Market Update 7-24-2020
Overview
Crude oil and RB are higher,while ULSD is down slightly. The tone we read in the news is more bearish than bullish.
Overnight oil and equities were hit on news that China had closed the US consulate in Chengdu. Chinese blue chip stocks were off 4.4% (Reuters)
Asia's crude and Gasoil markets weakened. Dubai cash/futures spread weakened to +34 cts from +59 cts seen Wednesday and $1.20 seen at the beginning of the month. Murban crude was offered at a 95 cts discount to its OSP. Chinese and Japanese demand is "slow" as per Platts. Demand is seen staying weak amid "slim refining margins".
The Gasoil cash premium in Singapore has fallen to a 1 1/2 month low amid weak buiyng interest. The cash premium was assessed at 46 cts down from 53 cts Thursday. But, Wood, Mackemzie sees diesel demand improving in the 4th quarter. The Gasoil crack from Dubai crude fell 50 cts Friday from Thursday to $6.78, but this was better than the end June value of $6.29. (Reuters)
Analysts see the prospect of a double dip recession in the US , especially if Congress fails to pass a new aid package for the unemployed and local and state governments. Benefits are set to end in a few days. The jobless report issued Thursday hurt US equities, Bloomberg reported.
Technicals
Technically momentum for crude oil has turned negative and we see signs of walls of resistance having formed this week in crude oil and ULSD.
WTI has resistance at 4236-40 and support at 4064-72. The low overnight is 4072.
ULSD for Sept has support at 12426-40. Resistance lies above at 12892. Momentum is neutral.We note that the Aug Sept ULSD spread has risen to its best value since February at 75 cts.The spread though is getting near overbought . We see resistance at 73-74 pts, then up at 49. Support is likely to be found at 99 pts.
RB September momentum is positive. But here without help from crude oil, we see the upside as limited. Resistance comes in at 12679-97. Support is seen at 12322-30, the double bottom from yesterday/today. Below this support is seen at 12143-50.
Natural Gas
NG is slightly lower having spent most of the overnight lower as weather forecasts cooled slightly. (Reuters)
Refinitiv sees demand this week at 92.7 bcf, falling to 91.4 next week, then rising to 93.4 in 2 weeks.
Yesterday's rally after the EIA data is said to have been due to a tightening storage balance going forward.
Yesterday's number was neutral. The 37 bcf build was just 2 bcf over WSJ survey. It was better than last year's +44 bcf. Storage has risen to a total 3,215 BCF. This is +656 bcf/ +20.8% vs year ago level and +436 bcf/ +15.7% vs the 5 yr avge.
But next week's number is seen shrinking the storage imbalance further. Refinitiv is forecasting a build of 29 bcf. This compares to last year's +56 bcf and the 5 yr avge of +33 bcf.
N G I had a headline yesterday that referred to the August contract beign supported by the heat we have seen and are likely to still see going into August. But, N G I said that the forward months were hurt by the outlook for weak export demand and the fear of demand loss due to Covid19.
Technically NG has seen its momentum turn positive with yesterday's strong rally, but we see the contract as stuck basically between 1.60 and 1.90 , as it has been for the most part since March. ( We suggested 8 days ago a range of 1.70 to 1.90) For today support for August Ng is seen at 1.707-1.708. Resistance lies at 1805-1808.
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