Morning Update 04.16.21

Overview 

Energies are higher as Chinese and U.S. economic data are adding to the positive environment created earlier in the week from the OPEC and IEA reports, as well as the DOE data. 

Yesterday, U.S. retail sales were seen rising to a record level in March. Sales rose by 9.8% from February. Sales were +17.1% over pre-pandemic level. Reuters forecast called for sales to rise by 5.9%. Unemployment claims fell to their lowest level since March, 2020. Morgan Stanley revised their first quarter GDP forecast up by 1% to 9.7% annualized. 

Today, China reported that first quarter GDP growth rose by 18.3% year on year. This was below estimates of +19.0/+19.2% seen in Reuters/WSJ surveys. First quarter growth was +0.6% versus that seen in the 4th quarter. (BBCNews) 

Chinese refinery runs in the first quarter averaged 14.17 MMBPD, which was up 17.8% year on year. The uptick was said to be to a fair degree due to an increase in refining capacity in China as new units come on stream. First quarter runs were below those of the 4th quarter of 14.26 MMBPD. The lower pace in the first quarter was attributed to the Lunar New Year holiday period slowdown. Planned maintenance at refineries is seen increasing in the April through June period to 1.33 MMBPD. This is up from March's maintenance level of 1.1 MMBPD. (Platts) 

Movement of jet fuel from Asia to the U.S. is seen increasing as demand in the U.S. rises. The arb from North Asia to the U.S. looks good, as per Platts reporting. American Airlines says that they will run summer domestic U.S. capacity at 90% of pre-pandemic levels. They say that they will run international capacity at 80% this summer due to stronger demand projections The Asian aviation sector remains depressed, though, due to regional border controls and rigid travel restrictions. 

Technicals

Momentum remains positive, though it is getting near overbought for ULSD. Today, energy prices for the major contracts rose to their best value seen since March 18th. 

WTI for June has support at 6279-80. Resistance above lies at 6411-18, then at 6455-68. June WTI futures have the most volume traded on the CME with the expiration yesterday of the May options. 

Brent for June sees support at 6648-50. Resistance lies at 6775-82. 

May RB support comes in at 2.0309-14. Its resistance lies at 2.0750-61. 

May ULSD sees support at 1.8885. Resistance lies at 1.9120-31, then at 1.9231. 

Natural Gas

The EIA number seen Thursday was supportive as storage built by 61 BCF, which beat all estimates we saw. However, storage did flip to a surplus versus the 5-year average. That surplus is 11 BCF. The deficit to last year grew to -242 BCF. Platts Analytics forecasts next week's storage data to show a build of 37 BCF, which equals the 5 year average. 

We note the strength in the pricing for the TTF (European) and JKM (Asian) markers, which should underpin NG prices in the U.S. for export purposes. The TTF price is the best since late January, on the basis of the DC chart. The JKM pricing for the June through August strip is over $8. The one drawback to the pricing in TTF is that it is bumping against the upper DC bollinger band. 

Platts Analytics has upped their end of season storage forecast in the U.S. to 3.5 TCF, from prior 3.3 TCF. They raised their U.S. production level for the summer by 1 BCFD. Thus, they lowered their summer Henry Hub price forecast from $3.00/MMBTU to $2.80/MMBTU. The June through August strip for the Henry Hub on the CME is valued at about $2.82. 

Technically, NG pricing is firm, having risen to its best level since March 11. Resistance for May futures comes in at 2.730-34. Support at 2.656-2.663 was tested overnight with a low of 2.658. Below this, we see support at 2.623-24. 

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.