Market Update 05/04/21

Overview

Prices are being supported by the prospect of a pick-up in fuel demand in the United States and Europe, as New York State, New Jersey, Connecticut and California are set to ease pandemic curbs and the European Union plans to open up to more foreign visitors who have been vaccinated, analysts said. (Reuters) Products are up more than crude oil, befitting an overall positive demand outlook. 

Airline travelers nationwide (in the U.S.) hit a 14-month high of 1.6 million passengers on Sunday, according to TSA, and refiners are expecting a close-to-normal summer driving season. (WSJ) 

Monday, Fed Chairman Jerome Powell said that the U.S. economic recovery is “making real progress,” although he cautioned that the gains have been uneven. (Bloomberg) 

The positive notion of demand is reflected in Asia's jet fuel market. The cash differential there moved to a premium today for the first time this year. The premium was plus 9 cents, which is up from a valuation of minus 40 cents seen back on March 24. China and Australia saw a small uptick in scheduled flight seats in the week ended Monday. India's seat capacity fell due to the recent severe rise in new Covid-19 cases. The jet fuel crack margin from Dubai crude rose on Monday to $6.02, which is also a one year high. On March 24, the crack was valued at $3.19. (Reuters) 

Estimates for U.S. petroleum supplies data this week are calling for crude stocks to draw by 2.2 to 3.9 MMBBL. Platts survey sees gasoline supplies falling by 0.5 MMBBL and distillate supplies falling by 1.6 MMBBL. Runs are forecast to rise by 0.5-0.6 %. Platts says that U.S. crude exports rose last week to 3.8 MMBPD. This is up from last week's EIA data showing them at 2.54 MMBPD. 

Technicals

ULSD spot futures have risen to their highest level seen since January 2020. Momentum is now positive for all the major energy contracts. The one drawback today is that the products are bumping against their upper DC bollinger bands. 

For RB that band lies at the 2.1380-85 area. The overnight high is 2.1599. Resistance lies at that area 2.1593-99. Support below is seen at 2.1116-19. The low seen overnight is below that at 2.1065. 

ULSD sees its upper bollinger at 1.9965-70. The overnight high is 1.9986. Resistance lies just above that at 1.9997-2.000, then at 2.0164-81. Support comes in at 1.9530-50, which is just above the overnight low of 1.9519. 

WTI has support at 6453-57. The low seen today is 6429. Resistance is seen at 6621-24. The overnight high is 6584. 

Natural Gas

NG has tested $3.00 for the first time since February 22 as a lighter storage number this week is supportive, as is the strength in cash pricing, which is underpinned by weather demand and exports. 

NGI says that whisper numbers for this week's EIA storage data are in the high 60 to low 70 BCF range. An NGI model is calling for +76 BCF. Bespoke Weather sees a +69 BCF build. These both compare favorably to last year's +103 BCF build and the 5 year average build of +81 BCF. Tudor, Pickering reaffirms their bullish stance, saying that a 25 cent rally may be needed to induce a drop of 1 more BCF in demand for power generation, and thus possibly adding 200 BCF to storage. Tudor sees storage end of injection season at 3.5 TCF, which is 7% below the 5 year average. They see a possible 2 BCF undersupply leading to an end winter storage level of 1.2 TCF. 

Platts Analytics paints a slightly different picture. They say that NG based power generation is suffering from the recent run up in prices. Platts says that NG cash prices at the Henry Hub have risen by 24%/56 cents since early April. They say that power generation from NG is down 5% year to date versus year ago level. This could change somewhat if hotter temperatures arrive in summer. 

Technically, NG is overbought, but price action is firm. Resistance for spot NG futures is seen at 3.041-3.049, if 3.001-3.005 is breached. Support comes in near the overnight low. That support lies at 2.934-2.941. The low today is 2.939. 

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.