Market Update 4/13/2021

Overview

Energies are higher today. The news wires touted strong Chinese crude imports in March as the key reason for overnight strength. Energies are shrugging off bad news about U.S. vaccinations.

Chinese March crude imports jumped 21% from a low base of comparison a year earlier. At 11.69 MMBPD, March imports were down from 11.73 MMBPD in February. Imports are seen falling in Q2 as refiners go into turnaround. "High crude prices and a backwardated market structure have also dampened crude purchase for stockpiling activities", FGE consultants say. Margins for teapot refiners in a key province were seen strong for diesel and gasoline. China’s refined oil product exports for March rose 28.9% from February to 6.83 million tonnes (1.61 MMBPD), but was still down from 7.26 million tonnes (1.72 MMBPD) a year ago.

American authorities recommended halting usage of the Johnson & Johnson vaccine after six people in the U.S. developed a rare blood clotting disorder.(CNBC) There had been issues wth distribution of the vaccine in recent days. 15 million doses of the Johnson & Johnson vaccine were ruined when a manufacturer mixed up ingredients between the Johnson & Johnson and AstraZeneca vaccines. (communityimpact.com) Thus, we ask is the FDA suggestion about halting use now less impactful because there have been supply distribution issues?

In its monthly market report issued today, OPEC increased its 2021 global oil demand forecast by 100,000 barrels a day to 5.95 MMPBD. They also raised their forecast for global economic growth by 0.3 percentage points to 5.4%. The cartel said its increased demand forecast was prompted by forecasts of a better-than-expected second half of the year, thanks to "stimulus programs and a further easing of Covid-19 lockdown measures, amid an acceleration in the vaccination rollout. They also lowered their estimate for Non OPEC oil output supply growth by 30 MBPD to 0.9 MMBPD. (WSJ)

Reuters details struggles that U.S. pipeline companies are having in the Permian basin. Nearly half of all oil pipelines from the Permian basin, the biggest U.S. oilfield, are expected to be empty by the end of the year. Pipeline companies went on a construction spree throughout 2018 and 2019 to handle blistering growth in U.S. crude production to a record 13 MMBPD. But oil production is now near 11 MMBPD. By the fourth quarter, total utilization of the largest oil pipelines from the Permian is expected to drop to 57%, consultancy Wood Mackenzie said. The nadir during the last market bust in 2016 was roughly 70%. The gap between production and capacity covered by long-term contracts rose to a record over 1 million bpd in February, according to energy research firm East Daley Capital. Major pipeline companies are exploring ways to ship other products in those lines.

Iran's Foreign minister vowed revenge for the weekend cyberattack against their nuclear site. He also warned the attack could hurt ongoing nuclear negotiations. (kansascity.com/news/nation)

Crude supplies are seen falling in this week's U.S. petroleum data. Platts survey estimates -2.9 MMBBL. Refinery runs are seen rising by 136 MBPD as per Platts Analytics. Product supplies are seen rising as per Reuters. Cushing supplies are seen growing by 138 MBBL , according to Woods Mackenzie. (Reuters)

Yesterday's EIA drilling report forecasts a rise of 13 MBPD in the 7 major shale plays in the U.S. The total output from the 7 basins is seen at 7.61 MMBPD in May. Output in the Permian in seen rising by 52 MBPD to 4.47 MMBPD, which would be the highest level seen since April,2020. (Reuters)

Technicals

The opposing forces of vaccine hiccups, rising Covid cases in certain parts of the world and some increased oil supply from OPEC versus prospects for better demand later in the year and some geopolitical tensions are seen keeping prices in a range for now.

May WTI has support at 5882-86 and resistance at 6086-90.

RB May futures support is seen at 1.9550-75. Resistance lies at yesterday's high at 1.9982. Above that resistance is seen at 2.0171-79.

ULSD support for May is seen at 1.7877-82. Resistance lies at 1.8406-26.

Natural Gas

NG prices are up as cooler temperatures are seen in the next 7-10 days, with low temperatures ranging from the 20s to lower 40s. (N G I )

U.S. NG output has fallen somewhat over the past week, according to analaysts at Schneider Electric. They say output slipped to 91.0 BCF/D, down 1.5% on the week. They suggested it might be a function of some spring pipeline maintenance. (WSJ)

N G I modeling has NG storage rising by 67 BCF in this week's data. This compares to last year's +68 BCF and the 5 year average build of 26 BCF. Energy Aspects issued a preliminary estimate for 69 Bcf injection for the week ending April 9.

The netbacks to Europe and Asia remain attractive for U.S. LNG exports. Cooler weather in Europe and what NGI calls "resilient demand" in Asia are supportive for U.S. LNG exports.JKM/Asian prices are near $7 and TTF/ European prices are near $6. European storage inventories remain at about 30% of capacity, or 46% lower than this time last year. Over the next 12 months, U.S. exports should average about 8.96 Bcf/d, up from 6.38 Bcf/d over the previous 12-month period, according to Bloomberg and NGI calculations.

Technically, NG has positive momentum and a double bottom from yesterday/today at 2.529-2.530. Resistance above lies at 2.656-2.663, as prices have risen over yesterday's high of 2.605.

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