Morning Update 03.04.21

Overview

Energies are mixed as the market awaits a decision from the OPEC+ meeting. Products are lower while crude oil is up slightly. 

The market was higher overnight after the Houthis claimed to have launched a missile at a Saudi Aramco oil facility in Jiddah. The Saudis say that the missile was intercepted and destroyed. (Platts) 

Despite the report heard Wednesday that OPEC+ might rollover their agreement, the Russians seem to be angling for an increase in their production. JP Morgan cited Russia's representative on the OPEC+ technical committee, Denis Deryushkin, as saying that Russia saw some rationale in raising output because the oil market was in a 500 MBPD deficit. A source familiar with Russian thinking said Moscow wanted to raise its output by 125 MBPD from April. (Reuters) Veteran OPEC-watchers still expect some extra barrels from the group, and there’s little chance output will be held at current levels, according to Bloomberg. WSJ reporting offers the following: "Saudi Arabia and Russia are discussing a proposal to bring back a combined one million barrels a day of oil to global markets, people familiar with the matter said." 

Yesterday's DOE data was sharply influenced by the recent storm in Texas. Crude oil stockpiles rose by 21.563 MMBBL. Gasoline stocks fell by 13.624 MMBBL and distillates drew by 9.719 MMBL. Refinery runs fell by 12.6%/2.327 MMBPD to 9.930 MMBPD. The build in crude stocks was the greatest ever. The percentage refinery utilization is the lowest on record. The gasoline draw was the greatest ever. The distillate draw was the most since 2003. (Reuters) Crude oil production in the U.S. rose by 300 MBPD in the report to total of 10 MMBPD. Stockpiles of crude are now 3% over the 5-year average while gasoline stocks are 3% and distillates are 2% below the 5-year average U.S. distillate and gasoline stocks are back below the pre-pandemic 5-year average for the first time since the first wave of coronavirus infections in late March 2020. (Reuters) 

The lifting of Covid-19 restrictions by some states in the U.S. heard Wednesday was deemed a positive as per DJI reporting. Also positive for prices, U.S. President Joe Biden said the United States would have enough Covid-19 vaccines for every American adult by the end of May. Biden said he hoped that the United States would be “back to normal” at this time next year and potentially sooner. (Reuters) 

India, the world’s third largest oil importer and consumer, wants major OPEC+ producers to boost output in order to fulfill their promise of stable crude markets, the nation’s oil minister Dharmendra Pradhan said on Wednesday. India imports about 84% of its oil needs, with over 60% of that coming from Middle Eastern countries. (Reuters) 

Jet fuel cash differentials in Asia fell to a 4-month low today at -57 cents. The differential was -23 cents on February 22. Weak demand due to lockdowns was cited for the weakness. (Reuters) 

Technicals

Momentum points lower for the ULSD and crude oils. 

WTI has a double top from yesterday/today at 6198-99. Above that, resistance is seen at 6292-6300. Light support is seen at 6011-16 via the 60 minute chart. Below that, better support comes in at 5933-43. 

RB for April sees its resistance at 1.9548-56, which was tested today with a high of 1.9855. Above this, we see resistance at 1.9710-20. Support lies at 1.9040-60. Momentum here is neutral. 

ULSD support lies at 1.8007-25, where we see 3 of the past 4 sessions' lows. Below this, we see support at 1.7872-82. Resistance lies at the doube top of yesterday/today at 1.8487-1.8500. Above this, resistance comes in at 1.8755-75. 

Brent futures for May see their support at 6269-73, then at the double bottom of Tuesday/Wednesday at 6238. Resistance is at 6488-96. The high today is 6488. Above this, resistance lies at 6585-93. 

Natural Gas

NG is down slightly as spring approaches. 

Today's EIA NG storage number is forecast to show a draw of 144 BCF, as per a WSJ survey. Bloomberg forecasts -148 BCF. These compare to last year's draw of 119 BCF and the 5-year average -81 BCF. 

Volume remained light on the CME in NG futures, suggesting a lack of conviction by market participants as to market direction. Preliminary data shows volume on CME totaled 228,358 contracts Wednesday. 

Technically, NG is looking a bit soft after a 4 day stepladder up pattern. Support at 2.786-2.793 is being tested. Below this, we see support at 2734-2.741. Resistance lies at 2.855-57, then at 2.886-89. 

Disclaimer

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.