Daily Energy Market Update 3-5-2025

Crude is down $1.56????????? RB is down 6.0 cents???????? ULSD is down 6.05 cents

Overview

Energies are lower due to the concerns over tariffs and the increase in supply as OPEC+ is set to unwind production cuts. ULSD and WTI are making fresh multi month lows today.

API????????????????? Forecast?????????? Actual

Crude Oil???? +0.192/+0.3?????? -1.455

Gasoline?????? -0.175/-0.5??????? -1.249

Distillate?????? +0.2/+1.1????????? +1.136

Cushing??????????? n/av???????????????? +1.63

Runs???????????? +0.2/+0.4%????????? n/av

The tariffs imposed Tuesday had immediate effects in terms of gasoline and diesel prices offered in N. England by Irving Oil at retail outlets. For example, they raised Boston diesel pump prices to $2.7017/gal with a nearly 24ct/gal hike and Irving's price for ultra-low sulfur winter distillate in Bangor, for example, is $3.1651/gal after a 26.36ct/gal midnight increase. (OPIS)

Analysts at Morgan Stanley Research said it was possible OPEC+ would deliver only a few monthly increases, rather than fully unwind the cuts. (Reuters) Quantum Commodities offered commentary that suggested the unwinding of OPEC+ production cuts was driven by in-house wranglings over compliance rather than external political factors. It was record output from Kazakhstan that helped sway the decision, sources told Reuters. Oversupply from Kazakhstan, Iraq, Russia and the UAE has irked OPEC's de facto leader, Saudi Arabia, Reuters adds.

The Trump administration also said on Tuesday it was ending a licence the U.S. granted to U.S. oil producer Chevron? since 2022 to operate in Venezuela and export its oil. The decision puts 200 MBPD of supply at risk, ING commodities strategists wrote in a note on Wednesday.

Technicals

ULSD momentum basis the DC chart is getting oversold. Momentum for the WTI is neutral basis the DC chart.

ULSD has fallen to its lowest spot futures value since December 30. Support lies at 2.1990-2.2004. Resistance comes in at the overnight high at 2.2755-2.2766. The spot futures are testing the lower bollinger band on the DC chart that intersects at 2.2286.

WTI is testing its DC chart lower bollinger band as the spot futures have fallen to their lowest value since mid-November. That band intersects at $67.25. Support comes in at the major lows seen since September. Those lows are at 66.61 and 65.27. Resistance lies at 68.52-68.56 and then at 69.37-69.39.

RB spot futures confirmed the DC chart based mean reversion having settled Monday over the upper DC chart's bollinger band. That was set up as April futures became the spot contract two days ago. Support for the April futures is seen at 2.1295-2.1299 and then at 2.1105-2.1115. Resistance lies at 2.1744-2.1755. Momentum remains positive though due to the steep rise in spot futures valuation due to the April contract having become the spot futures contract.

Natural Gas- NG is up 7.0 cents

NG futures are higher now versus settlement, but are having an inside day versus yesterday's price range. The NG futures traded overnight between higher and lower prices as the market digests the impact of tariffs on gas flows into the U.S.

Tuesday's rally took NG spot futures to their best value since December 30, 2022. Many news wire reports touted cooler forecasts, but above all record LNG feedgas flow for export for the NG rally seen Tuesday. Some news reports later in the session touted the impact of tariffs.?

In the immediate, Reuters data yesterday showed gas imports into the U.S. from Canada this week are running at 9.4 BCF/d and the exports of gas from the U.S. to Canada are running at 3.9 BCF/d. Thus, at present, there has not been a drop in the supply to the U.S., which may allay some of the fears seen yesterday.

Amplifying on the news we touted yesterday about the U.S. sourcing electricity from Canada, we saw the following : " Both NYISO and ISO New England Inc. import millions of cheaper MWhs per year from Canada. With just 10% tariffs, this price advantage is nearly eliminated."--As per Grid Status intel. The 2 ISO's cited above have asked the FERC for the following : "? immediate approval of tariff changes designed to allow the ISOs to begin collecting import tariffs. Without these changes, the ISOs could face insolvency - forced to pay with no mechanism to allocate costs and no retroactive ratemaking. Between New York and New England, nearly 5 GWs of generators rely on gas from the Iroquois pipeline alone, which comes down from Canada through Waddington, NY."

The European Union is easing requirements for filling gas storage this year, allowing countries some wiggle room on meeting the region’s Nov. 1 target. This move is being prompted by market speculation driving the cost of refilling this summer. The EU said it will consider allowing flexibility for gas storage if “specific market conditions” like high prices, mean that targets aren’t met. Member States should still aim to have storage 90% full by Nov. 1 but allowances can be made like pushing the deadline to Dec. 1 if countries can explain why the target hasn’t been met, according to documents published Wednesday. The Summer 25 versus Winter 25 spread has widened further today to Euro 2.27/Mwh, which is wider by 40% as per Market News reporting.

Today, we saw the June and July contracts down about 0.48 Euro, while the December and January contracts were down 1.05/1.1 Euro.? ING analysis regarding the TTF flat price value in the spot futures reads as follows: "? We believe that the weakness is overdone given the tighter storage environment. Also, European prices need to stay elevated and at a premium to Asia to ensure the region brings in enough LNG through the injection season. Previously, the TTF forward curve was at a consistent premium to Japan Korea Marker (JKM) prices for much of the year. This isn’t the case amid weakness in European prices." Currently, TTF spot futures are valued near 42 Euro/Mwh (=$12.30/MMBTU). The spot futures peaked at over 59 Euros three weeks ago.?

Futures open interest for NG on the CME rose by over 26,000 contracts in Tuesday's trading. We see this as more new longs than shorts. Noticeable increases were seen in the April, May and October contract months.

Tuesday's options open interest data from the CME shows large increases in the April, May and June puts. In the June put options, a notable trade seen was the $4.15/$3.75 put spread which traded 12.2 cents with a delta amount of futures that traded $4.70. The June $3.75 put open interest rose by 7,982 contracts. We also note a large amount of $1.50/$2.00 October January calendar spread put options traded at 2.0 cents cost to the buyer of the $1.50 put. Another notable trade seen was in the October calls. The $10 call was bought against which twice the amount of $15 calls were sold. The cost was 3 cents. One colleague suggests that market participants look at the storage balances and think we do not have enough gas to fill storage adequately by end of injection season in October.

China’s LNG demand dipped to its lowest since February 2020 as February arrivals totaled only 4.5 million tonnes amidst warm weather, high stocks and weak manufacturing growth. (Oil Price.com)

We heard a few colleagues say " nothing surprises me"- with regard to the very sharp upward price move seen Tuesday and the possibility for higher prices. One colleague saying that during the Spring and Fall the market can be "rudderless".?? ?

Technically NG spot futures have positive momentum. We peg resistance at the high from January of 4.476 and then at yesterday's high of 4.551. The market looks to have possibly triggered some stop purchases in the run up this morning to the high of 4.518 as there was a large spike in volume in the move to the high. Support is seen at 4.266/4.270 and then at 4.173-4.175 via the April 60 minute chart.

Disclaimer

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