Market Update 3/2/2021

Overview

Energy prices are near unchanged after spending much of the overnight lower. The move lower was mostly due to worries over production increases expected from OPEC. Many analysts, though, do not see the output hike greatly threatening the balance between supply and demand.

Reports seem to show expectations for an increase of ( up to ) 500 MBPD from OPEC at this week's meeting. Most reports we read also say that the Saudis will end their voluntary 1 MMBPD cut at the end of March. Analysts expect OPEC+ to discuss increasing output as much as 1.3 million barrels per day. (CNBC) ”If the returning supply does not exceed 500,000 bpd though, the effect will be nearly neutral, as no trader can really expect OPEC+ to keep its cuts forever" , according to one analyst quoted ina Marketwatch article.

Abu Dhabi National Oil Company (ADNOC) will likely ship more crude in April by cutting term crude supply nominations by 5% versus cuts of 10%-15% in March. (Reuters)

India reiterated a call for OPEC to increase its oil production from April. (Bloomberg) India’s fuel consumption could rise by 9.8% in the year to March 2022, its highest pace of growth in six years, driven by robust demand for gasoline and gasoil in Asia’s third largest economy. (Reuters) This prediction comes even as February diesel sales by state owned refiners fell by 5.3% in February from January. State-refiners' daily gasoline sales in February, however, rose by 1.5% from a year earlier. But this was the slowest pace of growth in six months, preliminary industry data showed, as record-high retail prices hit consumption. (Reuters)

Russia last month pumped below its OPEC+ oil-output target for the first time since the historic curbs began last May. Production was some 30 MBPD lower than its OPEC+ quota. Freeze offs seem to be the culprit for the decline. (Bloomberg)

Energy prices fell hard midday Monday as the market sees OPEC raising production. This seems to be a tipping point for now as the speculative interest is unwilling to add to their length at these prices, which was evidenced in the reports seen the past few days, showing the first reduction in length in 16 weeks in all the energy contracts. Added to that is the slowdown in crude oil demand from Asia we have mentioned the past few sessions. China’s Unipec was re-offering cargoes of April Angolan crude amid weaker sales, Bloomberg reported.

Crude exports from Louisiana’s offshore supertanker port tumbled to zero as Asian buyers limited purchases to manage high inventories that threaten to overwhelm storage facilities. The lack of shipments in February from the Louisiana Offshore Oil Port -- for the first time in nearly two years -- is a stark contrast from January when the facility sent out a record of nearly 15 million barrels of domestic crude to buyers in China, South Korea and India, data compiled by Bloomberg show.

The World Health Organization warned Monday that a potent threat from Covid remains. Global cases rose for the first time in almost two months in the past week, mainly in the Americas, Europe and Southeast Asia, WHO officials said at a media briefing Monday. (Bloomberg)

Technicals

We had suggested tops were being put in place last Friday, as we saw a key reversal setting up in RB. The RB key reversal has been confirmed with a lower settlement Monday. The energies are on the defensive and likely to stay that way until a clearer picture emerges as to OPEC's plans at their meeting later this week.

April WTI has support at 5979-82, then at 5933-43, just below the overnight low of 5945. Resistance lies above at 6171-76. There is some light resistance at 6095-97, which was tested with the overnight high at 6106.

ULSD for April sees resistance at 1.8463-69, then at 1.8600-05. Support is seen at 1.8007-11, then at the overnight low at 1.7872-82.

RB sees its resistance at 1.9600, then at 1.9890-94. Support lies below at 1.9140-45, then at 1.9020.

Natural Gas

NG prices are higher today as the selling has slowed, evidenced by a very low amount of volume on the CME for NG futures Monday. Volume there totaled 216,445 contracts.

NGI’s Spot Gas National Avg. gained 32.0 cents to $2.965 on Monday. The week ahead is expected to generate some demand increases, but overall the weather is seen as bearish according to Bespoke weather. "There’s potential for colder weather systems to return to the northern and central U.S. March 13-15, but far from convincing and with more evidence needed.” NatGasWeather said. (NGI)

Technically, NG is getting oversold. It eked out a small gain on Monday after being down for 7 straight sessions prior. We wonder if NG is supported by some traders who may have been long crude oil / short NG.

We see support for spot NG futures at 2.730-34, then at 2.697-2.700. Resistance lies at 2.854-55, having lifted over resistance in the 2.800 area.

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