Market Update 7/20/2020

#Crudeoil #Naturalgas

Overview

Crude oil and Rb are lower, while USLD is unchanged as the market is worried about demand loss due to the pandemic. Some hope is being pinned to an EU recovery fund, which is helping support the Euro. (Reuters)

Simmering Chinese US tensions are hurting. CNN has the following headline from last week "US-China relations are at an all time low".

In Asia, the Dubai forward structure weakened due to sluggish demand. Aug/Sept fell into contango again. The value was seen at minus 8 cts , which was down from friday's plus 3 cts valuation. Sept/Oct fell to -14 cts from -5 cts friday. Sluggish demand is seen from Chinese refienrs due to poor domestic margins there and their backlog of prior crude purchases that are still being offloaded in ports. Floods in China are also hurting demand there. Worries over increased supply from OPEC come August are also weighing on pricing.(Platts/Reuters)

India's petrol and diesel sales in the first 1/2 of July have fallen by 18% from the same period in June. Renewed lockdowns and higher prices hurt sales there. (Reuters)

Friday's Baker Hughes oil rig count showed a decline of 1 unit.

Friday's CFTC Commitment of Traders report showed an increase of 614 contracts in net length in WTI held by money managers on ICE/CME combined. This underscores for us the lack of conviction in price direction seen by the market.

RB length held by money managers on CME rose by 4,989 contracts in the week ended Tues 7/14.

Platts reporting sees the prices for RINs in the US staying in a "tight range" due to uncertainty over small refinery exemptions from biofuel blending mandates. Prices since late May have "hovered" in the high 40 ct area. Friday's valuation was 46.75 cts.

Today is the last trading day for the August WTI futures contract on CME.

Technicals

Crude momentum is neutral, while those of the products are negative.

September RB has slipped below its mid bollinger on its daily chart. That value lies at about 1,2116. Support below that is seen at 1.1773-89. Resistance above comes in at 1.2297-1.2307.

August ULSD support is seen at 1.1950-70, while its resistance lies at 1.2425-36.

September WTI support is seen at 39.57-58. Resistance above lies at 41.12-19.

September Brent support is seen at 4194-99. Resistance lies at 4342-50.

Natural Gas

NG is down 3 cts as the slow drift lower continues due to worries over demand loss from the pandemic and high supplies in the US.

Friday's Baker Hughes NG rig count posted a drop of 4 units.

Money managers raised their net length in futures/options in NG on the CME by 15,465 contracts. Their net length totaled 37,307 contracts as of Tues. 7/14.

Tudor, Pickering sees this week's EIA NG storage report as a rise of 40 bcf. This compares to the 5 yr avge of +37 bcf.

Temperatures in the US are seen remaining hot thru early August. This is helping the Aug Sept spread on CME narrow today by almost 1 ct from Friday's settlement. Current value is 3,8 cts , which is near the recent highs of 3.5-3.6 cts. The spread made a fresh 3 month high today at 3,4 cts.

For today we see support for the spot futures at 1.672-1.674. Below that we see support at 1.655-1.656. Resistance above lies at 1.750-1.753. Momentum is negative. The contract has fallen below the mid DC bolinger. That value lies at about 1.733.

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