Morning Update 04.15.21

Overview

Energy prices are giving back some of the strong gains from yesterday due to profit-taking, according to the news wires. 

The DOE statistics seen Wednesday helped push energy prices out of their recent range. The draw in crude oil was better than estimated. Distillate supplies drew, while a build had been forecast. Gasoline demand rose to its best level since last August, as per Reuters reporting. At 8.944 MMBPD, gasoline demand is very close to the 9 MMBPD level that is considered psychologically strong. Gasoline demand, though, remains below the 2019 same week figure of 9.42 MMBPD. Distillate demand this week was 4.128 MMBPD This is better than that seen the past two years. Two years ago, distillate demand was 3.353 MMBPD. Jet fuel demand has picked up in recent weeks. The four week moving average for jet fuel demand at 1.25 MMBPD is the best since April 3, 2020, Platts reports. The jet fuel demand this week rose to 136 MMBPD, a 13-week high. Two years ago the jet fuel demand was 1.674 MMBPD. The rise in jet demand is helping the overall distillate stock picture. Refiners are needing to blend less fuel into other distillates given the uptick in jet demand. 

Citi Research is bullish on U.S. refining activity. They see runs climbing sharply in the coming months. Runs this week rose to their best level in 13 months at 15.051 MMBPD. Goldman Sachs reiterated their bullish oil forecast. They see Brent at $80 in Q3 on improved near term demand and supply discipline. (Reuters) 

Nuclear talks with Iran are set to resume today in Vienna, with the Iranian President saying “Don't worry about Iran. We have always remained committed to our obligations." He reiterated that the Islamic Republic had no intention of making a nuclear bomb and called on world powers to honor the deal. (Investing.com) 

Wood Mackenzie consultants have put out analysis that global oil prices could drop to around $40 a barrel by 2030 if governments push to reduce fuel consumption in step with U.N.-backed plans to limit global warming. By 2050, Brent may slide to $10 to $18 a barrel. (Reuters) 

India reported a record 200,000 new COVID-19 cases on Thursday and the financial hub of Mumbai entered a lockdown. Cambodia has put its capital city of Phnom Penh in lockdown. (Reuters) 

The April WTI/LO options expire today. The $64 call strike price has the greatest open interest of any call seen at the CME. The open interest of the $64 on the CME stood at 9,538 contracts as of Tuesday's close. 

Technicals

Momentum is positive. Staying above the recent high of 6227 for WTI should keep the picture firm. One slight negative for prices are the double tops seen from yesterday/today. Notable is the large open interest increase for WTI futures from yesterday's seen in preliminary CME data. We suspect new length was added. 

In spot WTI, the double top is at 6344-48. Support lies at 6227. 

In June Brent, the double top is at 6690-94. Above this, resistance is seen at 6780-82. Support lies at 6541-46. 

May RB has support at 2.0171-79, tested with a low overnight of 2.0176. Below this, we see support at 1.9980-85. Resistance lies at 2.0465. 

May ULSD support comes in at 1.8754-56, which is the low seen overnight Below this, support is seen at 1.8570. Resistance lies at the double top at 1.8945-63. Above this, we see resistance at 1.9120-32. 

Natural Gas

Surveys from Bloomberg and WSJ are both calling for a build of 66 BCF in this week's EIA NG storage data. This compares to last year's build of 68 BCF and the 5-year average build of 26 BCF. 

Today, in a quarterly report, the EIA painted an upbeat picture for global NG demand. Demand is expected to increase by 3.2% year-on-year in 2021, enough to more than offset the lost consumption of 1.9% seen in 2020. This is driven by demand in the industrial sector. Industrial gas demand is expected to continue its recovery amid improving economic conditions. The power generation sector is being negatively impacted by higher gas prices, which will limit fuel switching from coal. Also, strong competition from increasing renewable capacity will limit the power generation demand. (Platts) 

Platts Analytics says that U.S. dry NG production has risen to a month to date level of 92.6 BCF. This is only 0.5 BCF below the March 2020 level. However, their analysis sees production dropping through the summer to average 91.6 BCF, before starting to rebound in November. 

Technically, NG has positive momentum, but has failed to sustain prices over the 2.655 area where they found resistance when May became the spot futures contract. Support below is seen at 2.575-78, then at 2.529-2.530. 

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.