Market Update 05/07/21

Overview

Energies are lower despite decent Chinese import/export data. Covid-19 worries out of Asia seem to be the overriding topic. 

India again today reported a record new number of Covid-19 cases. The resurgence of Covid-19 in countries such as India, Japan and Thailand is hindering gasoline demand recovery, energy consultancy FGE said in a client note. (Reuters) 

China's import growth was said to be a decade high in April. Imports rose 43.1 % year on year, which was the best since January, 2011. Exports rose by 32.3% year on year. One analyst, though, cited price inflation for part of the growth. Chinese economic growth is expected to slow from the first quarter pace of +18.3% as chip shortages, container shortages and "skyrocketing" freight rates may be a drag. (Reuters) 

China's crude imports fell by 0.2% year on year in April. The pace was 9.82 MMBPD. This was down from March's level of 11.69 MMBPD. Crude imports are seen rising in May. The August-September period could see imports reaching 10.5-11.0 MMBPD as new refining capacity comes on stream. April's import level was hurt by refiners' profit margins being squeezed by rising crude oil prices and "swelling" product inventories. (Reuters) 

The talks between Iran and the U.S. continue in Vienna, with wide gaps still remaining, although a U.S. official says that an accord is possible within weeks if Iran decided it wants one. (Reuters) 

Indian state refiners placed orders for regular supplies from Saudi Aramco for June (after reducing purchases this month) after the Saudis reduced their prices. Another reason for the increase in orders placed may be that Indian refiners need to boost purchases to meet annual contractual volumes (Reuters) 

April Non-Farm Payroll data disappointed today. Payrolls rose by 266,000 in April. This was way below the estimates seen from Reuters of +800,000 and WSJ of +1.0 million new jobs. March and February's data was reduced by a total of 78,000 jobs. The dollar fell on the news, as the pressure for the Federal Reserve to raise interest rates has decreased. (WSJ) On the other hand, energy prices may suffer as the demand boost from a solid economy may be reduced. 

Technicals

Energy prices remain soft as momentum is negative and supports are being pierced. Some of the weakness in energy prices is symbolized by the sharp drop in the July/December spread in Brent seen since the beginning of the week. The spread was seen near $2.50 on Tuesday, but has fallen back today to near $2.00. Support lies below at $1.80. Momentum for the spread is negative. 

Spot Brent futures for July see support at 6644-52. Resistance lies at 6808-15, then at 6889-94. Prices almost touched the psychologically important level of 70 dollars this week. 

WTI for June sees support at 6380-88, then at 6308-13. Resistance above comes in at 6492-96, then at 6541-47. 

June RB support is seen at 2.0750-61. Resistance lies at 2.1166-81. 

June ULSD support is seen at 1.9512-19. Resistance lies at 1.9868-81. 

Natural Gas

NG spot futures are up slightly as they remain in a range seen for the past week, with support seen near 2.90 and resistance seen at 2.971-2.975. Momentum for the spot futures contract is negative as per the DC chart. 

The EIA data seen yesterday was shrugged off, though it was mildly supportive. The build of 60 BCF was slightly below newswire survey estimates. However, cash spot prices fell back indicating a weather pattern that has no great cooling or heating demand in the near term. Cash prices as per NGI's National Spot average fell by 5.5 cents to $2.705 on Thursday. 

NG storage is now 345 BCF lower than one year ago and -61 BCF versus the five year average. We wonder whether some of yesterday's price softness may be due to expectations for next week's storage to grow by more than this week's. Next week estimates suggest a build in the 70-80 BCF range as per NGI reporting. 

ERCOT sees record power demand this summer, but they see ample reserve margin. Thus, there is a low risk of an Energy Emergency Alert, the type of which was seen this past February when record cold descended upon Texas. (Platts) 

Disclaimer 

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