Morning Update 03.17.21

Overview

Energies are lower due to concerns of weaker demand raised in Europe as vaccinations of AstraZeneca's drug have been paused. Added to this is the rising belief that China has ramped up purchases of Iranian oil. API data was mixed, with crude oil showing a surprise draw. A stronger dollar is also creating some headwinds. 

The IEA released its monthly report, adding 100 MBPD to its 2021 global oil demand forecast. However, they added there was "more than enough oil in tanks and under the ground to keep global oil markets adequately supplied" The prospect of stronger demand and continued OPEC+ production restraints point to a sharp decline in inventories during the second half of the year, the IEA said. The call on OPEC oil will rise to 27.3 MMBPD from 20.8 MMBPD in 2020. The Non-OPEC supply increase for 2021 was revised down by 130 MBPD to +700 MBPD. The report also said that the outlook for the refining sector was grim despite a modest rise in oil demand as chronic overcapacity is likely to persist.The IEA sees the need to shut 6 MMBPD of refinery capacity to return to normal. Jet fuel demand will surpass 2019 levels of 7.9 MMBPD only in 2024.(WSJ/Platts) 

One part of the IEA report that seemed shocking was their pronouncement that gasoline demand may have already peaked as efficiency gains and the shift to electric vehicles offsets mobility growth in emerging and developing economies. (Platts) 

"Crude oil fell as the market frets over the uneven global recovery in demand. Concerns that demand could fall further have been rising as Europe's health ministers suspend the rollout of AstraZeneca vaccine amid health concerns, as per a quote from an anayst in Platts reporting. 

"Word on the street is that China is buying close to 1 MMBPD of sanctioned Iranian crude at discounted prices, displacing oil from its usual suppliers and complicating OPEC+ efforts to tighten supply and accelerate the draw-down global inventories,” Platts quoted a source as saying. 

Indian state refiners are planning to cut oil imports from Saudi Arabia by about a quarter in May, in an escalating stand-off with Riyadh following OPEC's decision to ignore calls from New Delhi to help the global economy with higher supply. (Reuters) 

API                   Forecast              Actual

Crude Oil          +0.4/+1.4             -1.05    

Gasoline            -1.4/-2.5              -0.926

Distillate            -0.9/-1.6             +0.904

Runs                +5.0/+5.1%           n/av

Cushing                n/av                 -0.246

Today is the last trading day for the April WTI options. 

Technicals

Energies are on the defensive with RB and ULSD breaking support. Their momentum points lower. 

RB Support at 2.0750-70 has been broken. Support is now seen at 2.0314-38. Resistance lies at 2.0860-80. The overnight high is 2.1038. 

ULSD has support at 1.8885. Support at 1.9100 has been broken. Resistance lies at 1.9360-65. The high is 1.9439. 

Support for WTI at 6380-82 is beng tested. Below this support lies at 6313. Resistance comes in at the double top from yesterday/today at 6534-43. 

Natural Gas 

NG futures have retreated this morning on a bearish weather outlook. (NGI) 

Platts survey is calling for this week's NG storage number to show a draw of 17 BCF. This is better than last year's -15 BCF, but well below the 5-year average draw for the week of 59 BCF. 

Platts reports that LNG tanker rates hit an all time low this month, which should keep U.S. Gulf Coast LNG exports strong this spring. Thus, US Gulf Coast LNG netbacks from the TTF have improved by around 50 cents/MMBTU, while the comparable netback from the JKM has now improved by around $1/MMBTU. The netbacks have favored deliveries to the TTF in April, which has likely led to US spot cargoes reorienting back to Europe. Unless Asia sends a clear price signal that it needs more LNG, forward netbacks still indicate that the TTF retains a roughly 33 cent/MMBTU premium compared with the JKM for a USGC loaded cargo in April. LNG may continue to target Europe for the next two months. 

Technically, NG has a triple top from the past 3 sessions at 2.561-66. There is a gap to fill above that to 2.584. Yesterday's rally looks like it was due to short covering, as preliminary data from the CME shows a large drop in open interest in the April contract month. Support for NG lies at 2478-79, then at 2.454-48. Momentum is trying to stay positive. 

Disclaimer 

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