Morning Highlights
Morning Highlights

6.28.21 Fundamentals continue to be supportive for the petroleum complex


Katie Murphy

Jun 28, 2021

Outlook: Fundamentals continue to be supportive for the petroleum complex, with WTI locking in a gain of 2.5% last week. Both front month contracts for WTI and Brent sit steadily near their highest levels since October 2018. Price action this morning is slightly weaker, but markets remain mostly quiet to start the week. Currently attention remains mostly on this week’s OPEC+ meeting that is scheduled for July 1. According to OPEC forecasts, supply is seen at a 1.5 million bpd deficit in August if output levels remain the same. That deficit is then seen widening out to 2.2 million bpd in the fourth quarter. Currently, it is expected that OPEC will likely add back additional barrels of production in August due to rising prices and demand. Additional support as of late has stemmed from consistent draws for crude oil as reported by the EIA. The past four Weekly Petroleum Status Reports have shown a combined inventory decrease of about 25 million barrels.  

Crude

  • President Biden reportedly ordered an airstrike against Iranian-linked militia groups in Syria and Iraq that had been engaged in UAV attacks against the U.S.
  • A Bloomberg survey shows that analysts expect OPEC+ to boost output by 550,000 bpd in August. Global demand recovery is expected to still outpace forecast supply increases.
  • U.S. shale producers are expected to keep output relatively flat despite increasing oil prices. Currently output sits at 7.77 million bpd, far below its peak of 9.18 million bpd seen in January of 2020.
  • The August crude oil contract is trading $0.35 higher at $73.65. The 20-day and 100-day moving averages are $71.01 and $63.43 respectively. The 14-day RSI is 71.05%.
  • As of 8:30 am CST: August Brent is down $0.40 at $75.78, the U.S. dollar index is 0.058 higher at 91.909, while the nearby e-mini S&P 500 futures contract is up 5.25 points at 4276.5.

Diesel

  • TSA checkpoint data continues to climb to new pandemic highs, with the most recent data showing 2.167 million travelers.
  • The July ULSD contract is trading $0.0046 lower at $2.1447. The 20-day and 100-day moving averages are $2.1242 and $1.9333, respectively. The 14-day RSI is 62.18%.

Gasoline

  • According to AAA, U.S. average gas prices are seen at $3.099 versus $3.044 last month. A year ago, the average price was $2.178.
  • The July RBOB contract is trading $0.0122 lower at $2.2517. The 20-day and 100-day moving averages are $2.2038 and $2.0141, respectively. The 14-day RSI is 62.31%.

Propane

  • Concerns regarding supplies continue to support prices as traders look towards crop-drying needs this fall along with demand for the coming winter. Some traders also expect that we could see Conway rising to a premium over Mont Belvieu this fall.
  • At last look, Conway propane was up $0.00250, trading at $1.03250. Mt. Belvieu was unchanged, trading at $1.04000. 

Natural Gas

  • Surging global demand supports prices as record heat in northwest U.S. increases consumption and exports remain robust.
  • The July Natural Gas contract is trading $0.095 higher at $3.591. The 20-day and 100-day moving averages are $3.252 and $2.976, respectively. The 14-day RSI is 76.29%.
As of 8:30 AM CST   WTI AugustULSD JulyRBOB JulyNat Gas July
CONTRACT HIGH71.002.31752.21704.720
RESISTANCE75.002.18772.28553.480
PREVIOUS CLOSE74.052.14932.26393.496
GLOBEX-CURRENT73.592.14472.25173.591
SUPPORT66.702.11602.15583.000
CONTRACT LOW6.500.67240.51891.521