Market Update 4-1-2022

Overview

Crude oil and RB prices are lower as the market digests the US SPR release.

The IEA is set to meet today and is likely to authorize an additional 50-60 MMBBL worth of oil to be released, adding to the US's announcement of a 180 MMBBL release from its SPR over 6 months. (Reuters)

Analysts have indicated some scepticism with the US SPR release. Questions are being asked regarding (1) what amount of sweet versus sour crude will be released? Most of the SPR crudes are light and sweet, instead of the medium sour crudes that European refiners are used to,according to one analyst cited in Platts reporting. Russian crude tends to be of heavier, sour grade. (2) Is there ample pipeline takeaway capacity in the region to take on the added SPR flow ? (3) will the extra oil be able to get to where it might actually be needed? where can the pipelines take the added oil? One analyst says that the SPR release will cap prices, but "not provide significant downside". (Quantum Commodities) "The looming flood of U.S. barrels does not change the fact that the market will struggle to find enough supply in the coming months," according to another analyst cited by Refinitiv.

Goldman Sachs lowered their 2nd half 2022 Brent oil forecast due to the SPR announcement. They see prices at $120/bbl in the 2nd half , down $15 from their prior forecast. But they raised their 2023 forecast by $5 to $115, reflecting higher demand and lower shale supply exiting 2022. (Platts)

Economic news seen today has a negative tinge. The Caixin Chinese PMI fell below 50 for March, signaling ecoomic contraction. The index reading was 48.1, down from February's level of 50.4. March's reading was the lowest since February 2020. Euro zone inflation rose by 7.5% in March from a year ago. This was a record increase and puts greater pressure on the European central bank to raise rates. (Reuters)

U.S. Non Farm Payroll data issued today showed an increase of 431,000 jobs in March. The WSJ forecast was for +490,000. But, revisions for February and January added 95,000 jobs.

Technicals

Momentums are negative as the Crude oils and ULSD have registered fresh lows today for the week. Crude is on track for its greatest weekly drop in 2 years, down 12 -13%. (Reuters)

ULSD has gapped lower on the DC chart as the premium demanded by the expiring April contract has evaporated. Brent has also gapped lower on the DC chart basis.

The gap on the DC ULSD chart goes up to 3.6178. Resistance lies below that at 3.4935-40. Support comes in at 3.2835-3.2927, the latter being the overnight low.

Spot RB futures see support at 3.0950-75, tested with a low of 3.0971. Resistance is seen at 3.2225-75.

Brent spot futures have a gap from 106.24 to 106.50. Resistance above that comes in at 109.40-62. Support is seen at 102.19-35, then at 100.66-89.

WTI has key support at 95.82-96.00. The low today of 97.78 is below that seen 3 days ago at 98.44, which may provide some support. The 50 day moving average on the DC chart intersects at 98.67. A close below that level may see some technically driven funds become sellers.

Natural?Gas

NG is lower as Russian gas continues to flow in Europe. Also, the?WSJ cites the drop in LNG demand in Asia due to sticker shock. Added to that is the return to more seasonal weather in the US in the coming week. NatGasWeather expects a “warm U.S. pattern” next week, with mild temperatures across the northern stretches of the country, but some demand may surface as temps in the South may reach the high 80's/low 90's.

The Kremlin said on Friday it would it would not immediately turn off gas exports to Europe as payments on deliveries due after April 1 come in the second half of this month and May. (Reuters) TTF prices are softer today.

The EIA data seen Thursday showed an increase of 26 BCF in storage. Total storage of 1.415 TCF is 347 BCF below year ago level and -244 BCF versus the 5 year average.

Technically NG spot futures look neutral basis the DC chart momentum as it currently is registering an inside day. Resistance to the upside lies at 5.663-5.673, tested today with a high of 5.685. Above that resistance is at 5.789-5.799. Support comes in at 5.454-5.464.

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