Market Update 5/06/2021

Overview

Energies are lower as demand concerns are overwhelming. 

India once again reported a record number of cases and fatalities on Thursday as it faces a devastating second wave of Covid-19 infections that has pushed its health-care system to the brink of collapse. (CNBC) 

Japan's capital, Tokyo, on Thursday asked the federal government to extend Tokoy's state of emergency aimed at curbing coronavirus infections until May 31. (Reuters) Australia suspended the "travel bubble" it had exclusively with New Zealand. Sydney reinstated social distancing measures. (Reuters) 

Some have interepreted Saudi Arabia's reduction in OSPs to Asia as a sign of concern over demand. We wish to add that India for the past few months has turned from taking Saudi crude oil in favor of other suppliers. India did so as they had months ago voiced concern over oil price increases, calling on the Saudis to open the taps. Saudi Arabia's June OSPs to Asia were reduced by 10 to 30 cents. NW Europe saw a decline of 50 to 80 cents and the Mediterranean saw declines of 20 to 40 cents. Only the U.S. saw an increase. It saw raises of 20 cents. (WSJ/Platts) 

The DOE statistics seen Wednesday were a mixed bag. The crude supply draw of almost 8 MMBBL was supportive. U.S. crude exports rose to 4.122 MMBPD, their highest since March 2020, up from 2.5 MMBPD the previous week. Refinery crude runs rose by 225 MBPD, while utilization rates rose by 1.1 percentage points to 86.5% of overall capacity, their highest since March 2020. Gulf Coast refinery utilization rose to 90.2% of capacity, its highest since March 2020. Refinery utilization is seen increasing as driving season is seen as strong, although this week's gasoline demand was disappointing. Gasoline demand fell by 13 MBPD to 8.864 MMBPD. This week's demand lags well behind the figure seen two years ago of 9.871 MMBPD for the period. Gasoline supplies rose by 737 MBBL. A small draw was forecast. Product supplied fell by 704 MBPD to 19.691 MMBPD. Product supplied is considered a proxy for demand. Distillate supplies fell by 2.896 MMBBL, beating expectations. Distillate demand fell by 205 MBPD, dropping to 4.125 MMBPD. This, though, is still better than the level seen two years ago of 3.896 MMBPD. Inventories of crude oil, distillate and gasoline are all 2% below their five year average. 

Technicals

Energies are retreating from overbought conditions as momentum has turned negative. 

WTI has a double bottom from yesterday/today at 6490-92. Below that support level, we see the next support at 6425-29. Resistance lies above at 6619-24. 

RB spot futures support is seen at 21166-81. Resistance lies at the 2.16 area. 

ULSD for June sees its support at 1.9801-23, just below the overnight low of 1.9828. Resistance comes in at the 2.0150 area. 

A revered techie colleague of ours agreed with us that prices had reached resistance/overbought status yesterday, but his opinion is that the retracement will be "shallow.”

Natural Gas

NG prices slipped Wednesday in what a WSJ headline states is "broadly weakening demand" as neither heating nor cooling demand in the U.S. will be very strong in the coming week. Currently, prices are near unchanged versus yesterday's settlement price in spot NG futures trading. 

Today's EIA storage number is forecast to show a build of 62 BCF as per a WSJ survey. Survey estimates we have seen the past few days have varied quite a bit. The best is a build of 51 BCF, as per a Platts survey. The biggest build estimate we have seen is the NGI modeling a +76 BCF. The five year average is +81 BCF. Last year saw a build of 103 BCF. 

NGI's National Spot Average price fell on Wednesday for the first time this week, dropping half a cent to $2.76. 

Feedgas volumes and exports remain very strong out of the U.S. LNG feed gas volumes stood at 11.7 BCF on Wednesday, NGI data showed. A total of 28 countries imported U.S. LNG in April, a record number for a single month, according to Bloomberg data. The previous record of 24 was set in March. (NGI) 

Technically, the following quote from Bespoke Weather service seems to sum things up rather well, "The market likely needs a new bullish catalyst to break through the $3.00 level.” NG futures volume on the CME seen Wednesday was very light at near 250,000 contracts, suggesting a lack of enthusiasm either way for NG pricing. Resistance lies at the $3.001-3.005 area. Support comes in at 2.891-2.900. Momentum is trying to turn negative from near overbought conditions for the NG spot futures on the DC chart basis. On the positive front, though, is the continued strength in the TTF/European NG marker, as per data from the CME for its contract. The TTF chart is attached. 

Disclaimer 

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC, and its affiliates assume no liability for the use of any information contained herein. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy.