Market Update 06/17/2020

Overview

Energies are lower, pressured by disappointing API data for crude and gasoline, but seemingly more so pressured by Coronavirus resurgence fears. Beijing schools were closed and hundreds of flights in and out of the capital were cancelled. (Reuters)

The Asian jet crack "remains under pressure on limited demand,” as per Reuters reporting. The article notes that the crack has been below $3 for 5 straight sessions as people mostly take to the roads instead of skies as lockdowns ease. 

Japanese crude oil imports in May, at 1.92 mmbpd, were down 36% YOY. LNG imports fell by 18.9% YOY.  (Reuters)

The Brent Dubai spread traded at a 4-month high in Asia as light sour crudes out of the Middle East have become expensive due to the recent hike in OSPs by Middle East producers. Also, margins for lighter sour crude grades are not so good according to Platts reporting.

API                 Forecast              Actual

Crude oil        -0.152/+0.9           +3.9

Gasoline            -0.6                   +4.3

Distillate          +2.0/+2.4            +0.9   

Runs                 +0.6                   n/av 

Cushing              n/av                  -3.3

Today is the last trading day for the July  LO/WTI crude options on the CME with open interest in nearby options strikes not being very large.

Technicals

Technically, the energies seem to have found their range with momentum for Brent and the products looking neutral. WTI spot futures have support at 3705-07 and then at 3638. Resistance lies at 3906-10.

Brent August futures have support at 3972-75 and then at 3895. Resistance is seen at 4145-46, the overnight high. Then resistance above that comes in at 4199.

July RB support lies at 1.1550. Resistance lies at 1.2175-1.2200 and was tested with an overnight high of 1.2197. Above this, we see resistance at 1.2325-50.

ULSD in July sees its resistance at 1.1955-60. Its support lies at 1.1525 and then 1.1315.

Natural Gas

NG is up 1 cent as weather has "trended somewhat hotter,” as per NGI reporting. Also supportive may be the expectation for a bullish number for EIA storage tomorrow. Platts survey is calling for a build of 79 BCF, which compares favorably to last year's +111 BCF and the 5-year average of +87 BCF.

Also supportive may be the news that Chinese LNG imports in May were up 25% YOY and +10% from the prior month. U.S. exports to China resumed in April and U.S. market share is said to have risen. Importers are said to be eyeing spot cargoes vs. the more expensive contractual volumes. Also, LNG cargoes are said to be cheaper than pipeline imports, as per the NGI article.

Platts reports that the first 12 days of June power burn for electrical generation in the U.S. was up 3.1 BCF over levels seen in the second half of May. However, industrial demand in June is down 2.1 BCF vs. June 2019 and feedgas volumes have dropped off by 1.4 BCF to a current 4.1 BCF. 

Technically, the NG spot futures have negative momentum, but we see 2 things that are mildly supportive in the immediate. There is a mean reversion set up for the spot contract flat price on the daily and DC charts. A close over 1.625 will confirm the reversion. Also, there is currently a double bottom from yesterday/today at 1.597-1.602. Support below this is seen at 1.555. Resistance on the upside comes in at 1.661 and then 1.692.

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