Morning Update 02.19.21

Overview

WTI prices are down almost 1 dollar from yesterday's settlement as crude production in the U.S. is seen being restored, while supply from OPEC in the coming months is seen increasing. RB prices are higher, while ULSD prices are down 1 cent as refinery issue concerns limit their losses. 

Platts Analytics says that U.S. crude production outages Thursday amounted to 3.3 MMBPD. But output is seen being restored to the degree that outages will only be 200 MBPD as of this coming Monday February 22. Refinery outages Thursday were said to total 4.4 MMBPD, with another 1.5 MMBPD being impacted. 

The Biden administration on Thursday took a major step, joining with European partners in offering to begin talks with the Iranians for the first time in four years. Iran says it wants Washington to step up its game and make the first move, refusing to budge until sanctions are lifted.(CNBC) Platts Analytics is upbeat that an Iran nuclear deal will be reestablished by mid-2021, allowing for 1 MMBPD of its oil returned to the market by year-end. 

Friday in Asia, slower demand for crude saw the April Dubai cash/futures premium slip 21.5 cents to 74.5 cents. Indian refiners are wary as Covid cases there are rising and lockdown restrictions are seen hurting Gasoil consumption. With refineries in Japan, South Korea, Taiwan and Thailand opting for downtime across April, May and June, crude oil purchases from the countries remain sluggish. (Platts) 

Kpler ship trackers see gasoline imports to the U.S. rising to 5.69 MMBBL in the week starting February 22. This compares to the DOE data seen yesterday indicating gasoline imports of 4.69 MMBBL on the week. The week starting March 1 is seen with gasoline imports staying high at 5.21 MMBBL. Most of the gasoline is seen heading to the East Coast. (Platts) 

Yesterday's DOE data was positive with crude stocks drawing more than anticipated, on the back of strong exports. Crude supplies fell by 7.257 MMBBL, well above the best estimate we saw of -3.4 MMBBL. Crude exports rose to an 11 month high of 3.862 MMBPD, rising 1.245 MMBPD on the week. U.S. crude output fell by 200 MBPD on the week. Crude stockpiles this week fell to the lowest level since last March. Next week's number will see a significant drop on the back of this week's outages. Gasoline demand rose by 550 MBPD this week to 8.407 MMBPD. Yet, this still lagged the past 2 years' figures of 8.800 and 8.918 MMBPD. Distillate demand rose to a 15 month high at 4.454 MMBPD. This is above the 5 year average for the period of 4.12 MMBPD. 

Thursday crude prices were hurt by news that has OPEC+ boosting output at the upcoming March 4th meeting, as per WSJ reporting. WSJ also cited weaker equities weighing on energy prices. 

Technicals

"It looks like the weather-induced rally this week has peaked.” That is a quote from the DJI wire, which sums up the crude oil chart picture. However, the market remains concerned about refinery outages in Texas as per WSJ reporting, which explains the much stronger performance of the products today versus crude. Momentum has turned negative for the crudes. 

March WTI futures expire Monday.

April WTI has support at 5893-97 via 60 min data. Then below that support lies at 5857-60. The latter is the overnight low. Resistance above is seen at 6019 then at 6078. 

April RB support comes in at 1.8646-63, just below the overnight low of 1.8675. Resistance comes in at 1.9060,then at 1.9247. These are the past 2 sessions' highs. Momentum is neutral. 

ULSD April momentum is also neutral. Here support lies at the lows of today and Wednesday at 1.7882-1.7905. Resistance lies at 1.8374, then at 1.8504. These are the highs from the past 2 days. 

Natural Gas

NG futures are near unchanged after dipping below $3.00 overnight as some production is seen returning in the coming days, but demand remains strong, and restoring full production could take several weeks, according to EBW Analytics Group. (NGI) 

Regional NG prices fell dramatically on Thursday. The Waha Permian hub saw prices fall $56 to the mid $8.40's as per Platts reporting. Henry Hub next day cash was seen near $7.50, which was down 16 dollars from Wednesday's level. NGI’s Spot Gas National Average tumbled $31.765 to $8.860. 

Platts says that U.S NG output rose Thursday to 75.4 BCF, from 72.1 BCF seen earlier in the week. This is still below the near 90 BCF that was being produced 10 days ago. "Pipelines and wells will need to be carefully inspected for damage; even if the majority of wells can be brought back online in the next two to three weeks, 3-5 BCFD or more of production nationally could remain offline for most of March,” EBW said. (NGI) 

The EIA storage data seen Thursday disappointed with a draw of 237 BCF. The WSJ survey was calling for a decline of 251 BCF. Storage totals 2.281 TCF and is now 105 BCF below year ago levels, but still at a surplus of 57 BCF versus the 5 year average. However, that surplus is seen being wiped out with next week's number foreseen as being very strong, possibly even setting a record for withdrawal for one week. Platts Analytics' supply and demand model expects a 369 BCF draw for the week-ending February 19. The largest weekly storage decline on record stands at 359 BCF, which was set for the week-ended January 5, 2018. The 5 year average draw for next week is 120 BCF. 

Technically, NG spot futures seem to have put in an interim top with the past 2 days's highs at 3.298 / 3.316. Momentum on the DC chart has turned negative reinforcing the high in place. A wholesale collapse in prices is not likely though given the strong demand seen recently and the uncertainty of the return of output in the U.S. For now, support is seen below at 2.982-2.987, which is just below the overnight low of 2.991. 

Disclaimer 

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