Market Update 7-22-2020
Overview
Energies are lower pressured by a few items that are bearish.
API data last night showed a large unexpected build in crude stocks.
Yesterday Reuters reported that Iraq has failed to comply with its OPEC quota.
Then this morning , the US government abruptly ordered China to close its Houston consulate office; this has hurt several financial markets.
China called the US move an "unprecedented escalation"and threatened to retaliate. China may close the US consuate in Wuhan. (Reuters)
Iraq has kept their crude oil exports from the South at the same rate in July that they had in June at 2.70 mln bpd. Northern crude exports have actually climbed in July from June by 80,000 bpd to 450,000 bpd. In June, Iraq delivered 88% compliance , but their July figures equal a 66% compliance rate. They had vowed to overcomply recently due to not meeting quota in May and June. (Reuters)
Chinese crude demand from small refiners is seen as low due to weakening domestic product margins and high crude stockpile levels.The backlog of crude purchased, which is still being offloaded in July is hurting . They are seen shunning light grades of crude oil in favor of more sour barrels. Certain crude grades they had previously demanded have seen their values decline. Chinese refiners' top crude picks, including Oman and Russia's ESPO Blend grades, have taken a hit. ESPO blend crude differentials have also narrowed to lows seen two months earlier. Demand for WTI Midland has also been on a downtrend as per Platts reporting.
On a positive note, Russia is said to be cutting their oil loadings from their Baltic and Black Sea ports by nearly a quarter in the Aug. 1-10 period vs. the same period in July. No reason was given.
API Forecast Actual
Crude Oil -1.0 +7.5
Gasoline -1.8 -2.0
Distillate unch -1,4
Runs +0,6% n/av
Cushing n/av +0,7
Technicals
The market is signaling topping action in the energies as momentums have turned negative and the crude oil and ULSD have fallen back below the highs seen prior to yesterday.
Yesterday September WTI filled its upside gap to 42.49. The high was 42.51. We see resistance below that even at 4240. Support lies below at 4072-77. The DC high bollinger intersects at about 42 dlrs. The high seen in late June was 4174.
September Brent support lies at 4314-16. Resistance is seen at 44.89. The upper DC bollinger lies below that even at 44.38.
September ULSD support is seen at 12430-38. Resistance comes in at 12879-94 via the 60 min chart. The June high was 1.2713.
RB for September has its support at 12243-50 and resistance at 12695-12715.
Natural Gas
Spot futures are down 3 cts from yesterday as the market grapples with the current heat that has caused high demand versus the fear of LNG export losses that could swell storage later in the season.
Platts reporting has South Texas basis pricing vs the Henry Hub having improved by 7-8 cts from year ago levels. This has come as a result of higher exports to Mexico and some falloff in production from the Eagle ford basin.
Power demand for NG has risen by 6 bcf in the past month due to the hot weather. (Platts)
Platts survey is calling for tomorrow's EIA storage number to show a build of 33 bcf. The 5 yr avge is +37 and last year's number was a +44 bcf.
Platts Analytics sees next week's storage number being a build of 25 bcf. which is 11 bcf below the 5 yr avge.
Technically Ng still has negative momentum on the DC chart. But currently today's range for spot futures is almost identical to yesterday's. The lows from yesterday & today are 1.622. The highs are 1.680-1.681. Above the 1.685 level, we see next resistance at 1.712-1.715. Support below is seen at 1.602-1.605.
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