Market Update 5-3-2022

Overview

Concerns over Chinese Covid lockdowns and the poor Chinese economic data seen the weekend are outweighing worries over Russian oil supply.

Beijing will close gyms and cinemas over the Labor Day holiday and Shanghai will keep virus measures in place despite falling cases as it seeks to stamp out the Covid-19 outbreak that’s hobbled its economy. The nation is battling its worst outbreak since the virus first emerged in Wuhan in late 2019. (Bloomberg)

OPEC+ is seen raising output by 432 MBPD at their meeting this week, but their ability to do so was strongly put into focus with news seen yesterday. In April, OPEC members managed to raise output by 40 MBPD as per Reuters reporting. OPEC was allowed to raise output by 254 MBPD as per their output accord. April's small increase seemed to be to a fair degree a result of the drop in output seen in Libya mid-month due to protests there.

As per a Reuters headline : ""No let off to oil prices as Russia barrels disappear from market -BP CEO." He sees 1 MMBPD having come off the system so far in Russia. He says that will likely double this month as sanctions kick in.

Yesterday's strong rally off the lows in the energies seemed to be largely due to news that Germany is not opposed to immediate sanctions against Russian oil; prior thinking was that Germany would seek a more gradual limitation to Russian oil imports.

Technicals

Rb?and?Brent?DC?charts?show?momentum?ready?to?turn?downward.

RB's DC chart shows a bit of a wall that formed in the prior 3 sessions. Resistance thus is seen at 3.5320-44. Support for the RB is seen at 3.4240-70.

We had our question about possible resistance at 4.00 for spot ULSD futures answered loud and clear yesterday. There was no real resistance there as the futures surged another 26-27 cents. Resistance lies at yesterday's high at 4.2738, with some resistance seen below that in the 4.200 area. Support comes in at 4.0450-90, then at 3.9957-85.

WTI spot futures see support at 102.01-12 and resistance at the double top from yesterday/today at 105.80-94.

Natural?Gas

NG is up strongly again today ignoring the drop in energy prices. TTF prices are a bit higher, but not enough to keep pace with NG. NG is still being supported by supply worries, while on Monday increased demand expectations added to the strength.

Temperatures in Texas are seen rising above 90 degrees in the coming 2 weeks.?The temps will be 5-8 degrees above normal. Heat indices in Houston will be near 100 degrees this coming weekend. Houston may set a record high Saturday. (ABC13.com)

Kinder Morgan is performing planned maintenance on its Permian pipeline, which will reduce flows by as much as 1 BCF/d over the next 10 days. (Platts) This underscores the narrative of supply issues that we have heard of late. Wood Mackenzie analysis points to the ongoing lack of infrastructure to allow production to rise. (Fortune) Production currently out of the Northeast is seen suffering.

NG has tested over $8 today. It is thus approaching highs seen 2 weeks ago.?We peg resistance at 8.065-8.075 and then at 8.197, which are the highs seen 2 weeks ago on the DC and June charts. The only drawback to the strength is the spot futures are bumping against the upper DC and June chart bollinger bands. The DC upper bollinger les at about 7.845 and that for the June daily chart at 7.925. Support for NG spot futures lies at 7.725-7.735 then at the 7.619 area. Momentum remains positive as does the price action.

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