Morning Update 03.12.21

Overview

Energies retreated overnight as OPEC's monthly report spurred selling in Asia. However, Brent is still set for its eighth straight week of gains. (Reuters) 

OPEC lowered its oil demand forecast for Q1 and Q2 by 180 MBPD and 310 MBPD, respectively, due to extended measures to control COVID-19 in many key parts of Europe. However, OPEC raised its estimates for Q3 and Q4 by 400 MBPD and 970 MBPD, respectively, citing "expectations for a stronger economic recovery due to vaccination rollouts.” Overall, OPEC expects oil demand to be 96.27 MMBPD in 2021, a 220 MBPD upward revision of its previous forecast. (Platts) 

Saudi Arabia has cut the supply of April-loading crude to at least four north Asian buyers by up to 15%, while meeting the normal monthly requirements of Indian refiners. Saudi Aramco is also commissioning its 400 MBPD Jizan refinery in the south west of the country, which may have reduced its exports. Saudi Aramco did not cut supplies for some Asian buyers in March, but had reduced volumes by up to a quarter in February. (Reuters) 

On the positive side, port information for both U.S. coasts seen the past few days look good. The joint Port of New York & New Jersey posted a 16.9% year-on-year increase in container throughput for the month of January, the highest January on record, the port said on March 11. Export empties increased by over 33%, reflecting the high demand to return empty containers to global manufacturing centers so they can be reused for future imports The Port of Long Beach posted its busiest February on record amid an ongoing import rush, Platts reported. Empty container exports grew by over 71%. Marketplace.org explained the shipping uptick as follows: "Those ships are full of the furniture, appliances, gym equipment and building materials this economy’s been devouring during the pandemic. And with consumers set to spend a whole lot more this year, that backlog isn’t going away anytime soon." There’s been a surge in global shipping thanks to online shopping. At the Port of Los Angeles, the Executive Director expects backlogs to continue at least until mid-summer. 

Asian jet fuel refining margins dropped on Friday, posting their third consecutive weekly decline, weighed down by persistent weakness in aviation demand. The crack remains nearly 70% lower than their five-year seasonal average for this time of the year, Refinitiv Eikon data showed. The crack is seen at a 6-week low. Cash discounts for jet fuel widened by 10 cents on Friday to 80 cents per barrel in Singapore, the biggest discounts since October 22. 

Sustained higher oil prices are expected to encourage U.S. producers to increase output, which could eventually weigh on prices, JP Morgan analysts wrote. Commerzbank expects oil to ease to about $60 during 2021. While, RBC Capital analysts said the fundamentals for summer gasoline is the most bullish in nearly a decade. (Reuters) OPEC left its forecast for a 160 MBPD increase in U.S. crude supply for 2021 unchanged. (WSJ) 

Technicals

RB forged a new high today for the recent rally. Momentum for the energies is neutral. 

RB has a high today of 2.1512. This is not far from resistance at 2.1555-59 from weekly highs going back to 2018/2019. Above this, resistance lies at 2.1675-2.1700. Support comes in at 2.1267-76 (from the 60-minute chart data), then at 2.1119. 

ULSD support is seen at 1.9489-1.9502, which was tested with the overnight low of 1.9494. Below this, we see support at 1.9362-75, via the 60-minute chart. The DC upper bollinger band is not far away here. It lies at 1.9705. 

WTI has its support at 6518-24, via the 60-minute chart. Below that, support lies at 6454-57. Resistance is seen at the double top of yesterday/today at 6621-24. Above this, resistance via the 60-minute chart comes in at 6708-10. 

Natural Gas 

NG is near unchanged as the sideways price pattern seen this week persists. 

The EIA storage data seen yesterday disappointed. The draw of 52 BCF was well below many estimates that ranged from 65 to 78 BCF, as per news wire surveys. Storage now totals 1.793 TCF. This is still 257 BCF (-12.5%) below year ago level and -141 BCF (-7.3%) versus the 5-year average. Higher US production and softening demand hurt, while Canadian imports fell 1.5 BCFD. Platts Analytics' model currently forecasts a 22 BCF withdrawal for the week ending March 12, which would measure 37 BCF weaker than the 5-year average. NGI quotes 2 weather services as predicitng that next week's number could show a draw as low as 5 to 10 BCF. 

Asian spot LNG prices rose to a one-month high this week on supply disruption from Russia and buying interest from China and India, trade sources said. The average LNG price for April delivery into Northeast Asia was estimated at about $6.50 MMBTU, up about 80 cents from the previous week. (Reuters) 

Technically, NG spot futures are trying to turn positive via their momentum, but the price action this week is sideways. Upside resistance comes in at 2707-2714, then at 2734. Support lies at 2623-2624, then at 2591-96. 

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.