Market Update 09/17/20

Overview

Energies are mixed with crude oil lower and products higher.

Product strength is likely coming from issues with refineries in the Gulf Coast region as a result of Hurricane Sally, which has dumped heavy amounts of rain on the area. Phillips 66 is advancing maintenance on its Alliance, LA 255,600 BPD unit. (Reuters)

Crude is likely suffering to some degree from the pullback in equities and a stronger dollar. Equities have slid back after the Fed signaled that they would keep rates near zero until 2024, yesterday. (Marketwatch) Crude oil may also be softer as OPEC's Joint Ministerial Monitoring Committee is to meet today and will discuss compliance, but not suggest any further production cuts. (Platts)

Yesterday's DOE statistics, along with the shu- in of crude production in the Gulf, helped boost prices. Crude supplies fell by 4.389 MMBBL, beating expectations where the best of which we saw called for -1.8 MMBBL. A few forecasts were even calling for a build in crude supplies. Gasoline supplies fell by 381 MBBL. Forecasts were seen of a draw of 160-800 MBBL. Distillate supplies grew by 3.461 MMBBL. This was worse than expectations for a build of 200-600 MBBL.

Distillate demand was weak at 2.809 MMBD, down 904 MBD on the week. Crude production rose by 900 MBD to 10.9 MMBD in total. The rise was due to output being restored in the Gulf of Mexico after Hurricane Laura. The same could be said for the rise of 4.0% in refinery usage. 

Reuters says that European Gasoil margins are the worst in 16 years due to ample supplies. Evidence of such is a rare movement of some supplies from Europe to the U.S.. Normally the flow is from West to East. The Gasoil crack in Northwest Europe for Brent is around $3. This is down from $6 one month ago and $16 at the beginning of the year. 

In Asia, Gasoil prices have fallen below those of gasoline for the first time since November 2017. Gasoil supply there is rising while gasoline demand has strengthened as regional driving activity picks up. Gasoil is trading at -$1.75 vs. gasoline. Part of the problem is a function of refiners reducing jet fuel yield and maximizing gasoil yield as a result. The European gasoil overhang is limiting the arb movement of supplies from Asia.The article goes on to say that gasoline prices may be capped as lockdowns reemerge and exports from China may be forthcoming. Light distillate supplies are at record levels in Singapore. (ArgusMedia).

Technicals

Technically, the energies have positive momentum, but we see double tops, which may limit the upside and the mood from news wires is that the rally is going to be hard to sustain. WTI double top is at 4034-39. Above that, resistance lies at 4108. Support comes in at 3905-07.

Brent support lies at 4132-38. The double top here is at 4244-49. Very strong resistance comes in above that at 4342-50. 

RB double top is at 11989-90. Resistance above that lies at 12170-80. Suppport is seen at 11550-57.

ULSD has its support at 10967-68, which is a double bottom from yesterday/today. Resistance lies at 11375-84.

Natural Gas

NG is down 10 cents and has fallen to its worst value in a month as demand is seen as weak due to fall like temperatures in much of the U.S. coupled with the loss of demand that is seen as a result of Hurricane Sally. 570,000 customers were without power as of yesterday. (Reuters) 

Cameron LNG facility is seen regaining electrical power by September 30th. However, NGI hints that the delay may be weighing on prices. This news seems to be trumping the shut-in of 805 MMCFD as of yesterday in the Gulf due to the storm. (Reuters) Also likely weighing on prices is the build of 77 BCF expected today in the EIA data. Last year saw a build of 82 CF and the 5-year average is +77 BCF. 

Technicals have been rebuffed the past few sessions at the DC mid-Bollinger Band and has fallen back and filled the DC gap to 2197 from 2227. Support below lies at 2135-2140. Resistance comes in at prior support area of 2275-2284. The overnight high is 2275.   

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