Market Update 07/09/2020

Overview

Energies are mixed with RB and crude lower and ULSD unchanged as the sideways pattern for crude oil persists. Equity indices have also seen a mostly sideways pattern over the last month.

WSJ commentary on the equity markets reads as follows: "Investors have been weighing stimulus efforts by central banks and governments against signs that the rebound in U.S. economic growth has lost speed.” Similarly, in crude oil, the markets have been torn by output cuts as a positive on the one side versus fears of possible demand loss due to an uptick in COVID-19 new cases.

Yesterday's DOE stats were supportive for gasoline as demand on the week rose by 205 MBPD to 8.766 MMBPD. The gasoline draw of 4.839 MMBBLS beat the best estimate of a draw of 1.2 MMBBLS. Distillates tell a different story with a build of 3.136 MMBBLS. Survey estimates were basically calling for unchanged. Distillate demand fell by 759 MBPD to 3,019.

Crude oil supplies rose by 5,654. A draw of roughly 3 MMBBLS was forecast. The build was due to an increase in crude oil imports of 1.425 MMBPD. At the same time, U.S. crude exports fell on the week by 705 BPD.

Technicals

Technically, the crude oil and ULSD momentums are getting overbought. Upside resistance for WTI lies at 4108 and then at 4163. Support is seen at 3989-91 and then at 3905-10.

RB support is seen at 12625-40 and then at 12325-50. Resistance comes in at 12960-74, which was almost tested with a high of 12954. Above that, best resistance we see on the DC chart is up at 1.3288.

ULSD support lies at 12210-20 and then at 12090-12100. Its resistance is seen at 12511-24, which are 2 of the past 3 sessions' highs.

Natural Gas

NG is up $0.05 as temperatures are seen remaining hot for the balance of the month with some saying it could be the hottest one on record. Bespoke Weather says that over the next 15 days Gas Weighted Degree days could reach record levels. Offsetting that bullish tone is the fact that feedgas for LNG exports has fallen by 1.2 BCF in July from June. July feedgas deliveries are averaging 2.9 BCF. (NGI)

Platts says that the arb for sending U.S. LNG to China for September had opened. The Asian market has tightened as supply from major sources, among them the U.S. and Australia, has dropped. September JKM (the Asian LNG marker) settled Wednesday at $2.64 on the CME. This compares to Henry Hub (HH) U.S. NG pricing for September of $1.876 settlement basis Wednesday. October JKM settled at $3.275 versus the CME HH NG value for October of $1.970.

The EIA storage data is seen as a build of 53-58 BCF, per surveys we saw. This compares to the 5-year build of 68 BCF and last year's +83 BCF. Given the persistent heat expected for the rest of July, the storage surplus versus last year should shrink further in coming weeks' data, as noted by analysts.

Technically, NG is holding steady, but momentum on the DC chart is getting overbought. Resistance above is seen at 1896-1898, which was almost tested as the high today is 1891. Above this, we see resistance at the high this week of 1924. Support may be light at 1846-1848. Below that, support lies at the double bottom of yesterday/today at 1808-1812.

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