Market Update 4-21-2022

Overview

Concerns about supply from Libya and Russia are supporting crude oil and RB prices today. Also supportive are the DOE stats seen Wednesday, with U.S. exports in focus. Yet, ULSD prices have retreated as refiners are seen maximizing distillate yield at a time when they would normally be making more gasoline. The ULSD crack from WTI is worth $14 more than that for RB vs WTI, basis June products vs June WTI.

Libya said Wednesday that output there has dropped by 500 MBPD due to protests that have disrupted production and disrupted export flows. Russian exports continued to decline in April amid increased self-sanctioning. (Quantum Commodities)

U.S. DOE data showed total exports hit a record 10.6 MMBPD as overseas buyers scrambled for US volumes after the loss of Russian barrels started to bite, as described by Quantum Commodities. Product demand rose in the DOE stats. Gasoline demand was up 132 MBPD to 8.868 MMBPD, lagging behind last year's level of 9.104 MMBPD. Distillate demand rose by 338 MBPD to 3.822 MMBPD, beating last year's level of 3.854 MMBPD. The steep rise in U.S. crude exports this week of 2.09 MMBPD helped crude stocks drop by 8.02 MMBBL.

Technicals

ULSD & RB are poised to see their momentum turn negative within a day or 2. Added to that is the front month ULSD spread having a mean reversion set up from Wednesday, suggesting it hit a wall and would likely retreat. Today the spread is narrower by 360 points. The spread looks to have resistance near 30 cents.

ULSD spot futures look to have hit a wall near $4.00. For June ULSD that wall seems to be near $3.70. Support lies down in the $3.5800-15 area.

June RB support comes in at the overnight low area at 3.26, then at 3.22. Light resistance is seen at 3.3115-20, then better at 3.3706-09.

June WTI, now the spot contract, sees support at 102.01-12, which is where 3 of the past 5 sessions' lows lie. Support below that is seen at 100.70. Resistance comes in at the double top from yesterday/today on the DC chart at 104.16-32, then at 105.53-59.

Natural?Gas

NG pulled back further overnight as the narrative is one of an overbought contract bumping into shoulder season tepid demand. Yet, prices picked their head up to rebound back over $7-as they did yesterday, as next day HH cash prices are seen near $7.

NG dry gas production is seen picking up. Refinitiv sees production rising by 0.5 BCF/d next week to 94.7 BCF/d.?While next week demand is seen falling to 91.9 BCF/d from this week's figure of 99.5 BCF, as per Refinitv forecast.

Today's EIA storage data is seen as a build of anywhere from 31 to 40 BCF as per news wire surveys. Last year's build and the 5 year average build are 42 BCF.

The spot futures head to expiration next Wednesday. Is value to be found under $7 ? We do not believe that it is far-fetched to say that prices peaked over $8 and are not likely to see that value again until we see sustained heat arrive in the key demand areas in the Southeast/Southwest--notably into Texas.

Momentum remains negative for the spot NG futures. The spot futures have a stepladder down look since peaking earlier this week. Resistance is light at 7.235-7.241. Better resistance lies at 7.346-7.348. Support comes in at 6.950-54, then at the double bottom from yesterday/today at 6.768-6.791.

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