Market Update 9-7-2020
Overview
Energies are lower hurt by demand concerns and the lowering of Saudi OSP's this weekend.
The demand concerns were raised in Platts reporting of the Asian gasoline and Gasoil markets. Asian gasoline demand is seen remaining "tepid" as lockdowns have ramped back up in Australia , while Indian demand is seen slowing down. Due to their slow demand, Indian refienrs are seen offering cargoes into the spot market. The Gasoil market is seen as soft due to a " supply glut and weak demand". But Platts offered a bright spot with regard to the jet market. They say that Asian Q3 jet demand will rise to 1.7 mln bpd from 1.3 in Q2.
The Saudi OSP for their flaghip A-light crude was lowered by $1.40 to Asia. The same grade's OSP to the US was lowered by 60 cts and by 20 to 40 cts to NW Europe and the Mediterranean. The oil markets took the lowering of the OSP's as a sign of weakness. (reuters)
Chinese crude oil imports slowed in August fron July. August imports averaged 11.18 mln bpd, down from 12.08 mln bpd in July. The August figure though was still up by 12.6% vs. year ago level. Imports going forward though are seen slowing. Crdue loaded in August headed for China was said to be running at 7.93 mln bpd down from 8.2 mln bpd in July and the 2nd quarter avge of 11.87 mln bpd. (Refinitiv)
The Russian oil minister was quoted over the weekend as seeing 2020 oil demand down by 9-10 mln bpd. Opec's last monthly report had estimated demand to be down by 9.06 mln bpd. The minister said oil prices could be in a "corridor of $50 to $55 per barrel." (Reuters)
Citgo's Lake Charles refinery could take 4-6 weeks to restart due to the problems caused by Hurricane Laura. The refinery has a capacity of 418,000 bpd. (Reuters)
The US oil rig count rose by 1 unit in the Baker Hughes data issued Friday.
CFTC data showed money managers lowered their long position in Brent by about 19,000 contracts in the week ended Tues. 9/1. (Reuters) WTI positons on ICE/CME combined were little changed. RB net length fell by 5,672 contracts. Money managers flipped back to a net short position in ULSD on the CME by adding shorts and reducing longs by a total of 11,112 contracts. They were net short 9,493 contracts in ULSD as of Tuesday 9/1. Gasoil length was reduced by roughly 6,000 contracts, (reuters)
Technicals
Technically the energies are soft with Rb and ULSD hitting 2 month lows, but there are 2 technical signs that we see that temper some of the bearishness. The momentum for RB is getting oversold and the lower DC bollingers are above current pricing for Brent and WTi, which may provide some support.
The lower bollinger for the Brent lies at 4213. Support basis the DC chart comes in at 4132-38. Resistance is seen at 4289-92.
WTI's lower bollinger n the DC chart intersects at 3931. Support is on the low at 3854-55 and resistance lies above at 4002-4008.
October RB support lies at 11350-55. Resistance is seen at 11924-39 then at 12104-12126, which are the previous 2 sessions' highs.
ULSD support is seen at 1.1150 and resistance at 11654-74. Preliminary data for CME ULSD futures open interest from friday's activity shows an increase of over 8,000 contracts. This comes on top of the increase of over 11,000 contracts seen from Thursday's activity. We suspect a bunch of new shorts having been added.
Natural Gas
NG is down 8,4 cts in Oct and 5,1 cts in Nov as cooler temps seem to be a drag on prices. Henry Hub cash prices fell below 2 dlrs on friday, which puts into question the October contract trading at 50-60 cts premium.
The NG rig count as per Baker Hughes data isseued Friday was unchanged,
NG length held by money managers on the CME for NG futures/options fell by 809 contracts for the week ended Tues 9/1 as per CFTC data issued friday.
Technically Ng has negative momentum and shows 4 consecutive highs now in the upper 2.50's to 2.600, creating a wall. Resistance for today lies at 2552-2557 then at 2598-2604. Support comes in at 2455 then 2415.
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