Market Update 07/09/2019

Energies are higher as supply concerns outweigh demand worries today. Yesterday BP cancelled a scheduled crude oil loading out of the main southern Iraqi port of Basra-highlighting the concerns over shipments in the Gulf region. (Platts)

Russia's crude output in early July is said to have fallen to the lowest level seen in 3 yrs as oil transporter Transneft and oil producer Rosneft feud mainly due to issues stemming from the recent contaminated pipeline operated by Transneft. At 10,79 mln bpd, Russia is below its quota of 11,18 mln bpd (Platts)

Also likely supporting prices today is the expectation for a decent size draw in crude supplies this week in the US -expectations we have seen are for a drop of between 3,6 and 4,2 mln bpd. Platts’ survey is calling for gasoline supplies to have fallen by 1,2 mln and distillates to have risen by 1,4 mln bbls.

Gasoline margins in Asia are said to have risen by 150% from June's pricing. Monday's value of $6.68 is up from levels seen below 3 dlrs in June. The rise is attributed mainly to refinery maintenance in India and China. India's June gasoline exports are seen at 50% of May's levels. But some say the margin rise is not going to last as supply will increase --China's June gasoline exports were said to have been 1,6 mln tonnes worth--up from 865,000 tonnes in May. (Reuters)

Yesterday, ICE reported that speculative interest reduced their Brent net length by almost 7 mln bbls worth in the latest reporting week (6,748 contracts). A Reuters analyst says that net length total now held is 248 mln bbls worth -down from the avg of the past 4 yrs of 359 mln bbls worth. CFTC data out yesterday showed money managers increased their net length in WTI on ICE/CME combined by 12,124 contracts. RB net length rose by 5,476 contracts and that of ULSD rose by 5,494 contracts in the period ended 7/2.

The market overnight in Asia was weaker for crude oil, as participants there were disappointed by the news that OPEC's June output showed a lower compliance to the output accord. Increases by Saudi Arabia (+150,000 bpd) and Nigeria (which is producing at 1.97 mln bpd--280,000 bpd over quota). Also in Asia, traders believe that the recent OSP levels set by Saudi Arabia were a bit too high for the medium and heavier crude grades (Platts)

Key reports from OPEC & the IEA are to be released Thursday and Friday this week.

Technically the energies remain in the recent trading ranges seen. Momentum remains negative, but the contracts are trying to move above their DC mid bollingers and are well off the recent lows seen late last week.

WTI touched resistance today again at 5817-22 (the high is 5819) with resistance above that lying at 5861-65. Support comes in at the double bottom of yesterday/today at 5729-30 with support below that seen at 5666-5675.

Brent futures in September have support at the dbl btm of yesterday/today at 6374-79--then at 6291-95--with resistance lying at 6493-6504, then 6551.

RB for August has support at the dbl btm of yesterday/today at 18928-35-below that support is not seen until 18674-91. Resistance lies at 19378-97.

August ULSD has support at its dbl btm from yesterday/today at 18870-86 then at 18750-57 with resistance lying at 19105-14 (the former is the high overnight) then resistance comes in at 19201.

NG is near unchanged after dipping down to minus 4 cts vs settlement right before the daytime session opening 1/2 hr ago. We see support for the contract at 2355-2358 (the low is 2360). Resistance lies above at 2441-2445--light resistance at 2404-2406 has been tested on the high this morning. DC momentum remains positive.

The one negative we see is that rolling of index length put some pressure on the front end of the curve yesterday--notably in the Aug Oct portion --which weakened by 1,5 cts from Friday’s settle. And today that spread has weakened a further 7-8 ticks from yesterday's settlement. Current value is Oct 2,0 cts over Aug—Friday’s settle was Aug 3 ticks over. The spread is close to a thicker area of support for August in the 2,2 to 2,5 ct area (Aug discount) with nearby resistance for Aug seen at 1,0 ct discount--momentum favors Oct.

The Gulf of Mexico is likely to see a Tropical storm later this week, which is seen bringing flooding rains to the region. Bloomberg claims that the storm may threaten oil and gas production.

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