Market Update 8-6-2020
Overview
Energies are higher after spending most of the overnight session lower due to demand fears. This came despite the US dollar having fallen to its lowest level vs the Euro since May,2018. Equities were lower as lawmakers in the US struggle to reach agreement on a stimulus package. (Reuters)
In Asia, crude sentiment for the physical market is "weak" as Chinese demand is seen "lackluster" as import quotas are limited and crude stockpiles are high after the Chinese buying spree in the 2nd quarter. Volumes are seen capped for the rest of the year. Ocotber cash Dubai fell to -51 cts, its worst value since May 29. Trading in crude in Asia has been subdued this week as the market awaits the release of next month's OSPs. (Platts)
Iraq says they will cut output in August by 400,000 bpd. This will be over and above the agreed cut for August. (Reuters)
Yesterday's DOE data showed product stocks having risen. The gasoline rise of 0.419 mln bbls was unexpected. Estimates were calling for a fall of 0.5 to 1.3 mln bbls. Distillates stocks rose by 1.591 mln bbls. This was more than the estimates for a rise of 100-200,000 bbls. Distillate stocks have risen anew to their highest level since 1982. Gulf Coast distillate supplies hit a fresh record.
Crude supplies fell more than expected. The draw of 7.373 mln bbls beat estimates for a fall of 1.8 to 4.1 mln bbls. Crude production was down 100,000 bpd. The fall in crude stocks though is hard to reconcile as refinery runs rose by only 42,000 bpd, while the net crude oil import figure rose by 1.256 mln bpd.
Technicals
Technically the energies have positive momentum, but have fallen back into prior ranges after yesterday's move to fresh 5 month highs for ULSD and Crude oil. The upper bollingers on the DC charts may limit some of the upside.
For RB that bollinger lies at 12330. Chart based resistance lies above that at 12442-56 then at 12646-48. Support is seen at 12092 then 11920-40.
September ULSD support is seen at the double bottom from yesterday/today at 12516-30. Below this support comes in at 12090-12110. Resistance comes in at 12910.
Brent has its upper DC bollinger at about 45 dlrs. Resistance lies above that at 4623. Support at 4482-90 has held with an overnight low of 4485. Below this we see support at 4393-95.
Natural Gas
Spot futures are up 8 cts supported by expectations for a smaller than usual injection in today's EIA storage data. Spot futures have hit a fresh 8 month high.
The survey estimates call for a build of 26 to 31 bcf. This is better than the 5 yr avge of +33 bcf. Last year storage built by 58 bcf in this week.
Prices yesterday were also supported by the next day Henry Hub cash trading to $2.18. This allows September to be worth mid $2.20's basis the spread that existed when August futures were still tading.
Platts reports that US NG production in August at 87.4 bcf has dropped by 200 MMcfd from July's average. Feedgas volume in August has been running at 4 BCF. July's level was in the low 3 bcf range. Platts reports that next month's feedgas is seen averaging over 6 bcf. But, the article casts a bit of a negative in the that the Southeast region storage is just 23 bcf shy of a record. This may limit the injection capacity as we head to shoulder demand season in September and October Platt says. Storage in the Southeast filled lately, contrary to the normal pattern of withdrawals from mid July thru August.
As much as the news is supportive, the technical picture is a cautionary one with momentum rather overbought and the upper bollingers on the DC and daily charts lying above at the 2295 area. Spot futures support basis the DC chart comes in at 2162-2163 then at 2104-2111. Upside resistance lies at 2297-2303 basis the DC chart.
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