Market update 6-2-2022

Overview

Energies fell sharply overnight as the Financial Times (FT) becomes the second major publication to report that the Saudis ( and likely some other OPEC members,notably the U.A.E.) are prepared to raise output if Russian production falls significantly due to sanctions. (Quantum) A report from Energy Intelligence points to the group lifting production by some 500 MBPD rather than its normal 432 MBPD increase. (WSJ)

The FT report describes the prospect that the output agreement that OPEC+ has, that was to end in September, may see the output cuts brought forward to July and August.

Also hurting energies are economic growth concerns in the U.S.. The Fed's Beige book issued Wednesday showed growth moderating. The Fed reported : Four districts explicitly noted that the pace of growth had slowed since the prior period,” it said. Business contacts in several districts reported becoming more cautious as their outlooks grew more pessimistic. The Beige Book suggested that uncertainty about the economic outlook is causing some businesses to pull back on spending and investing.?J.P.Morgan Chase's head warned of an economic hurricane on the horizon due to higher interest rates and the fallout from Russia's invasion of Ukraine. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.” (Quantum/Bloomberg)

The OPEC+ technical committee, which met Wednesday, trimmed its forecast for the 2022 oil market surplus by about 500 MBPD to 1.4 MMBPD. (Reuters)

API?????????????? Forecast????? ????Actual

Crude?Oil??????????-0.5/-1.35????????-1.181

Gasoline??????????-0.1/+0.553???????-0.256

Distillate?????????+0.8/+0.99????????+0.858

Cushing??????????????-0.1???????????? +0.177

Runs????????????????+0.4?%??????????? ?n/av

Technicals

Momentum is positive for the products and WTI, but not for the Brent. The products are having inside days, but the crude oils are struggling to rise above yesterday's lows.

Brent spot futures have support at 112.94-113.01. The low today is 112.45. Resistance lies at 11680-93, then at 11836-57. Yesterday's low was 115.40.

WTI spot futures see resistance at 116.57-64. Support lies at 112.62-69. The low today is 111.20. Yesterday's low was 114.58.

RB for July sees support at the overnight low at 3.9900-43. Resistance lies at the 4.1028 area.

ULSD July support is seen at 4.0614, then at 4.0197-4.0211. Resistance comes in at the 4.1716 are, then at 4.2455-74.

Natural?Gas

NG is up in spite of TTF prices being lower and the drop in energies detailed above. The narrative yesterday for the rally in NG was for one a sharp drop in US output of 2.4 BCF, as per Bloomberg. Also contributing was a reduction in wind generation, which is seen falling further this week as per NGI reporting.

The EIA data due today is seen as bullish as it will further widen the deficit to the 5 year average. News wire estimates are for a build of 84-87 BCF. The 5 year average and last year's build are both 100 BCF. One analyst cited in NGI dares to say that the market may have already seen its peak injection for the season at 89 Bcf.

Momentum remains negative for the NG on the DC chart, although it may turn neutral in a day or so if prices stay up towards $9. Support for the spot futures is seen at 8.605, then at 8.462-67. Resistance lies at the overnight high area at 9.057-9.062. Above that resistance comes in at 9.151-9.164.

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