Market Update
Energies are mixed with RB down a bit, but WTI, Brent & ULSD higher as the contracts remain in recent ranges with the same ying-yang of Mid. east tension offset by demand worries.
Sunday, the Iranian Pres. said that the presence of foreign forces in the Gulf raised tension. (Platts) Britain called on Iran to release the recently seized UK vessel, but said that they will not swap seized tankers with Iran. (Reuters)
Trade talks between the US & China are set for this week, with expectations having been lowered due to a tweet from Pres. Trump who said that the Chinese may wait until after the 2020 election to enter into a deal. (Reuters)
Chinese refiner demand for crude for Sept/Oct has been seen as strong of late --reflected in strong valuations for certain crudes--i.e. Russian ESPO & Omani crudes. Refining margins have increased such that Chinese refiners are now seeing a profit—versus the losing margins they had in the 1st 6 mths of the year. Stockpiling of crude has also helped after the 2nd batch of crude import quotas were announced earlier this mth (Reuters).
Gasoline exports out of China are running at 50% over June levels in July—increased exports seen to Mexico & Nigeria due to refinery outages and issues in the US & Mideast. (Reuters)
Rhine water levels are dropping, causing barge rates to increase to 4 mth highs, with some barges loading at below 50%. This will cause lower volumes to reach Southern Germany and Switzerland. The impact may be a slight loosening of front mth gasoil spreads in Europe as less product is moved in the immediate term—the issue could worsen if water levels drop further. (Platts)
Friday's Baker Hughes rig count for oil came in as down 3 units--the 4th straight weekly decline.
CFTC data out Friday showed money managers having reduced their net length in WTI on ICE/CME by a total 33,232 contracts in futures and options for the week ended Tues 7/23. Brent ICE longs held by money managers fell by 24,101 contracts. RB net length fell by 9,062 contracts.
Technically the energies seem stuck—momentum is positive but almost turning neutral with WTI having been in a roughly 3 dlr-wide range for the past 10 days. September WTI resistance lies at 5684-88 (tested) then at 5743-50 with support at 5568-74.
Brent Oct. futures see support at 6254-60 and resistance at 6377-80.
RB is supported in Sept. by a dbl bottom from today/Friday at 18063-64 with support below that seen at 17852-56. Resistance lies at 18343-50
ULSD Sept futures have support at 19003-10 and resistance at 19353-73.
NG is down about 1 ct after making a fresh multi yr low at 2.144 in spot futures overnight. The prior low from June 20 was 2.159. Cooler weather forecasts caused the overnight setback. WSJ says that the current pricing is the lowest seen in July in 20 yrs.
Today is the last trading day for the August spot futures contract on CME.
US NG producers have seen their stock valuations fall considerably in the past few mths as the market punishes them for drilling too much and not returning enough to investors. To that end, EQT Corp--the largest NG producer (WSJ) --which mines quite a bit in the Appalachian region—said that they plan to pay down debt and buy back shares rather than drill. Appalachian producers are struggling to compete with producers mining out of the Permian where NG remains very cheap --near 1 dlr (Jeffries& Co. figure) --as associated gas from crude oil production is mined. (WSJ)
Baker Hughes reported Friday that the NG rig count fell by 5 units.
CFTC data shows that money managers remained very bearish on NG in the week ended Tues 7/23. They increased their net shorts in futures/options on ICE/CME by a total 31,941 contracts. Their CME net short position totaled 184,231 contracts.
Technically NG remains on the defensive given the new spot futures’ low and the negative momentum, albeit that momentum is waning.
Support for September futures is seen at the 2.115 low from June; resistance lies at 2.192-2.193.
We heard the following Friday, some end user buy interest was seen along the curve in summer next yr. Another colleague believes, though, that a settlement below the recent lows from June could see prices fall to 2.20-2.05.
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