Energy Market Update 4-11-2023

Crude?is?unchanged???RB??is?-139?points??????ULSD?is?down?435?points

Overview

Crude is now unchanged. It was supported overnight by a weaker dollar, a risk on sentiment, hope for Chinese stimulus and the continued halt in Iraqi crude exports. The word "steady" is being bantered about again today to describe crude pricing.

ICE data showed money managers added a significant amount of length in the week ended Tuesday 4/4, mirroring what the CFTC showed for positions in WTI futures/options. Brent net length rose by 73,354 contract. Bloomberg says that the only other time more length was added was in 2016, when OPEC made a surprise cut announcement.

Chinese stimulus hopes are based on inflation data announced overnight. Chinese consumer inflation is at an 18 month low, which CNBC commentary described as signaling an "uneven recovery". The number leaves the government more room for monetary easing to boost demand, the article added.

On the bright side, the key demand engine globally currently, India, saw March fuel demand hit a record. Demand " soared on robust economic activity." Demand in March was up 5% year on year to 4.83 MMBPD. Infrastructure spending was seen as key to the strong data. Jet fuel and diesel demand were also strong. Infrastructure spending though may ease in the upcoming monsoon season, which runs from June to September. (Reuters)

The weaker U.S. dollar and risk on sentiment seem to be fueled by the belief that the Fed may only raise rates once more in the coming months after what is perceived as the soft jobs data issued Friday. (Reuters)

Technicals

RB & Crude oil momentums are turning negative. The crude oils are closer to the lows seen post OPEC+ news than to the highs. There are gaps to fill to the downside.

WTI spot futures have support at the recent 79.00 low, then at 77.92-98. Resistance lies at the high seen last week at 81.81.

RB for May sees support at 2.7395-2.7432. There is light support above that at 2.7656. Resistance comes in at the high from last week at 2.8428, which was tested today with a high of 2.8470.

ULSD for May sees support at 2.6188-2.6210. Resistance comes in at the double top from yesterday/today at 2.7036-57.

Natural?Gas?-?NG?is?up?4.5?cents

NG is up today--having risen to its best spot futures value during the month of April. Reuters and Celsius Energy cite short covering for some of the advance.

Some of the NG rally seen early on Monday seems to have been precipitated by the May to July roll underway this week. The spread rallied before the opening Monday pushing May NG up. The spread narrowing, favor of May, may have been to some degree a wrong footing coming into this week by some speculative interest, who are expecting retail selling to pressure the May front contract. The notion of short covering is evidenced by the very large drop in the May 2023 contract's open interest on the CME. May's open interest fell by over 42,000 contracts. The TAS/Trading at Settlement volume yesterday was huge for May and July, as we had alerted Friday.

Celsius Energy pointed out Monday that the supply/demand picture was supportive with coal to gas switching, weaker nuclear and wind generation, and continued strong feed gas demand.?The coal to gas switching narrative was echoed in NGI commentary.?Data over the weekend showed the share of natural gas in the thermal stack climbing to around 73% after averaging 70% through March, according to TPH estimates. This would drive an incremental 2.5 BCF/d of demand compared to earlier in the year, when natural gas’ share of the thermal stack sat at around 67%, the firm said. (NGI)

Some of the NG price gain may also be a function of pipeline maintenance being done in the Permian basin. Two key pipelines have seen reductions in flows of about 0.7 BCF in recent days versus last month's flows, as per Platts reporting, although some of the maintenance ends today, which may see Permian production rebound. Month to date, production has averaged just under 16.4 BCF/d – down from an average 17.1 BCF/d in March, data from S&P Global Commodity Insights shows. With pipeline maintenance scheduled to end by mid-April, it's possible that gas production could quickly rebound back above 17 BCF/d by early next week as Permian producers move to refill previously suspended pipeline capacity. Light demand is forecast in the region over the next 2 weeks.

Yesterday, we technically spoke of shoulder season trading having a range defined in recent years by the low side being at $2 and high side at $3. In that vein, we have seen technical analysis from a revered source that suggests although the downtrend may not be complete, that 80% of the decline is done and he writes that there is reduced risk/reward being short towards $2.00, which echoes the seasonal pattern we mentioned yesterday. The price pattern of this month shows 3 lows in the 1.992-2.015 area, which now represent support. Resistance at 2.238-2.241 has been tested today with a high of 2.247. Above that resistance is see at 2.37-2.384. Momentum has turned back to being positive with yesterday's strong showing.

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