Market Update 07/10/20

Overview

Energies are lower as the fear of a virus resurgence is weighing on prices.

This, despite the IEA today having raised their demand forcast for 2020 by 400 MBPD from last month's estimate. On the other hand, the IEA cut their 3rd quarter demand forecast from last month's estimate by 630 MBPD, largely due to worries over U.S. demand. Refining margins are being squeezed by higher feedstock prices, such as crude oil, and by the product supply overhang that still exists from the weak 2nd quarter. The possible return of up to 900 MBPD of oil production from Libya by year end was also mentioned in the IEA monthly report. 

The IEA says that U.S. oil production bottomed out in the 2nd quarter. The 2021 demand forecast for OPEC crude has improved by 200 MBPD from last month's figure. In 2021, the demand for OPEC crude is seen at 28.7 MMBPD vs. the expected output of 25.6 MMBPD. (Platts)

Libya has restarted oil exports from its largest terminal after 6 months. (WSJ)

The oil market was impacted negatively by the fall in equities, as per WSJ reporting.

Technicals

Yesterday's selloff hurt technically, with momentum now pointing lower for crude oils and ULSD. 

The market hit a wall for Brent spot futures evidenced by the prior 3 sessions' highs between 4345 and 4350. Support lies at the 4103 area. The DC mid-Bollinger Band was tested today in Brent spot futures. That values lies at about 4153. The low seen overnight is 41.32.

WTI has its DC mid-Bollinger Band at about 3885. Support can be found at 3773-79. The resistance above comes in at 4049-54.

RB's support in August futures is seen at 12092-12100. The DC mid-Bollinger Band lies above that at about 12130. Here, DC momentum looks poised to turn negative. Resistance lies at 12623-41 and then at 12841.

ULSD support in August is seen at 11950-70. The resistance we see comes in at 12350.

Natural Gas

NG is up 2 cents after having spent the better part of the overnight in negative territory. 

Yesterday's selloff was said to have been due to an easing of some of the hotter temperatures seen later this month. Also weighing on prices yesterday was the selloff in energies and the equity markets, according to WSJ reporting. 

Yesterday's EIA storage number was neutral. the 56 BCF build was in-line with survey estimates we saw.

Storage remains 685 BCF YOY and +454 BCF vs. the 5 year average.

Platts Analytics sees next week's EIA storage number as a build of 52 BCF. The 5-year average for the week is +63 BCF

Platts reports that the gas fired power burn for electricity is near record level. July is seen averaging 44.3 BCF, which is up 2.6 BCF vs. June.

Technically, NG peaked short term this week with the failure to stay over 1.885. Resistance we see for spot NG futures lies at 1815-1817, and then at 1848-1851. Support lies below at 1741-1743, which was tested with an overnight low of 1737. Momentum turned negative with the down move from yesterday. 

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