Market update 8-25-2020
Overview
Energies are higher as the Gulf Coast awaits the landfall of Hurricane Laura, which is seen hitting Texas and or Louisiana as a Category 2 maybe even Category 3 storm, set to come onland overnight Wednesday into Thursday.
Products are leading again, as refineries are reducing their operations due to the storm. Valero, Motiva and Total are cutting back some of their refinery usage at their Port Arthur, Texas units. Motiva's total capacity there is 630,000 bpd, Total's 225,500 bpd and Valero's 335,000 bpd. The impact over the past 24 hours has been for US Gulf Coast gasoline to rally to its best value vs CME RB futures since Sept. 27,2019. Gulf CBOB was valued at +2.5 cts over Oct Rb on NYMEX on Monday.
Oil output in the Gulf was said to be reduced by 1.523 mln bpd ( 82% of the oil output in the Gulf) as of midday Monday. (Platts). This has affected crude values in the Gulf. Notable was Louisiana Sweet crude's value. Heavy Louisiana Sweet crude was assessed by S&P Global Platts at a $2.75/b premium to cash WTI, $1.60/b stronger from Aug. 21.
The inbound Houston ship channel was closed and 10 ports in N. Orleans were closed.
In Asia, October cash Dubai weakened Monday from Friday by 12 cts to - 83 cts due to "easing demand" (Platts) September/October Gasoil improved to -41 cts from -48 cts Monday as excess supply from China and India was seen depleted - as per Reuters reporting, but the jet crack fell by 17 cts to -54 cts. Refiners are said to be continuing to make gasoil from jet fuel. (Reuters)
Estimates from Platts and Reuters expect draws in Crude, Gasoline and Distillates in this week's US petroleum data. Crude supplies are seen down 3.8/4.3 mln bbls. Gasolline stocks are seen down 1.7/2.7 mln bbls. While distillate stockpiles are seen dropping by 1.0 mln as per Reuters survey and refinery runs are due to fall by 0.1 %.
Technicals
Technically the crude pattern looks sideways. Some analysts noted the muted reaction in crude prices Monday even as output was shut in. This was due to the negative effect that Covid has had on prices recently.
Spot WTI futures are attacking resistance at 4297-4303. Above this lies the most recent high at 4352. Support comes in at 4209-11. Crude momentums are now neutral, while those for the products have turned positive.
Brent resistance for October lies at 4623. Support comes in at 4447-53.
October RB has forged a fresh high since March. Resistance lies at 12942, with a gap to 13292. Support down below is seen at 12400.
October ULSD support is seen at 12597-12601. Resistance lies at 12844-51, then at 13010.
Natural Gas
NG is higher by 2 cts as 1.542 bcf of production was shut in in the Gulf as of midday Monday as per US government data. (Platts)
LNG feedgas volume in the Gulf was not impacted much on Monday. Volume of feedgas was said to be 5.1 bcf , which was 100MM/cfd better than Sunday's volume . (Platts)
Platts details the fact that electric power generation in the week from Aug 24-28 in the ERCOT,MISO and SPP will be 9-19% over the past 5 years' last week in August. Yet, the article says that the power usage forecast may not have fully taken into account industrial demand losses, considering the reduced refinery operations in the Gulf.
Ng is rather overbought with a double top in the spot futures from yesterday / today at 2552 /2554. October futures have a double top at 2649/2658. The October contract has a gap to fill from 2661 to 2663 from May 2019. Above this we see resistance at a high from May, 2019 at 2676. Support below lies at 2513-2514.
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