PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Petroleum futures settled in the black today amid weakness in the US dollar and the continued shutdown of the Colonial Pipeline, despite a bearish revision to the 2021 global oil demand forecast in the EIA's Short-Term Energy Outlook and losses in US and European equities. The EIA released its May STEO today, in which the agency cut its 2021 global oil demand growth forecast by 80kb/d to 5.42mb/d, but raised its 2022 growth estimate by 80kb/d to 3.73mb/d. The EIA expects US crude oil production to fall by 290kb/d to 11.02mb/d this year, which is a higher drop compared to the previous estimate of 270kb/d. Production is expected to jump 820kb/d higher in 2022 to an average of 11.84mb/d. Colonial Pipeline, which transports more than 2.5mb/d of gasoline, diesel, and jet fuel, has been shut for five days now due to a cyberattack. The company expects to “substantially” restore operational service by the end of the week. In US economic news, the Job Openings and Labor Turnover Survey (JOLTS) put openings at 8.123m in March, beating expectations at 7.455m and up from an upwardly-revised 7.526m in February. European stock markets closed in the red today with the DAX down 1.8%, the CAC 40 losing 1.9%, and the FTSE 100 dropping 2.5%. As of this writing, US stock market indexes were trading flat to lower with the Nasdaq having edged down 0.04%, while the S&P 500 and the Dow were seeing larger losses of 0.80% and 1.31%, respectively. The US dollar index was down 0.11%, which is supportive for crude prices.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures turned back north today despite a weaker two-week degree day forecast and a looser US market balance expectation for next week. Refinitiv analysts now see total US supply of 97.5bcf/d outpacing US demand at 82.4bcf/d next week, implying larger injections of 15.1bcf/d (compared to yesterday’s forecast at 14.6bcf/d). The Global Forecast System cut its total degree day forecast from 144 to 138 for the next two weeks (62 HDDs and 76 CDDs), which is just below the 30-year average of 139 TDDs and further below last year’s 151 degree days over the same period. In the cash market today, prices at the Henry Hub benchmark rose by 3 cents to $2.93/mmBtu, Transco Zone 6 prices in New York strengthened by 5 cents to $2.45/mmBtu and Algonquin citygate prices jumped from $2.53 to $2.65/mmBtu. The National Hurricane Center does not expect any Atlantic tropical cyclone activity over the next 48 hours. According to a Reuters poll of analysts, estimates for the weekly EIA petroleum inventory report for the week ended May 7 call for a 2.8mb draw from US crude stocks amid a 0.5 percentage point predicted increase in the nation’s refinery utilization rate. Distillate stocks are expected to fall by 1.1mb and gasoline stockpiles are expected to see a decrease of 0.6mb. API petroleum inventories for the same week are due this afternoon at 4:30.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures rose 1.2% today in an average-volume inside session (lower high, but a higher low). The technical picture remains mixed, as the MACD and major averages point higher and the ADX has now strengthened to where it indicates the presence of an uptrend - but as the RSI is overbought and slow stochastics look bearish, while candlesticks are neutral. We remain sidelined, especially as bulls were unable to take out nearby $2.0462 resistance on a settlement basis. We continue to look there, followed by the recent $2.0776 high, whereas the 9-day ma ($1.9883) and then $1.9695 are our nearby support levels. RBOB futures edged up 0.3% today in a downside session, even more consistent with our neutral view. Bears made another try for $2.1108 support, but failed on a settlement basis and we'll continue to keep an eye there and then down at the 18-day ma ($2.0675), whereas $2.1904 and then $2.2170 (yesterday's fresh multi-year high) are expected to offer resistance. Similarly, WTI edged up 0.6% in an inside session, settling just north of 9-day ma support ($64.91). After the 9-day ma, we look to $63.75 for support, whereas $66.85 and then $67.98 are our nearby resistance levels. As with products, the chart picture is mixed and we remain neutral. Natural gas futures continue to move sideways, consistent with our view. Futures gapped lower but settled 0.8% higher in a downside session. Nearby $2.898 support continues to hold on a settlement basis, and slow stochastics re-crossed in neutral territory. We continue to expect resistance at $3.171 and then $3.316, while $2.898 and then $2.758 remain nearby support.