Market Update 9-23-2021

Overview

Energies are mixed after spending most of the overnight higher. Crude oil is near unchanged, while the products are lower, befitting the data seen in the DOE yesterday.

The crude draw of 3.481 MMBBL seen in the DOE's was better than expected. Crude stockpiles are at their lowest level since October 2018. (Platts) Crude production, while rising 500 MBPD this week, still leaves output at 10.6 MMBPD, which is below the 11+ MMBPD seen before Ida. Added to the supply side positive tinge is the fact that refinery utilization increased. Crude oil inputs to refineries rose by 960 MBPD. East Coast refining capacity utilization is seen at 93%, which Reuters says is the best since May 2019. Distillate demand rose by 629 MBPD to a healthy 4.424 MMBPD, which is better than 2019's level of 3.897 MMBPD. Gasoline demand was basically unchanged at 8.896 MMBPD and being below 9MMBPD, it is signalling that driving season is over.

The Fed released its minutes Wednesday. The Fed is seen beginning tapering of asset buying sooner than originally expected. Also they are seen raising interest rates sooner than expected. News wire accounts say that this supported energy prices as it indicates good demand from the U.S. This interpretation comes even as the U.S. dollar rose to a 1 month high. (Reuters)

Today, Norway announced that they produced more crude oil in August than they forecast. The produced 1.812 MMBPD, above their 1.76 forecast. Production has now risen for 3 months in a row. (Quantum Commodities)

On Wednesday, the Iraqi energy minister said that the (Iraqi) ministry hopes to maintain the oil price at more than $65/ bbl and that OPEC was working to try to keep oil prices close to $70/bbl. These comments echo remarks from oil ministers and corporate chiefs heard in recent weeks. (Quantum Commodities)

Syncrude Canada cut September supplies due to a mechanical disruption at its Alberta oil sands site, Bloomberg reports. In a force majeure notice sent by one of Syncrude's owners earlier this month, customers were informed of a supply cut of as much as 20% in September. Syncrude’s upgrader, which turns mined bitumen from the oil sands of northern Alberta into light synthetic crude, produced about 275,000 barrels a day between January and May, Alberta Energy Regulator data show. (WorldOil/seeking alpha)

The Syncrude outage is added to the Gulf of Mexico oil production outage that Wednesday was seen at 294,214 BPD (16.18%).

Total oil product inventories in the key Mideast hub of Fujairah have fallen to their lowest level since records have been kept ( starting in 2017). Strong demand for middle distillates and residual fuels was cited. Arbitrage opportunities to the West and lower supply from China, Japan and Taiwan in October are likely to keep supplies of middle distillates, such as jet fuel and diesel, tight. Light distillate stocks rose as gasoline demand remains muted due to Covid restrictions. (Platts)

Technicals

Momentums are not showing quite the negative look they did a few days ago. The momentum for Brent futures on the DC chart is in fact trying to turn positive. Brent futures today reached their best value since mid-July.

Brent spot futures have support at 7518-21 and resistance at 7672-74.

November ULSD came close overnight to the resistance seen via the 2.2225 high seen last week. Today's high is 2.2207. Support lies below at 2.1720-25.

RB for November has support at 2.0447-48 and resistance at 2.0947-60.

WTI spot futures see resistance at 7272-82 and support at 7107-15.

Natural Gas

NG is up as today's EIA data is not seen reducing the storage deficit. Estimates are for a build of 73 to 75 BCF as per news wire surveys. This compares to last year's +70 BCF build and the 5 year average build of 74 BCF.

News circulated yesterday that Unipec, the large Chinese trading firm, had issued a tender for 11 cargoes of LNG for delivery between November and March. While such a tender is not unusual, its size was greater than expected. (Quantum)

Refinitiv sees next week's U.S. NG demand falling to 82.4 BCF from this week's 86.2 BCF level. This is due to milder weather, that has seen Appalachia NG's discount to Henry Hub (HH) prices fall quite a bit of late. Eastern Gas South's value is seen at $1.30 below that of HH. The discount month to date had averaged 76 cents. The discount for Eastern Gas South has also grown as demand has shrunk due to the Cove Point, MD LNG terminal maintenance, which is seen lasting for 3 weeks. (Platts)

Yet, despite the outage at Cove Pt. and the issues that Freeport had at its LNG terminal, Refinitiv says that the amount of gas flowing to U.S. LNG export plants was only down to an average of 10.4 BCF/d so far in September, from 10.5 BCF/d in August. Strong prices in Asia and Europe continue to support U.S. LNG exports. (Reuters)

The NG production outage in the U.S. Gulf was seen at 0.541 BCF (25%) Wednesday.

Technically, although momentum is negative, there is a floor that has been built with the past 3 sessions showing lows in the 4.735-4.744 area. We see this as support. Resistance lies up at 4.905-4.913, then at 5.000-5.008.

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