Morning Update 02.25.21

Overview

The reflation trade and vaccine optimism has helped the energy market to keep pushing oil prices higher, as per Platts reporting. Prices have risen today to fresh highs since January, 2020. 

Inflation and employment remain well below the Federal Reserve’s goals, meaning easy monetary policy is likely to stay in place, central bank Chairman Jerome Powell said Tuesday. This helped equities and is underpinning the energy complex. (CNBC) WSJ quotes a source that says, "The dollar's current weakness is most evident against commodity-related G10 currencies including the Australian dollar and New Zealand dollar and oil-related currencies such as the Norwegian krone and Canadian dollar." The article says these currencies have risen to 2 to 3 year highs versus the dollar. 

The DOE statistics were mildly bearish. Crude supplies rose by 1.285 MMBBL. Forecasts called for a draw near 4 MMBBL. Crude likely built as crude inputs to refineries fell by 2.589 MMBPD, which was much greater than the drop in U.S. crude production of 1.1 MMBPD. Gasoline supplies rose by 12 MBBL. They were forecast to fall by about 3 MMBBL. Implied gasoline demand saw the biggest one-week decline since early April, falling 1.2 MMBPD to 7.21MMBPD. This tracks with a slowdown in end-user demand. US driving activity was down nearly 7 percentage points last week, Apple Mobility data shows, putting it at the lowest since the week ended May 15 and nearly 16% behind year-ago levels. (Platts) Distillate supplies fell more than expected, dropping by 4.969 MMBBL. Distillate supplies are now 3% over the 5-year average, which is the narrowest surplus since mid-April. (Platts) Distillate demand fell by 502 MBPD to a still respectable 3.932 MMBPD. The past 2 years showed demand for the period of 4.119 and 4.076 MMBPD. 

95% of shut-in crude production had been returned to service as of February 24, according to S&P Global Platts Analytics.

Economic mobility in Europe’s five biggest economies edged higher in the week to February 20, according to Google data, returning to levels last seen in late December. (Hellenic Shipping News) European gasoline demand this month is forecast to rise by 60 MBPD on January but remain 130 MBPD lower year-on-year, according to Platts Analytics. Regional diesel and gasoil demand is also expected to improve by around 60 MBPD and the remaining 260 MBPD below year-ago levels. But, the recovery in jet demand this year is expected to be slow with demand in February still 740 MBPD lower than the same month in 2020.

Three OPEC+ sources said an output increase of 500 MBPD from OPEC+ from April looked possible without building up inventories. India, the world’s third biggest oil importer, has urged OPEC+ to ease production cuts (Reuters)

Technicals

Momentum has turned positive for the energies. A top has not yet been signaled for the past few days rally.

Brent support for May is seen at 6512-21 via the 60 minute chart. Resistance comes in at 6765-73, then at 6869-89.

WTI spot futures support lies at 6241-44, then at 6144-48 via the 60 minute chart for April. Upside resistance via the DC chart lies at 6461-79 from data from April, 2019.

April RB has support at 1.9590-1.9600, then at 1.9486-92 via the April 60 minute chart. Resistance above lies at 1.9975-82, then at 2.0378, which is a spike high on the weekly chart from July,2019. Does RB for April have the ability to test and rise above $2.00?

ULSD in April has support at 1.8842-55, then at 1.8660-65 via its 60 minute chart. Resistance lies above at 1.9300-10. Above this we see good resistance from weekly data in the 1.9600-30 area.

Natural Gas

NG futures are higher today in what looks like some short covering after the recent drop. 

The EIA storage number out today is forecast to show a draw as high as 365 BCF based on the estimates we have seen. The WSJ survey of 14 analysts is calling for -334 BCF. This compares to last year's -145 BCF and the 5 year average -120 BCF numbers. Seeking Alpha projects the annual storage deficit is currently projected to expand by a further 157 BCF by March 26. The storage deficit relative to the 5-year average is projected to expand by 105 BCF over the same period to -278 BCF. Over time, the deficit to five-year average is expected to reach around 350-500 BCF based on solid analysis, according to Seeking Alpha.  This deficit is statistically associated with a natural gas price of around $3.5-4.2/MMBTU, they add. 

Technically, NG has a stepladder down look on the DC chart. Momentum is negative. The one positive thing we see today is a double bottom on the daily April chart at 2.791 from yesterday/today. Support below is seen at 2.768-2.773, then at 2.734-2.741. Upside resistance lies at 2.886-2.890, then at 2.949-2.955.

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.