Morning Highlights
Morning Highlights

6.1.21 The energy market has started this week on a strong note


Katie Murphy

Jun 1, 2021

Outlook: The energy market has started this week on a strong note, with crude oil contracts trading to new highs overnight. The front month WTI contract was seen rising by over 3%, reaching prices not seen since 2018. Brent futures also rally higher, seeming to take another attempt at holding above $70, a level that has not been maintained for an extended period since 2019. OPEC+ talks and continued negotiations with Tehran are the main focus this morning. An OPEC+ committee has reported that the oil stockpiles caused by the pandemic are now nearly gone and will slide rapidly in the second half of the year. Analysts expect that the current supply plan will be maintained as the group balances the prospect of increased Iranian supply with recovering demand. Iran has also stated that they hope to reactivate the nuclear deal by August, signaling that current talks may not yet lead to increased Iranian supply for the market. Additionally, strong signs of economic recovery in the U.S, EU, and China are expected to balance out with the possible addition of supply to the global market. Equities also rally higher this morning to start the month as U.S. covid case counts reach their lowest levels in over a year and vaccination rates rise.

Crude

  • OPEC’s Joint Technical Committee expects crude stockpiles to fall by at least 2 million barrels per day from September through December. The group also forecasts that we will see a 6 million bpd increase in oil demand in 2021.
  • Kuwait’s oil minister, Mohammad Abdullatif al-Fare, stated that the oil market should be capable of absorbing any gradual supply increases by OPEC or Iran, citing economic recovery, and increasing travel in many countries.
  • BP has announced its investment of $220 million into solar projects today, stating that new assets will be operated along with Lightsource BP. The new project will increase BP’s renewables pipeline from 14GW to 23GW.
  • The July crude oil contract is trading $2.32 higher at $68.64. The 20-day and 100-day moving averages are $65.35 and $60.13 respectively. The 14-day RSI is 63.81%.
  • As of 8:15 am CST: July Brent is up $1.98 at $71.30, the U.S. dollar index is 0.170 lower at 89.861, while the nearby e-mini S&P 500 futures contract is up 22.5 points at 4225.00.

Diesel

  • Friday’s TSA checkpoint numbers jumped to 1.96 million as the indicator for recovering airline demand continues to creep toward 2.0 million and reach new pandemic highs.
  • The July ULSD contract is trading $0.0691 higher at $2.1074. The 20-day and 100-day moving averages are $2.0273 and $1.8334, respectively. The 14-day RSI is 64.85%.

Gasoline

  • GasBuddy reported that gasoline demand this past Sunday in the U.S. jumped by 9.6% compared to the average of the previous four Sundays. This was also the highest demand value for a Sunday seen since the summer of 2019.
  • Gasoline sales in India plunged to its lowest level in a year during May due to strict stay at home measures. Sales were seen dropping by nearly 20% compared to the month prior, the lowest level seen since May of 2020.
  • The July RBOB contract is trading $0.0607 higher at $2.1976. The 20-day and 100-day moving averages are $2.1276 and $1.9253, respectively. The 14-day RSI is 62.96%.

Propane

  • Propane values continue to find bullish direction from both crude oil strength and unseasonable inventory draws. U.S. propane inventories are currently about 31% below last year’s levels, providing good fundamental support to the market.
  • At last look, Conway propane was up $0.00250, trading at $0.85750. Mt. Belvieu was up $0.00250, trading at $0.88750.

Natural Gas

  • Last week’s CFTC energy report showed the largest change in energy spec positions to be natural gas. Speculators were sellers of 8,400 contracts, leaving the new net short at 75,600 contracts.
  • The July Natural Gas contract is trading $0.124 higher at $3.110. The 20-day and 100-day moving averages are $3.011 and $2.878, respectively. The 14-day RSI is 58.59%.

  

As of 8:15 AM CST   WTI JulyULSD JulyRBOB JulyNat Gas July
CONTRACT HIGH71.002.31752.21704.720
RESISTANCE70.002.10002.21703.200
     
PREVIOUS CLOSE66.322.03832.13692.986
GLOBEX-CURRENT68.642.10742.19763.110
     
SUPPORT65.431.95002.12233.000
CONTRACT LOW6.500.67240.51891.521