Market Update 07/15/2020

Overview

Energies are higher, supported mostly by positive crude and gasoline data seen in the API data. Also supporting are a strong Euro and world equities.

The Euro is near a 4-month high against the dollar on hopes for a 750B Euro COVID-19 recovery fund. World equities were also near a 4-month high on hopes for virus vaccines. Equities rose despite the tensions simmering between the U.S. and China. President Trump ordered an end to Hong Kong's favored nation trade status and signed into law an act that authorizes sanctions on Chinese banks. (Reuters/Asia Times)

    API                    Forecast            Actual

    Crude oil             -1.3/-2.3           -8.3

    Gasoline               - 0.9                -3.6

    Distillate               +1.6               +3.0

    Cushing                n/av               +0.5

    Runs                   +0.4%              n/av

Venezuela's oil output has fallen to its lowest level since 1943 as U.S. sanctions bite. Storage has filled forcing cuts in production. June output was 393 MBD. This was down from May's 573 MBD level. The average for the first quarter was 821 MBD. (Reuters)

While OPEC+ is expected to trim their oil production cuts in August, some of this cut is possibly going to be tempered by extra cuts from some nations, notably Iraq and Nigeria and Angola. Those nations are cutting to make up for overproducing in prior months. (Reuters)

Technicals

Technically, momentums are getting near neutral, as the contracts remain in recent ranges. The crude charts are looking better than those for products. Brent is bumping up against the resistance wall created last week at the 43.50 area. Today's high is 43.59. Above this resistance, lies at 4393. Support is seen at 4214-21.

WTI resistance for August is seen at 4108 and then at 4163. The high today is 4100. Support is seen at 3990-91 and then at 3946-47. Preliminary data from the CME for Tuesday's WTI futures open interest shows a large increase. It appears to us to be new length especially in September.

RB August futures support is seen at 12442-56. Resistance is seen at 12911-13.

ULSD support in August is seen at 12090-12107. The resistance above is seen at 12425-36.

Natural Gas

NG is near unchanged as the weather is seen remaining hot through July (Nat Gas Weather).

Platts reports that industrial demand for gas has improved in July from June. They see industrial demand yesterday having been 20.4 BCF. This is up from 19.5 BCF in June. July industrial demand has averaged 20.1 BCF. 

Platts says that 25 LNG cargoes are afloat at sea as the large contango between nearby and later months is wide, which incentivizes storing gas. Also contributing to the floating storage are low demand and high inventories high inventories seen in Asia and around the world. In June there were 10-15 cargoes afloat. 

Feedgas for export in the US rose to 3.5 BCF Tuesday from 3.3 BCF the day before. (NGI)

Technically, NG still has negative momentum, but is trying to hold over the mid-Bollinger Band on the DC chart and today's price action has broken the past few days' downward pattern. The DC mid-Bollinger Band intersects at about 1.736. Resistance is seen above at 1.784-1.785. We see support at 1.708-1.712 and then at 1.688-1.692.

Platts survey is calling for this week's EIA storage number to show a build of 50 BCF. This is better than the 5 year average rise of 63 BCF. S&P analysis sees the number having been helped by an increase in power burn of 2.6 BCF week over week. This was offset slightly by the lower amount of feedgas delivered during that period.

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