NG has positive, but overbought momentum. However, the underlying support of a tighter than previously believed supply/demand picture should limit downside movement. We see resistance for the spot futures at 2.786-2.791. Support below is seen at 2.694-2.700.
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.