Market Update 8-4-2022

Overview

Energy prices are mixed with crude oil & ULSD higher, but RB lower. RB & WTI have fallen today to their lowest levels in months as DOE data disappointed yesterday and came on top of OPEC saying they did not raise output much amid fears that a global recession will crimp demand. Prices were supported today by a reduction in oil flow from Kazakhstan.

Kazakhstan says they have reduced flow along the Caspian pipeline. They did not give a figure. CPC Blend exports normally fluctuate between 1.3 MMBPD and 1.5 MMBPD depending on loading programs.The CPC consortium said repairs were taking place at the entry point at the "head" of the pipeline at Kazakhstan's Tengiz field and production had also been halted at the Kashagan field, the second-highest source for CPC crude. (Platts)

OPEC expressed concerns on Wednesday that global supply will not be able to meet demand after 2023. It said that emergency oil stocks among the 38 countries belonging to the Organization for Economic Cooperation and Development, which includes the world's biggest economies, are currently at their lowest levels in more than 30 years. On Wednesday, OPEC said that many of its members' production capacity was "severely limited" due to "chronic underinvestment in the oil sector."(CNN)

The DOE data seen Wednesday showed crude supplies rising, rather than drawing as was expected. This was due to a large jump in net crude imports and a drop in crude inputs to refineries. Net crude imports rose by 2.214 MMBPD as crude imports rose and exports fell. Crude inputs to refineries fell by 174 MBPD. Also disappointing was the drop in gasoline demand. It fell by 704 MBPD for the week to 8.541 MMBPD. This lagged behind both of the prior 2 years' figures. Last year's figure was a stout 9.775 MMBPD; in 2020 the figure was 8.617 MMBPD. Distillate supplies falling was a bright spot. They drew by 2.4 MMBBL. A build of near 1 MMBBL was forecast.

Today, Saudi Arabia raised their OSP's for September to Asia to record premiums.?The OSP for the flagship Arab Light was raised by 50 cents a barrel from August to $9.80 a barrel over Oman/Dubai quotes. This was slightly less than the 70 cents to $1 increase expected by some, as per Reuters commentary. The Medium grade crude OSP was raised by 60 cents to $7.75 and for Extra Light by 30 cents to $10.95. These were also record levels. Comments seen in Reuters suggested that the Saudis will need to reduce prices and that traders will seek spot cargoes versus contract crude. Today the Brent Dubai spread narrowed to its cheapest valuation seen since late April. The value was seen at $6.55.?This is seen making Brent crude more attractive. Lower refining margins seen in Asia in recent weeks was also a factor that suggests lower OSP's in the future.

China is seen raising its Gasoil exports in August to their highest level in a year as domestic demand is slow and margins for exported barrels are strong. Gasoline exports will fall as their margin is not as attractive. The Gasoil export amount is seen at 240 MBPD, while gasoline export flow is seen as low as 96 MBPD, down from an average of about 225 MBPD in the first half of the year. The Platts FOB Singapore 10 ppm sulfur gasoil cargo crack against front-month cash Dubai has averaged $35.27/b in August. The front month FOB Singapore 92 RON gasoline crack against Brent swap has averaged $8.75/b so far in August. (As mentioned above the Brent Dubai differential is about $6.55)

Gasoline prices at the pump have fallen for a 51st straight day. The AAA says the national average in the U.S. is $4.139.

Technicals

RB and WTI have fallen to their worst values since March and February respectively. In the case of RB, we were clearly faked out by the rally seen 24 hours ago. Oddly enough, the sharp price action seen Wednesday did not precipitate any large changes in open interest for futures or options in the energies on the CME.

WTI momentum basis the DC chart is getting near oversold. The lower bollinger on the DC chart lies at 89.70. Chart based support is seen at 90.00-90.06, just below the overnight low of 90.15. Below that support comes in at the 89.03 level. Resistance is seen at 92.93-93.01.

RB spot futures see support at the bottom of the gap on the DC chart down at 2.8359. There is a mean reversion setup here with the lower bollinger lying today at the 2.9097 level. Resistance above is seen at 2.9432-39.

ULSD sees support in September futures at 3.3382-3.3414. Resistance lies at 3.500-3.5050. There is a mean reversion set up here with the lower bollinger intersecting at about 3.3870.

Brent spot futures also have a mean reversion setup with the lower bollinger lying in the 96.25 area. Resistance basis the DC chart comes in at 98.49-50. Support is seen at 95.80-81 then at 94.50.

Natural?Gas

NG is near unchanged currently after rising overnight still feeling the positive effect of the Freeport announcement made yesterday.

NG rallied 50 cents in the early afternoon Wednesday as news from Freeport was issued. Freeport said that they have a "consent" agreement with the PHMSA that would allow it to "resume initial operations in early October. The company believes (this) will enable delivery of approximately 2 BCF per day of LNG, enough to support its existing long-term customer agreements. " (Freeport LNG Newsroom) This is in keeping with what Freeport said on June 30. Back then they said :"?it is estimated that the resumption of partial liquefaction operations will be early October 2022. " Comments regarding the Wednesday announcement pointed to the notion that the return in October was earlier than some had anticipated.

As was to be expected, the return of LNG exports from Freeport has pressured TTF prices today. They have retreated back below 200 Euros/Mwh.

The EIA NG storage data to be issued today is forecast to show a build of 26 to 29 BCF as per news wire estimates. This compares to last year's build of 16 BCF and the 5 year average build of 33 BCF.

Technically had a reversal day Wednesday and seems to have found support in the 7.55-7.65 area. Momentum though remains negative on the DC chart, though it seems poised to turn positive if prices were stay here or move higher.?We see support for spot futures at 8.010-8.016, then at 7.837-7.851. Resistance comes in at 8.474-8.487, then at 8.750-8.765.

Disclaimer

This e-mail, its contents, and any attachments are intended solely for the addressee(s) shown above, The e-mail and its contents are provided to you for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

This e-mail message and any attachment to this e-mail message contain information that may be legally privileged and confidential from Liquidity Energy, LLC. If you are not the intended recipient, you must not review, transmit, convert to hard copy media, copy, use or disseminate this e-mail or any attachments to it. If you have received this e-mail in error, please immediately notify us by return e-mail or by telephone at and delete this message. Please note that if this e-mail message contains a forwarded message or is a reply to a prior message, some or all of the contents of this message or any attachments may not have been produced by Liquidity Energy LLC.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC, and its affiliates assume no liability for the use of any information contained herein. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy