Market Update 06/09/2020
Overview
Crude oil is lower, but well off the lows, while products are higher. The market was hurt by a stronger dollar and the disappointment from the fact that the UAE, Kuwait and Saudi Arabia will not continue their voluntary cuts of 1.18 mmbpd in July. (Reuters)
Goldman Sachs is bearish short term on oil prices, even as they lifted their 2020 price forecasts. They see Brent retreating in the short term to $35. They say that the demand outlook is still gloomy and they are worried over the "daunting" inventory overhang. Yet, they raised their Brent forecast for this year to $40.40 from $35.60. WTI is seen averaging $36 vs. a prior $33.60. Goldman reduced their June supply deficit estimate to 1.2 mmbpd from previous 2 mmbpd. (Bloomberg/Reuters)
Refineries in India and South Korea are seen ramping up their refinery runs in the 3rd and 4th quarters. FGE Consultants say, “the average operating rate for refineries in Asia is expected to rise to 75.5% and 82.2% in the third and fourth quarters, respectively, from 72.4% in the second quarter out of total capacity of about 35 million barrels per day.” (Reuters)
Reuters also reports that the Gasoil crack in Asia hit a one month high of $5.67, up one dollar from previous session and up over 40% in the past week as demand is seen rising as lockdowns ease. Yet, refining margins in Asia are still under pressure, with Reuters data showing that a refinery in Singapore processing Dubai crude is currently a loss of 90 cents a barrel.
The crude market in Asia was hurt by the sharp increase in OSPs seen the past few days. Dubai inter-month spreads slipped. July/August spread fell 6 cents to +4 cents, while the August/September spread fell by 13 cents to -18 cents. (Platts)
A Reuters survey sees crude supplies falling by 1.5 mmbbls in this week’s U.S. oil data. Gasoline supplies are seen falling by 0.1 mmbbls.
Technicals
Technically, the energies have peaked and are soft as momentum has turned negative from overbought conditions. RB confirmed its mean reversion yesterday underscoring the belief of a peak in place. July RB futures support lies at 1.1770-75 via the 60-minute chart. Below that, support is seen at 1.1510-20. Resistance on the upside comes in at 1.2170-74 today's and Friday's highs. Then we see resistance above that at 1.2325-50.
ULSD July support lies at 1.0930-45 and resistance at 1.1525-30.
WTI has its support for July at 36.35-38 and its resistance at 39.68.
Natural Gas
NG is down slightly as the sideways pattern of the past week persists. The tone in the news wires remains somewhat negative though as worries over LNG demand for U.S. export remain. Platts Analytics sees US LNG Liquefaction utilization falling below 50% of capacity. The EIA in December put that capacity at a peak of 7.5 bcf. Softness in price may also come from the concern that associated NG output will rise as crude oil production increases.
Technically, NG has slight negative momentum as it remains mired in an overall trading range between 1.60 and 1.90 seen over the past month. Support for July NG lies at 1.740-1.742 and resistance at 1.854-1.861.
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