Market Update 05/26/21

Overview

Energies are lower as they are caught between decent API data and increased global demand prospects versus the prospect for increased Iranian oil supply. 

Tuesday, an Iranian government spokesperson said that he was optimistic Tehran would reach a nuclear agreement soon, although Iran's top negotiator said serious issues remained. Citibank's analysts expect an initial deal for an additional 500 MBPD of Iranian oil to come back to markets in July at the earliest. The bank also expects strong summer demand, "with markets tight enough to warrant mid-$70 a barrel," it said. Analysts have said Iran could provide about 1 to 2 MMBPD in additional oil supply if a deal is struck and sanctions are lifted. (Reuters) 

The global oil deficit is now seen at about 1 MMBPD, Russia's deputy prime minister Alexander Novak said on Wednesday, days before the OPEC+ top negotiators are expected to meet. (Reuters) 

API                Forecast        Actual

Crude Oil        -0.9/-1.05      -0.439

Gasoline          -0.614/-1.3    -1.986

Distillate          -1.5/-1.9      -5.137 

Cushing            -3.62          -1.153

Runs                +0.2%        n/av

In Japan, refinery run rates have fallen to a 42 week low due to maintenance, unplanned outages and a "sharp decline in domestic oil product demand" due to Covid-19 restrictions. Runs were seen at 2.01 MMBPD. The run rate is 58% of the total capacity of 3.458 MMBPD. The run rate is up 1.7% year on year, but down 6.8% from the week before. (Platts) 

Technicals

The dichotomy of good demand versus greater supply was evident in the narrow trading range seen in crude oil prices yesterday. The range was the narrowest in almost 5 weeks. Momentum for the crude oil and RB point up, while momentum for ULSD is neutral. 

WTI spot futures see support at 6492-97 and resistance at 6661-67. 

August Brent futures have support at 6768-75, while resistance lies at 6886-96, which was tested overnight with a high of 6895. 

July ULSD support lies at 2.0153-60, then at 1.9956-60. Resistance comes in at 2.0514-22. 

RB for July sees resistance at 2.1349-60. Support lies at 2.1050-75. 

Natural Gas 

NG prices are higher in what NGI suggests is anticipation building for summer demand, even as the NGI National Spot Average gas price fell on Tuesday by half a cent to $2.695. Today is the last trading day for the June NG futures contract. 

Tomorrow's EIA NG storage data is estimated as +107 BCF as per a Platts survey of analysts. Energy Aspects sees this week's number as +103 BCF. Last year saw an increase of 105 BCF and the 5 year average is +91 BCF. 

Two of the next three Energy Information Administration (EIA) storage reports are now likely to show triple-digit injections, according to Bespoke (NGI) However, Platts Analytics says that this week's number could be the only triple digit injection of the entire season. They forecast that the next 2 weeks' numbers will see injections in the mid 80's (BCF). Platts Analytics forecasts next week's data as +82 BCF. 

Platts reporting reinforced the topic of strong overseas LNG demand that we spoke of yesterday. Platts says that strong demand is sopping up the cargoes that are being diverted from India. Platts notes "unprecedented" Northern Asian demand, notably from China. However, Platts suggests that some end-users in Asia are "retreating to the sidelines" due to the strength in JKM pricing, which is near $10.60 for the July through September strip as per CME data. Platts also points out that European NG storage is running 13 BCM (439 BCF) below the 5 year average. 

NG futures volume on the CME the past few sessions has reverted back to a low level, maybe signaling a lack of conviction for the overall price direction. Momentum to the downside is waning and even showing the possibility of turning positive in the next day or so. Resistance for July NG futures that we had pegged yesterday at 3.013-3.015 has been tested with an overnight high of 3.017. Above this we see resistance at 3.045-47, then at 3.068-3.071. Support below lies at 2.983-2.987, just below the overnight session low of 2.988. Below that we see support at 2.948-2.951. 

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.