Morning Update 04.21.21

Overview

Energies are lower pressured by somewhat negative API statistics, adding to several news items seen yesterday. 

Iran's president says that nuclear talks are 60% complete, but the EU's lead mediator tweeted that there is "much more hard work needed.” (WSJ) 

The U.S. House of Representatives' Judiciary committee passed a bill that would open OPEC up to antitrust lawsuits over production cuts. Versions of the bill have been introduced in every Congress for the past two decades, typically when oil prices are on the rise. (Platts) 

Bloomberg said that oil prices fell Tuesday "with the broader market decline.”

Prices also have been under pressure the past few days due to the recent increase in Covid-19 cases globally, but notably in India. Wednesday, India reported another record increase in the daily death toll from Covid-19. India is trying to avoid national lockdowns. The president, in a national address Tuesday, urged states to use lockdowns as a last resort. First half April gasoline sales are seen down 5% versus mid-March and diesel sales were -3% from last month. Platts Analytics sees 2021 oil demand still below 2019 levels. 2021 is seen rising 400 MBPD versus last year, but 2020 fell by 470 MBPD from 2019. However, one state refiner source says that they are running at full capacity with no plans for big cuts unless they see widespread lockdowns. This stance comes despite Apple Mobility seeing a 34% drop in driving activity in India mid-April versus mid-March. 

API                     Forecast              Actual

Crude Oil             -2.4/-4.4             +0.436

Gasoline              +0.1+0.8             -1.62

Distillate               -0.4/-1.3            +0.255

Cushing                  n/av                 -1.3

Runs                    +0.8%                n/av

Technicals

The various items cited for the drop in oil prices yesterday seems to underscore for us the fact that the market was overbought. Positions had been accumulated recently as enthusiasm had grown about the rollout of vaccinations and the expected uptick in demand. However, that has been put on hold as India sees a record number of cases and issues with some of the vaccine rollout, most notably the J&J vaccine in the U.S. 

Momentum has turned negative from overbought conditions. As we noted two days ago, ULSD hit a wall over 1.90. WTI has fallen back below the high seen end of March, which was the top end of the range that persisted for a few weeks back then. 

June WTI has support at 6038-39. Resistance lies at 6253-63, then at 6357-63. 

June ULSD support is seen at 1.8387-1.8407, then at 1.8249-55. Resistance comes in at 1.8782-1.8801 

RB for June sees its support at 1.9638-53. Resistance lies at 1.9934-50 via the 60 minute chart. Above that, resistance is seen at 2.0165-69. 

Natural Gas

NG is lower today "as this week's cold spell in the middle part of the country starts to look less-widespread and less-enduring than forecasters had initially expected.” (WSJ) 

Platts details the strength in Southeastern and Texas NG demand. Some of it is from the increase seen recently in refinery usage in the Gulf Coast, and this is seen increasing in the summer. Southeast demand has been averaging 6.3 BCF this month. Platts says that this is the second best level ever for April. Also, pipeline exports to Mexico have averaged 5.5 BCF in April, which is a record according to Platts. Production issues in Mexico seem to have been boosting U.S. pipeline exports heading southward. Local gas production in Mexico has dropped by around 400 MMCFD since last September. (NGI) The strength seen in JKM pricing for the summer is also seen supporting feedgas demand. The JKM June through August strip is trading near $8.60 as per CME data. This is up from $7.50 seen 10-14 days ago. 

Technically, NG hit resistance just over $2.75 with the double top seen Monday/Tuesday. Momentum has turned negative from overbought conditions. Support at 2.694-2.700 has been pierced. Support below is seen at 2.650-58. 

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.