Market Update 06/10/2020

Overview

Energies are lower, being hurt by a very large unexpected rise in U.S. supplies in last night's API data.

Most of the other news that we see is positive from the EIA report seen yesterday to Nigeria's oil chief saying they will reach full compliance in production by “maximum, middle of July” (Reuters) adding the country will, by that point, need to cut an additional 40-45 mbpd in order to compensate for its earlier over-production. Nigeria had exceeded its quota for production cuts under an OPEC+ deal by a little less than 100 mbpd in May. (Reuters)

Yesterday, the EIA, in its Short Term Energy Outlook, said they expect global oil inventories will begin declining in June, a month earlier than previously forecast, with draws continuing through the end of 2021. They revised their U.S. oil production forecast down by 130 mbpd for 2020 to 11.56 mmbpd. They see output declining to 10.6 mmbpd in March 2021. However, they revised their U.S. oil demand forecast for 2020 down by 210 mbpd to 18.06 mmbpd. 

The EIA sees Brent averaging $37 in the second half of 2020 and then rising to $48 in 2021. (EIA) WTI is seen averaging $35.14 for 2020. This is up 16.7 % from their May forecast. (WSJ)

In Asia, jet cracks and gasoline cracks improved. The jet crack was seen at a 2-month high. Reuters reports that it climbed to $3.25 per barrel over Dubai crude. Last Friday, the crack was seen at 35 cents. The improvement was said to be due to weaker crude prices and a pickup in regional air traffic. (Reuters)

Gasoline demand in Japan is recovering. Gasoline shipments in the week to June 6 were seen at 5.04 mmbbls. This is up from the pre-state of emergency level in April 5-11 of 4.72 mmbbls. Refinery runs in Japan were up 5.3% for the week from May 31 to June 6 to 1.92 mmbpd. It was the first increase in 7 weeks. The Gasoline crack in Singapore from Brent crude improved to $ +2.48 today, up from $-1.38 on June 1st. (Reuters)

The El Feel oil field in Libya has been shut only days after restarting. The Sharara field was also shut yesterday after restarting only days earlier. (Reuters)

API                   Forecast                     Actual 

Crude oil           -1.2/-1.5                      +8.4

Gasoline             -0.1-0.2                       -2.9

Distillate             +2.9                           +4.3

Cushing               n/av                          -2,3

Runs                   +0.6%                        n/av

Technicals

Technically, we still see crude oil as soft with momentum negative and spot futures failing to break the highs seen the prior 3 sessions. Spot WTI futures have resistance at 3910 and then 3968. Support is seen at 3705-07 and then 3635.

RB spot futures support lies at 11913 and then 11770-75. Its resistance is seen at 12324-48 and then 12444.

July ULSD support comes in at 1.1165. Resistance is at 1.1590 and then at 1.1825

Natural Gas

NG is up 1 cent after making a fresh 3-week lows last night, down to 1.674 on what one colleague suggests may have been a fat finger error. The market rebounded quickly off that low and stayed over 1.725 for much of the overnight session. 

The EIA yesterday said they see summer pricing for NG staying below $2 through August, but rising in January to $3.08. They see 2020 U.S. NG demand at 81,9 bcf, which is down 3.6 bcf from last year. They see output in 2020 averaging 89.7 bcf, but falling in 2021 to 85.4 bcf. They see end of October storage at a record 4.1 TCF. They see LNG exports in the 2nd quarter at 5.6 bcf, then falling to 3.7 bcf in the 3rd quarter. (EIA.gov)

Technically, NG remains in a sideways trading pattern with momentum pointing lower. Support for spot futures lies at 1742-43 then 1722-1725 via 30 min chart. Resistance lies at 1815-1816.

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