Morning Update 04.01.21

Overview

Energies are higher in a volatile session as the market awaits the decision from the OPEC meeting. 

OPEC is expected to roll over their current accord, although some discussion of a rise in supply of 500 MBPD has arisen. Some OPEC members seem bothered by Russia asking for a supply increase even as Russia welcomes a rollover of the current accord for the other members. (Reuters) 

The U.S. Energy Secretary called her Saudi counterpart reenforcing the importance of “affordable energy.” (Bloomberg) 

Manufacturing activity indices around the world are giving supportive signs from March's data. Eurozone manufacturing rose at its best pace in 24 years in March. The IHS Marit index rose to 62.5 in March from February's 57.9 reading. Japan and South Korea also saw better readings in March. However, Reuters cites supply chain worries and renewed lockdowns as causes to presume the pace of manufacturing may be reined in soon. Supply chain issues are causing a surge in input prices, which is impacting profit margins. "Should there be significant compression in profit margins, this could dampen firms’ capex spending in the coming quarters,” as per an HSBC analyst. 

Wednesday saw prices retreat even as the DOE stats held some positive elements. The retreat seemed to be due to worries over Covid-19. The point was highlighted by OPEC Secretary General Barkindo. He said the economic environment "remains challenging, complex and uncertain." (WSJ) France imposed a nationwide lockdown, while Italy extended restrictions. (Reuters) 

The DOE data showed crude supplies falling by 0.876 MMBBL, which was better than the API build of 3.9 MMBBL. Gasoline supplies fell by 1.735 MMBBL, which was less than the 6.0 MMBBL draw seen in the API data. But, gasoline demand rose by 275 MBPD on the week to 8.891 MMBPD. Distillate supplies rose by 2.542, an almost equal amount to the API rise of 2.6 MMBBL. Distillate demand improved on the week by 521 MBPD to 4.113 MMBPD. Overall, Products Supplied equalled 20.313 MMBPD, which is a very healthy figure. Crude inputs to refineries rose to 14.941 MMBPD, up 552 MBPD. The input level is the best in a year. (Reuters) 

Technicals 

Price action to us signals that supports and resistance levels have been carved out for now. This will likely hold through the next several days as Europe breaks for Easter. 

WTI spot futures have resistance at 6134-36, then at 6190-99. Support is seen at 5933-43, then at 5894-97, which is the overnight low. 

RB spot futures support is seen at 1.9711, then at 1.9550-75. Resistance lies at 2.0179-83. 

ULSD support comes in at 1.7760-76, then at the low at 1.7677-83. Resistance lies at 1.8204-05. 

Natural Gas

Volume remains low for NG futures traded on the CME. Price action is sideways. The upside seems limited due to weak weather demand in the U.S., while the downside seems supported by strong feedgas volumes for U.S. LNG exports. 

LNG feed gas volumes eclipsed 11.7 BCF on both Tuesday and Wednesday, near record levels, according to NGI data. Rising temperatures also could push much of the Lower 48 into a multi-week period of comfortable weather conditions that minimize both heating and cooling needs, dampening demand for natural gas.(NGI) 

Today's EIA storage data is seen as a build of 21 BCF, as per WSJ survey. Platts survey is calling for +19 BCF. These estimates compare to the 5-year average draw of 24 BCF and last year's pull of 20 BCF. It seems that withdrawal season has ended. 

Momentum remains positive for NG on the DC chart basis. Support for May futures is seen at 2.545-2.546. Resistance above is seen at 2.655-56, then at 2.688-2.693. 

Disclaimer 

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