Market Update 04/27/2020

Overview

Energies are lower as oversupply/lack of demand concerns persist.

Genscape sees Cushing storage already at ~65 mmbbls—just 11 mmbbls away from hitting operational capacity. (Seeking Alpha.com) As of April 17th, Cushing supply was seen at 59.741 mmbbls—up 4.778 mmbbls for the week via DOE stats issued Wednesday April 22nd. 

As of Thursday, energy researcher Kpler said onshore storage worldwide is now roughly 85% full. (Reuters)

CFTC data issued Friday showed money managers added length in WTI futures/options on ICE/CME combined of 107,777 contracts, adding almost equally on ICE and CME. RB length was reduced by 1629 contracts. ULSD shorts total rose by 2,401 contracts.

The Baker Hughes oil rig count fell by a further 60 units this week. The total at 378 is the lowest since July 2016. The oil rig count stood at 683 on March 13th. The metric peaked at 1,609 in October 2014. (WSJ)

WSJ quotes a Mitsubishi analyst who says that North American producers have no choice but to reduce output by 10 mmbpd. 

BP, Exxon, Chevron and Shell are set to release their first quarter earnings results this week. They are all expected to detail additional spending cuts and investors will be watching closely for how those companies plan to manage dividends. Equinor, the large Norwegian oil company, surprised the market on Thursday by becoming the first big oil company to cut its dividend, slashing its first-quarter payout by two thirds and suspending a $5 billion share buyback programme. (Reuters)

Credit Suisse predicts that ENI will cut dividends by 30% this year. (WSJ)

Oklahoma's governor—in a letter sent Saturday—called on U.S. President Donald Trump to declare the coronavirus pandemic an"act of God.” Declaring a "force majeure" or "act of God" would allow oil companies to halt operations without risking that land leases will be cancelled for stopping production. Oklahoma's energy regulator said on Wednesday that producers could close money-losing wells without losing their leases—the first victory for struggling U.S. oil companies seeking relief. (Reuters)

Continental Resources invoked force majeure on crude sales last week, unwilling to sell its oil at the current low prices. (Reuters)

In Asia, the jet fuel and Gasoil cracks based off Dubai crude fell to new lows. The Gasoil margin is seen at $2.83–down from $5.27 Friday. The Jet crack is seen falling to -$4.87 from Friday's quote of -$1.98. (Reuters)

Japanese refiners are considering delaying some of their June term crude cargoes. Platt's Analytics sees a 13 mmbbl/440 mbpd surplus in June. They see demand for fuel oil products falling 20% in the April-June period YOY. 

All the bad news has overwhelmed good news from China seen this weekend: crude imports in March rose by 4.5% YOY. Imports ran at 9.68 mmbpd, but they were down from January-February combined levels of 10.47 mmbpd. Teapot refiners were seen taking advantage of cheap crude oil as margins improved.

China sets floors for some oil products' prices, helping refinery margins. ING says that refining runs in one key Chinese province where many teapot refiners operate were at record levels.(Argus Media.com/Reuters) 

Technicals

Technically, the energies look soft, though momentum for USLD is waning to the downside. WTI has support at 1173-79 then 1026 with resistance seen at 1445 then 1618–both below the overnight high of 1698. June crude hit a wall at $18 late last week. 

June Brent support lies at 1750. Its resistance lies at 2165 ( the high seen today is 2191). 

June RB support lies at 6510. Resistance lies at 7140-50. 

June ULSD support is seen at the low of last week at 7084. Then we see support via the DC chart at 6725. Resistance comes in at 7790-7800. 

Natural Gas

NG is down as weather demand is seen as moderate as per NatGasweather (WSJ) and storage supply concerns linger in the wake of the bearish misses in data seen the past several weeks.  

Today is the last trading day for the May NG options on the CME.

The NG forward curve has weakened quite a bit today with storage/demand fears coming into focus more.

June has lost 10 cents vs. December. The spread is seen gapping lower today as it tests its lower Bollinger on the daily chart. That value lies at about $1.05–current value is near $1.08–and the prior low was near $1.00. The gap created today lies from $1.005 to 99.8 cents. 

The U.S. NG rig count issued by Baker Hughes showed a decline of 4 units in the latest period.

CFTC data from Friday showed money managers reduced their net short position in NG futures/options on the CME by 34,919 contracts. The net total actually swung to one of net length of 227 contracts. The money managers have not had a net long position since 2 years ago.

NG remains on the defensive. June now having fallen below its mid bollinger on the daily chart, that value lies at about 1.885. Support for June futures is seen at 1745-1751. Its resistance is seen at 1842-1843 then at 1860-1865. The overnight high is 1883. Momentum points lower.

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