Morning Update 04.27.21

Overview

Energies are continuing their rally seen over the past 24 hours, powered primarily by demand hopes.

The German government today raised their 2021 GDP growth forecast by 0.5% to 3.5%. The German government sees household spending picking up as restrictions are lifted. The European Union's vaccine task force chief on Sunday said the bloc would be able to produce enough vaccines to achieve herd immunity of the EU's adult population by the middle of July. American tourists who have been fully vaccinated will be allowed to visit the European Union this summer, according to officials in Brussels. (DW.com/NPR.org) 

Vaccinated shoppers are heading back to the mall in the U.S. Foot traffic at 50 malls in March was up 86% from the same month last year. While that foot traffic was still lower than in March 2019, mall owners are suggesting that their business has turned a corner. (WSJ) 

Prices today were said to be helped by a report that the Saudis had intercepted an explosive laden boat near the port of Yanbu. No word on any damage caused. (Reuters) 

Energies rallied most of Monday off the lows seen upon the opening of the day session in the U.S. OPEC's Joint Technical Committee reaffirmed OPEC's recent demand forecast, but expressed caution due to the Covid-19 surge seen of late in India, Brazil and Japan. This injected a note of caution about OPEC's plan to raise output as of May 1. They are due to add almost 800 MBPD into the world's supply. (Reuters) 

OPEC+, will hold its joint ministerial monitoring committee (JMMC) meeting on April 27 instead of April 28 as planned earlier. The OPEC+ report seen Monday also said ithat OPEC+ expects commercial oil stocks to reach 2.95 billion barrels in July, taking them below the 2015-2019 average, and to remain below that average for the rest of the year. It said it saw stocks at about 70 million barrels below the average for the whole of 2021, a more optimistic outlook than its previous forecast of 20 million below the average. (Reuters) 

Product prices may have been helped by a lockout of oil workers that Exxon has threatened as of May 1. The lockout will affect more than 650 workers at both the refinery and the blending and packaging plant in Beaumont, Texas. Exxon is seeking temporary workers for the period of May 10 into August. The Beaumont, Texas refinery has a capacity of 338 MBPD. (Platts/Reuters) 

Technicals

The picture has improved quite a bit the last 24 hours. What we thought was a soft, less supportive tone has changed to one where the momentum for ULSD has turned positive to cite one element. 

WTI resistance has been pierced near 6225. We see resistance for the June futures at 6357-63. Support lies at 6172-77. 

June RB support is seen at 1.9792-95. Resistance lies at 2.0155-69, then at the 2.0280-85 area. 

June ULSD support comes in at 1.8775-82. Resistance lies at 1.9109-20. 

Natural Gas

NG was boosted Monday by strong exports out of the U.S. The feedgas volume was said to be 11.5 BCF, which is near record level. One source cited by NGI says that Local Distribution Companies (LDCs) in the U.S. might ramp up their storage injections, which could help push cash prices over $3 going forward. U.S. exports to Mexico could hit record highs over the next two weeks. Earlier this month they were just under 7.0 BCF. Platts Analytics sees exports staying near 6.5 BCF for July through September. (Platts) U.S. natural gas pipeline exports to Mexico averaged 5.1 BCFD in 2019. (EIA) 

This week's EIA storage number is seen as supportive as it could see storage building by 7-13 BCF, which is well below last year's figure of + 70 BCF and the 5 year average build of 67 BCF. Such a low storage build would be among the lowest ever for a second-half of April weekly EIA report. (WSJ) 

LNG demand in India is seen slumping in the near term due to their Covid-19 crisis. Domestic demand is seen down 10%. There is worry that storage injections may cause NG storage tanks there to top out. Indian spot purchases of LNG cargoes are seen on hold. They normally buy 3-4 spot cargoes per week. Spot deliveries into May and June are seen being curtailed. (Platts) 

Technically, June NG is holding on barely to positive momentum. Momentum is overbought. June NG futures see resistance at 2.923-2.926. Support lies at 2.820-2.826. 

The May NG options expire today with CME data showing a less than overwhelming amount of open interest for the $2.80 and $2.85 strikes. Thus a belief that options open interest could play a role in today's settlement price seems much less likely. 

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.