Morning Update 03.16.21
Overview
Energies are lower on the back of a stronger dollar, supply side worries and Covid-19 concerns, according to Reuters reporting. Monday's selloff was accelerated by news that several countries in Europe had suspended using the AstraZeneca vaccine. (Reuters) Platts projects that the storm in Texas caused a drop of 70 MMBBL in crude demand due to refinery outages. This is much greater than the 20-25 MMBBL loss of crude output in the U.S. This seems to have been reflected in the slippage into contango in the front month WTI spread. Add to this the belief that Iran might boost production to meet strong Chinese demand. "Boots on the ground suggest Chinese imports of Iranian crude might double in March from February, to 856,000 barrels/day", as per an analyst cited in WSJ reporting. The analyst added: "There have been reports that Iran's production is ramping up, possibly aimed at testing the Biden administration's commitment to sanctions put in place by the previous administration".
There were reports that the U.S. is considering new taxes to pay for an infrastructure program that is being discussed. This is seen as a damper on demand.(Reuters) Also, Treasury Secretary Yellen was looking into a campaign to "forge an agreement for a global minimum tax on multinational corporations", the Washington Post reported Monday.
Bloomberg is reporting that 16 of 18 refinery plants that were affected by the recent storm in Texas had resumed some sort of operation. Bloomberg says Texas refinery operations are nearly back to normal. This may have been a cause for the larger setback for Rb prices seen Monday. It is being cited in the drop in margins seen Monday. The April RB/WTI crack fell by $1.68. The HO/CL crack dropped by 56 cents.
The EIA on Monday, in their Monthly Drilling Productivity Report, forecast that U.S. crude oil production in April for the 7 major shale plays would fall by 46 MBPD . The output total for the 7 basins is seen at 7.458 MMBPD.
Platt survey is calling for crude supplies in the API/DOE data to show a small increase of 0.4 MMBBL. Gasoline supplies are seen falling by 1.4 MMBBL, while distillate supplies are seen dropping by 0.9 MMBBL. Refinery runs are seen increasing by 5% , but they would still be 14% below the 5 year average for the season of 88%.
Technicals
RB has retreated dramatically from the 2.1700 high seen Sunday night. Momentum on the DC chart has turned negative from overbought condition. Support at 2.0860-80 has been broken. Support at 2.0750-70 seen via the 60 minute chart has been tested today with a low of 2.0761. Below this support is seen at 2.0535-47. Resistance lies at 2.1119, then at 2.1455.
USLD support can be found at 1.9100-20, then at 1.8885. Resistance lies at 1.9489-94. The high today is 1.9489. Momentum here , as in the case of the crude oils, is still positive.
Brent spot futures see their support at 6648-50. Support at 6775-80 has been tested with a low of 6766. Resistance above is seen at 6903-07. The overnight high is 6894.
WTI sees its support at 6381-82. Resistance lies at 6621-24.
Natural Gas
NG is up slightly after being down 8 out of the last 9 days. The EIA in its Monthly Drilling Productivity report said they see NG production from the 7 major U.S. shale plays declining by 316 MCFD in April. The total output from these fields is seen at 82.59 MMCFD.
The N G I headline sums up NG technically : Momentum remains elusive for April NG futures. Momentum has been oversold ,while trying to stay positive for the entire month of March. So the question remains (as asked last week): At what point will storage operators come in to inject gas for the upcoming season? And will that be enough to allow NG to rally some, even as shoulder season demand is weak ?
Support for spot futures is seen at 2.480-84, which has been tested with the double bottom from yesterday/today at 2.478-79. Below this we see support at 2.454-58. Resistance comes in at the gap from the weekend at 2.561. Above that we see resistance at 2.591-95.
Disclaimer
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