Market Update 3/19/2021

Overview

Energies are higher in what is being seen as bargain hunting after yesterday's sharp selloff. Also helping today may be the pullback in U.S. Treasury yields, which reached a 14 month high Thursday. (Reuters) The EU health agency cleared AstraZeneca's vaccine for use, saying the benefits outweigh its potential risks, and six member countries said they would resume vaccinating. (WSJ)

Bond markets have experienced sharp moves this week as the U.S. Federal Reserve said it expected higher economic growth and inflation in the United States this year, although it repeated its pledge to keep its target interest rate near zero.

Goldman Sachs sees the oil price pullback as a buying opportunity.The bank expects a significant increase in global oil demand in the coming months, comforted by demand indicators in areas of high COVID-19 vaccination, with its Brent forecast rising from $65 per barrel in March to $80 per barrel this summer.

Energy prices reached a tipping point yesterday as vaccine rollouts in Europe have slowed and further lockdown measures have been imposed. Britain announced it would have to slow its COVID-19 vaccine rollout next month due to a supply delay. Concerns are rapidly growing of a mobility-depressing third wave in Europe amid a pause in vaccinations and rapid spread of the B117 mutation that originated in the UK,” JP Morgan said. France imposed a one-month lockdown in Paris and parts of the north on Thursday. Add to this the news heard this week of an increase in Iranian oil supplies to China and the pressure on demand globally that rising prices has caused and it is easy to see why prices have retreated this week.

Technicals

Crude oil had its biggest one-day decline since September on Thursday.(WSJ) It is hard to say that the selloff has ended, despite the very high volume of contracts traded in WTI on the CME yesterday, which sometimes would be an indicator of a top or bottom. The contracts have fallen below their mid bollingers in to the lower channel for the first time since November. We are reminded of the comment from the CEO of Total of about 10 days ago : "I am not betting on prices staying at $70 a barrel, for me the right price is around $50-$60 a barrel".

WTI May futures show support at 5919-28, then at 5828-36. Resistance lies above at 6175-69.

Brent spot futures support is seen at 6233-38, then at 6145. Resistance comes in at 6460-70.

May ULSD support lies at 1.7656-63, which is just below today's low of 1.7695. Resistance comes in at 1.8187-97, which was tested with a high of 1.8209. Above that resistance lies at 1.8365-73.

RB May futures support lies at 1.9115-35, then at 1.8933. Resistance lies at 1.9793-1.9808.

Natural Gas

The EIA data disappointed with a draw of 11 BCF, which was below most estimates seen. The spot futures contract made a fresh low on the news, but bounced strongly from that low. Is this a cause of liquidation of NG short positions, due to the selloff in the other energies? Total storage is now 1.782 TCF. This is -253 BCF / -12.4% versus last year, and -93 BCF / -5.0 % versus the 5 year average. Platts sees next week's EIA number as a draw of 32 BCF , which is 19 BCF weaker than the 5 year average. Platts sees end of season storage at 1.742 TCF, just 100 Bcf below the average. They add " Compared to the outlook one month ago, seasonal injection demand now appears more likely to trend close to average historical levels, keeping the US market well supplied through summer." We are slightly skeptical of this analysis , given that LNG feedgas volumes are setting records. This week they reached 11.65 BCF. Last year in April, LNG exports ran at an average of 7.015 BCF and then declined steadily for the next few months due to the Covid. In May of 2020, exports were 5.881 BCF, June's level was 3.633 BCF and in July they fell to the low for the year at 3.097 BCF. Thus, in our opinion there will be a big difference in demand for NG in the coming months due to feedgas volumes and hence this may well impact injections into storage.

Yet, Platts analysis suggests the level of exports may come into question as bearish signals lurk amid unseasonably high Asian spot LNG prices. Buyers are disincentivized by high spot LNG prices in shoulder months. One reason for strong JKM pricing has been the support from high NG prices in Europe and record high carbon prices that encourage gas burn over coal-fired power generation. "Some trading houses (in Asia) are planning to sell cargoes now and buy in the future, which shows how bearish they are," a China-based trader said. Japanese importers who were selling surplus volumes recently, said their downstream demand was not particularly strong and had less need to depend on spot cargoes, as inventories had been replenished and solar power was back with warmer weather."As prices have gone up higher than $6/MMBtu, there is less incentive to buy, unless prices of electricity go much higher, which is less likely in the shoulder months", a Japanese power utility said. Rising oil-linked prices will factor into spot LNG demand, which may stem some of the downward pressure on JKM prices. (Platts)

Henry Hub cash prices fell Thursday to a nearly 8 week low at $2.46.Through March 18, gas demand from US homes and businesses has averaged 34.7 Bcf/d – about 1.1 Bcf/d below its weather-normal average for the month, S&P Global Platts Analytics data showed. March 1 to date, U.S. output has averaged 92.3 Bcf/d -- up about 800 MMcf/d compared to its 30-day average prior to the mid-February production freeze-offs.

Technically, NG has a sideways to slightly softer pattern. Support lies at 2.421-2.429. Resistance on the upside is seen at 2.526, then at the triple top from this week at 2.561-66. Momentum shows no particular bias.

Disclaimer

This e-mail, its contents, and any attachments are intended solely for the addressee(s) shown above, The e-mail and its contents are provided to you for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

This e-mail message and any attachment to this e-mail message contain information that may be legally privileged and confidential from Liquidity Energy, LLC. If you are not the intended recipient, you must not review, transmit, convert to hard copy media, copy, use or disseminate this e-mail or any attachments to it. If you have received this e-mail in error, please immediately notify us by return e-mail or by telephone at and delete this message. Please note that if this e-mail message contains a forwarded message or is a reply to a prior message, some or all of the contents of this message or any attachments may not have been produced by Liquidity Energy LLC.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC, and its affiliates assume no liability for the use of any information contained herein. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy.