Market Update 05/28/2020

Overview

Crude is near unchanged after spending the overnight hours in negative territory due to bearish API data. The uptick now may be attributable to comments from yesterday showing OPEC+ considering extending their output cuts until the end of 2020 as President Putin and Saudi Crown Prince bin Salman agreed on further “close coordination” on oil output restrictions, the Kremlin said on Wednesday. (Reuters)

API                 Forecast             Actual

Crude oil          -1.2/-1.9            +8.7

Gasoline           -0.3                  +1.1

Distillate           +2.0                 +6.9

Runs                +1.0%               n/av

Cushing             n/av                 -3.4

Gasoline demand in May in Japan fell to a 37-year low while Gasoil demand was at a 10-year low in May. Some recovery in gasoline demand is seen with summer approaching, while Gasoil demand may benefit from the easing of lockdowns in Japan. (Platts) US clean product exports to Latin America are seen at 19.4 mmbbls so far in May vs. April’s total of 33.5 mmbbls and March's figure of 67.2 mmbbls. (Platts) UK oil output in the first quarter fell by almost 7% YOY and output is seen at 1.103 mmbpd in the first quarter vs. the 1.026 mmbpd seen in December 2019. The IEA sees UK output falling by 30 mbpd this year (we did not find a figure from which to base the drop). (Platts)

Dubai front month spread moved into a small backwardation on signs of OPEC+ cuts coupled with some demand rebound. The June/July spread was seen at +2 cents but back spreads remained firmly in contango as there is some lingering doubt about demand going forward. July/August Dubai was assessed at -46 cents. (Platts)

Alberta's Energy minister said Wednesday that oil output there has fallen by 1 mmbpd or about 25% of their production. (Reuters)

Technicals

Technically, we see the energies as soft, having met resistance recently and sliding back from those highs with momentum pointing lower. 

WTI resistance lies at 3332-44 and then 3432. Support is seen at 3134 ( tested with a low of 3114) and then at 3072. 

Brent resistance is seen at 3600-06 and then 3671-73. Support in August is seen at 3447 (the low is 3435) and then at 3394. 

July RB has resistance seen at 10360 ( via 60-minute chart ) and then at the 10618 area. Support lies at 9881-9891 (the overnight low is 9891) and then at 9698-9703. 

July ULSD has its resistance at 10065-73 and then10332-45. Support lies at 9584-90.

Natural Gas

NG is down 1 cent as July becomes the spot contract and there is a rollover gap left from the June expiration—that gap is down to 1.815. The undertone of the news we read seems more negative than positive at present.

NG output has ticked up slightly from the 85.5 bcf low seen recently. Platts puts output at slightly over 86 bcf/day. Feedgas deliveries for LNG exports have dropped to 6 bcf, down from 9.5 bcf two months ago.

Wednesday, the European NG benchmark (TTF) fell to a record low with spot pricing hitting $1.15. The Asian marker (JKM) fell below $2 and the arbitrage window from Europe to Asia was said to be closed, as per Platts reporting. About 45 LNG cargoes scheduled to be loaded in July at U.S. export terminals have been canceled by customers, according to market sources. The July cargo cancellations represent nearly two-thirds the average volume of U.S. LNG that was produced monthly when the coronavirus began to spread globally. (Platts) 

Today's NG EIA storage number is seen as a build of 101/105 bcf, as per Platts/WSJ surveys. This is in comparison to the +110 bcf and the five year average build of 93 bcf.

Technically, we see NG as still range bound with DC momentum positive, benefiting from the bump up in value that July supplies. July resistance lies at 1923-1927 and then 1970-1974 with support seen at 1849-1851 and then at the gap at 1.815.

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