Morning Update 04.05.21
Overview
Energy prices are sharply lower today. OPEC is planning to increase production over the next few months. Prices are also being hurt by news seen Friday of a resumption of "indirect talks" on the nuclear agreement between the U.S. and Iran. Those talks are set to begin tomorrow.
One analyst cited by Reuters says that sanctions against Iran are only likely to be lifted once the talks have concluded and Iran returns to compliance. Ahead of the talks, Iran’s foreign ministry said it wanted the United States to lift all sanctions and rejected any “step-by-step” easing of restrictions. (Reuters)
OPEC agreed last week to ease production curbs by 350 MBPD in May, another 350 MBPD in June and further 400 MBPD or so in July. (Reuters) Saudi Arabia said it will unwind its voluntary 1 MMBPD in extra cuts by 250 MBPD in May, 350 MBPD in June and 400 MBPD in July. (Platts)
Saudi Arabia raised their OSPs to Asia by 40 cents for their flagship A-Light grade and by 50 cents for their Heavy and Medium grades. Prices to the U.S. were cut by 10 cents for most grades. Prices to the Mediterranean were slashed by 20-30 cents. Northwest Europe saw the price of A-Light dropped by 20 cents, while most other grades were kept unchanged. (Platts)
Friday's Baker Hughes oil rig count rose by 13 units.
CFTC data issued Friday showed money managers raised their net length in WTI futures/options in the week ended Tueday March 30, while reducing their net length in products. This is befitting the recent trend for increased refinery runs in the U.S. WTI net length on ICE/CME combined rose by 3,580 contracts. Much of that was due to shortcovering on the CME. RB net length fell by 1,431 contracts and in ULSD net length fell by 2,785 contracts.
The U.S. Non-Farm Payroll data issued Friday was very strong. 916,000 new jobs were added in March. This beat estimates we saw for +647,000 / +675,000. Some economists project job growth will top one million in April. Further out, economists surveyed by The Wall Street Journal project employers will add an average of 514,000 jobs each month over the next year, for a total of more than six million. That would mark the best 12-month stretch of job creation in decades but leave overall employment totals below where they stood before the pandemic.
In India, electricity demand on an annual basis fell in the year ended in March for the first time in 35 years. The pandemic hurt demand, but it is now on the rise. Electricity demand has been steadily increasing this year due to a pickup in economic activity and amid higher temperatures being recorded in March in North India, which could have led to higher use of air conditioning. (Reuters)
Technicals
The notion of range bound trading is being reinforced as momentum for the energies is looking neutral.
Overall, WTI seems stuck between 57.25 and 62.25. For today, we see resistance at 6112-19, then at 6172-77. Support lies at 5885-86.
RB spot futures have support at 1.9550-75, then at 1.9370-75. Resistance lies at 2.0050, then at 2.0202-14.
ULSD support lies at 1.7760-76, then at 1.7625-30. Resistance is seen at 1.8204-05.
Natural Gas
NG is down 8 cents as the weather outlook is benign for the foreseeable future.
Thursday's EIA report was supportive, as storage rose by 14 BCF, beating estimates of +19/+21 BCF. Storage is now 225 BCF below year ago levels and -36 BCF versus the 5-year average.
The Baker Hughes NG rig count saw a drop of 1 unit in Thursday's report
Money managers added to their net length by covering shorts in the week ended Tuesday March 30. Net length rose by 12,903 contracts to a total 19,255 contracts.
Technically, the positive momentum seen on the DC chart belies the fact that prices failed to hold over 2.65 since May became the spot futures contract. Resistance is seen at the overnight high of 2.615-2.616. Suport comes in at 2.545-46, then at 2.502-04.
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.