Market Update 04/28/21

Overview

Energies are higher, shrugging off an unexpected rise in crude supplies seen in last night's API data. 

The OPEC+ decision to stick to plans for a phased easing of oil production restrictions from May to July underscored the group’s confidence in a recovery in global demand. (Reuters) 

The Fed will end a two-day policy meeting with ultra low interest rates likely still in place to support the economy. (WSJ) Adding to this positive is Goldman Sachs' upbeat forecast for oil prices and demand. They see demand for oil rising by 5.2 MMBPD in the next 6 months as vaccinations rise in Europe and travel demand rises. Goldman sees jet fuel demand rising by 1.5 MMBPD in May. Goldman is targeting Brent prices up to $80 and WTI to $77 over the next 6 months as virus curbs are eased, interest rates remain low and the U.S. dollar weakens. (Reuters) 

Heavy distillate product supplies at the key Mideast port of Fujairah have risen to an 8 month high due to slowing demand for bunker,marine fuel. Contrary to this is the decline in gasoline and jet fuel supplies. Refinery outages across the Middle East and export demand have limited gasoline supplies, leading to rising prices in the region. Light distillates stood at the lowest since the record low on Oct. 26, 2020, as per Platts data. 

API                        Forecast        Actual

Crude Oil              -0.1/-0.2        +4.319

Gasoline                Unch/+0.2      -1.29

Distillate                -0.1/-1.2        -2.42

Cushing                  n/av              +0.7

Runs                    +0.5%            n/av

Technicals

To quote an analyst: "it would appear that the higher is the path of least resistance for oil." Momentum points up. 

Spot WTI has tested resistance at 6357-63 with a high of 6366. Above this, resistance is seen at 6425. Support comes in at 6263-67. 

RB June futures see their support at 2.0200-2.0218. Resistance lies at 2.0521-42, then at 2.0627-40. 

ULSD for June has support at 1.8950-64. Resistance lies at 1.9403-14. 

Natural Gas 

Prices are continuing the rally seen Tuesday as U.S. NG production was seen having fallen to 89.1 BCF from 91.5 BCF on Monday, as per Wood Mackenzie data. Maintenance on various pipelines was seen as the cause. (NGI) 

Platts details the strength of regional NG prices in Texas versus the Henry Hub, due to strong feedgas demand and pipeline exports to Mexico, which have underpinned NG prices overall the past few sessions. As overseas demand for Gulf Coast supply surges, basis prices in East and South Texas have staged a sharp turnaround this month, rising from steep discounts to the Henry Hub in March. At Houston Ship Channel and Katy Hub, cash basis is up 21 cents and 16 cents, respectively, this month compared with last, with both locations now trading at premiums to the US benchmark. At these hubs, supply is expected to continuing tightening, which should keep these Hubs trading at a premium to the Henry Hub. At both locations, summer basis is pricing as high as 13 cents over Henry Hub for July and August. For the peak-winter demand month of January 2022, the two hubs are priced at a 22 cent premium. 

Today is the last trading day for the expiring May NG futures. June futures have upside resistance at 2.975-2.981, then at the psychological barrier at $3.00. Momentum is positive, but overbought, which cautions against the contract's ability to sustain pricing over $3 for now. Support for June NG is seen at 2.892-2.896. 

The underlying strength in NG is reflected in the sharp narrowing in the June21/Jan22 spread the last several sessions. There is a gap to fill on the chart at 30.7 cents. Current value is 32.5 cents. Support for June lies down at 35.5 cents. Momentum favors June presently. 

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.