Morning Update 04.09.21

Overview 

Crude prices are lower, but remain stuck in their recent range. Volatility has declined this week evidenced by yesterday's narrowest daily high/low differential seen in about 1 month. The rangebound nature of the market is further underscored by the headlines seen overnight. 

Reuters' headline said, "oil prices edge down as investors weigh rising supplies, demand outlook,” while Platts' headline stated, “crude oil futures supported by weak US dollar.”

The weaker dollar was caused by Fed Chairman Powell saying yesterday that inflation is not a worry. Powell signaled at an IMF event that the central bank was nowhere near reducing support for the U.S. economy, saying that while economic reopening could result in higher prices temporarily, it will not constitute inflation. As a result of the chairman’s comments, MSCI’s broadest gauge of world stocks set a record high in Asian trading. (Reuters) 

Platts says Chinese teapot refiners ran their refineries at a record rate in March, buoyed by "lofty" margins. Their March run rate was 81.9%. The rate is seen declining in April as refiners go into turnaround. The strength in margins is due to a tighter gasoil market, as farming and building activity is seen picking up as spring arrives. 

Crude oil production from OPEC and its allies rose by 450 MBPD in March, the latest S&P Global Platts survey found, as Russia and Iraq pumped well above their agreed caps, while quota-exempt members Iran and Libya also boosted output. In Libya's case, its production hit an almost eight-year high. Libya's output reached 1.19 MMBPD, which is the highest seen since June, 2013. Iraq pumped 3.95 MMBPD, 90 MBPD over quota. Iran's output rose by 160 MBPD from February. At 2.30 MMBPD, they are pumping the most since August, 2019. 

Thursday, the Saudi Energy minister said that there are no pressing concerns of the supply/demand dynamics changing. He added that OPEC+ has ammunition in place to change course if needed. (Nairametrics) 

Technicals

Sideways price action remains the theme. 

WTI May futures see support at 5882-86 and resistance at 6086-90. 

RB May support lies at 1.9166-71. Resistance comes in at 1.9813-38. 

ULSD May support is at 1.7760-76. Resistance lies at 1.8256-64. Some resistance has formed at the double top from yesterday/today at 1.8124-25. 

Natural Gas

Over the next 12 months, U.S. LNG exports should average about 8.96 BCFD, up from 6.38 BCFD over the previous 12-month period, according to Bloomberg and NGI calculations. Since April started, NGI data shows that LNG feed gas deliveries to U.S. terminals have remained exceptionally strong at nearly 12 BCFD. The summer netbacks to key markets in Asia and Europe are trending at more than $3 above Henry Hub futures, which lends support to U.S. exports. European storage inventories stood at just 31% of capacity on Thursday, well below the five-year average. Demand on the continent is expected to remain elevated as stocks will need to be replenished. The one drawback is feed gas deliveries to U.S. export terminals could drop off this month as facilities undergo routine spring maintenance. 

Yesterday's EIA NG storage number came in about as expected. The build was 20 BCF. Estimates were for +21/+23 BCF. Storage is still -235 BCF vs. last year, and - 24 BCF vs. the five-year average. 

Technically, NG momentum on the DC chart points lower, but recent price action tells us that prices are finding support in the mid $2.40's, while resisting getting above the mid $2.50's. For today, we see support at 2.478-2.479, then at 2.453-58. Resistance lies at 2.544-46, then at 2.565-68. 

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.