Morning Update 03.10.21

Overview 

Crude prices have rebounded after being lower overnight as the API showed a very large build in crude stocks, which some say may be the API data catching up to the very large EIA build seen last week. 

Platts details the fact that the physical Brent market has not kept up with the strength in the futures market. Dated Brent has been in a range of $67-69 this week, even as the futures rose to $71.38 at their high Monday. Platts says that there is an overhang of West African crude. Chinese refinery maintenance has made for some unsold Angolan crude for March and April loadings. Platts says this is "very rare.” The slowdown in Chinese demand is also one of the reasons why Saudi Arabia decided to continue its voluntary crude production cuts through April, according to trading sources, Platts reports. 

U.S. crude production is expected to fall by 160 MBPD in 2021 to 11.15 MMBPD, the EIA said on Tuesday. Its previous monthly forecast was for a drop of 290 MBPD. Production for 2022 is seen at 12.02 MMBPD, which is 500 MBPD higher than the last forecast. The EIA boosted its 2021 West Texas Intermediate crude price forecast to $57.24 a barrel, up from a forecast of $50.21 in its month-ago report. It expects 2022 prices to average $54.75, up 6.2% from the previous forecast.The EIA now expects Brent crude prices to average around $60.67/bbl in 2021, up $7.47/bbl from its February forecast and next year's is seen up 6% to $58.51/bbl. They see US petroleum consumption at 19.53 MBPD from 19.43 MBPD previously. US crude production averaged 10.4 MMBPD in February, down 500 MBPD from January output, the US Energy Information Administration said in its monthly Short-Term Energy Outlook, due in large part to winter-storm related shut-ins. (WSJ/Reuters) 

API Forecast Actual 
Crude Oil +0.7/+2.7 +12.792 
Gasoline -3.2/-4.8 -8.5 
Distillate -3.4/-3.8 -4.8 
Cushing n/av +0.295 
Runs +6.8% n/av 

Technicals

Gasoline cracks were seen at 3-year highs Tuesday, as per Platts reporting. The ICE New York Harbor front month RBOB crack versus Brent rallied to around $18.39/bbl in afternoon trading, on pace for the highest close since August 31, 2017. The chart for the April RB vs. the May Brent crude is bumping against its weekly continuation upper bollinger, which lies at about $18.68. 

Spot WTI futures have support at 6351-57. The low today is 6313. Resistance lies at 6598-99. Momentum is positive, as it is for the Brent and ULSD contracts. 

Brent spot futures see support at 6712, then at 6648-50, which is the overnight low. Resistance above lies at 6882-89, then at 6933. 

RB support is seen at 2.0314, then at the overnight low of 2.0202. Above, resistance is seen at 2.0665-70, via the 60-minute chart. Above that, resistance lies at 2.0790. Momentum here on the DC chart is seen turning negative from overbought condition. 

ULSD support is seen at 1.8885. Resistance lies at 1.9362. 

Natural Gas

NG futures are lower as temperatures remain moderate and the coming weeks' EIA data is seen as below average. 

This week's EIA storage number is forecast to show a draw of 65 BCF as per a Platts survey. Energy Aspects consultants see the draw as -61 BCF. Bloomberg's median forecast is -76 BCF. This compares to last year's -72 BCF and the 5-year average draw of 89 BCF. Platts Analytics estimates next week's number as -27 BCF, which is 22 BCF less than the 5-year average. They further forecast a number for the week ended March 19 as -14 BCF. 

Henry Hub cash prices averaged near $2.70/MMBTU for the week ended March 5–well below the prior week's average of $4.40/MMBTU. The softening prices drove stronger weather-normal gas burns, with gas’ share of thermal generation averaging 61% – well above the 53% level realized during the prior week, according to Platts Analytics. This, together with some participants injecting gas, has likely led to the futures not falling so fast. 

NGI’s Spot Gas National Average shed 3.0 cents to $2.470. 

EIA on Tuesday boosted its projected 2021 Henry Hub spot price average to $3.14/MMBTU. This was up from their prior forecast of $2.95. EIA noted the surge in cash prices amid the Texas deep freeze in February as the catalyst for the increase. (NGI) The EIA lowered their end season storage foecast to 1.6 TCF, from last month's 1.8 TCF. 2022 average price is seen at $3.16, which is down from last month's estimate of $3.22. EIA forecasts that natural gas inventories will ultimately end the 2021 injection season (end of October) at almost 3.7 TCF, which is 2% less than the 5-year average. For 2021, EIA expects that overall dry natural gas production will average 914 BCFD, which is 0.9 BCFD more than the February STEO forecast. The higher forecast largely reflects higher forecast crude oil prices, which EIA expects will contribute to more associated natural gas production. 

Over the weekend and into Monday and Tuesday, LNG levels dipped below 11 BCF, and on Wednesday, they declined to 9.83 BCF during the trading session. LNG feed gas volumes topped 11 BCF at the close of trading last week. (NGI) 

Technically, prices have fallen the past five sessions consecutively, and 12 of the last 14 sessions, though year-to-date prices remain 5% higher. The stochastic momentum indicator on the DC NG chart is oversold, but price action is not very encoruaging. Support beow is seen at 2.591-96. resistance lies up at 2.681-84, then at 2.730-34. 

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.