Energy Market Update 4-15-2024

Crude is down 64 cents?????? June RB is down 2.4 cents????????? June ULSD is down 3.08 cents

Overview

Energies are lower as the market had already priced in some form of attack by Iran on Israel, while limited damage and no loss of life means the potential for a more measured response from Israel. (ING)

Israel says Iran launched more than 300 drones and missiles, 99% of which were intercepted. The Iranian attack marked the first time Iran has launched a direct military assault on Israel.? (AP News) Iran said its attacks against Israel are now "concluded." (Reuters)? Israel is weighing its options for a response to the Iran attack as Biden warns Netanyahu U.S. won't support a counterattack. (Reuters) The US and allies are pushing for a diplomatic response, while the risk is that hardliners within the Israeli government push for a more aggressive response. (ING)

ING says that additional sanctions on Iran could see anywhere between 0.5 to 1.0 MMBPD of oil supply lost. Sanctions on Iran would make it harder for Chinese independent refiners to buy Iranian oil. China's independent refineries were estimated to have imported around 1.14 MMBPD of Iranian feedstock in March. Iranian Light was offered at a discount of $4-$4.50/b to ICE Brent, DES early this week. Iranian crude prices have risen sharply from discounts of $12-$13/b against ICE Brent since late October, when Chinese independent refines imported 1.47 MMBPD of Iranian oil. But independent refineries will likely continue to import crudes from Iran, since there will be no other big buyers for those barrels, according to a local analyst in Shandong. Iranian oil remains an attractive, large volume feedstock alternative for the refiners, even as discounts for the oil have narrowed over the past 6 months.. (Platts)

WTI options traded in some size Friday, especially the call options for May and June, which likely helped fuel the rally early in Friday's session. The May $90 call traded over 6,000 lots in a range between 30 and 95 cents. The May $100 call traded 4,500 lots between a cost of 4 and 13 cents. The May options go off the board this Wednesday. The June $90 call traded 6,500 lots in a price range between $1.43 and $2.22. Friday commentary read : " The near term crude options call skew has regained ground after narrowing slightly back closer to parity earlier this week. The call skew has been boosted by the stronger risk premium associated with the Mideast tension."? On the flip side, we noticed that on the CME there was size that went in the May $85 put. That option saw 5,800 lots traded in a range from 50 cents to $1.02.

On Friday, the Biden administration announced new, higher fees for drilling on Federal land. The administration finalized a range of reforms designed to boost returns and address environmental harms from drilling on public lands. Under the new policy, oil and gas companies will pay higher bonding rates to cover the cost of plugging abandoned oil and gas wells as well as increased lease rents, minimum auction bids and royalty rates for the fuels they extract. About 10% of the nation's oil and gas comes from drilling on federally owned land. The Department of Interior's Bureau of Land Management said in its final rule that its federal oil and gas leases will require a minimum bond of $150,000 and a minimum statewide bond of $500,000, compared with a previous lease bond of $10,000 that was set in 1960. As a colleague said, these rules will have longer term bullish effects. (U.S. News and World Report/OPIS)

The Baker Hughes oil rig count issued Friday showed a drop of 2 units.

CFTC data showed money managers added 10,841 new net longs to their WTI position on ICE/CME combined in the week ended Tuesday April 9. RB length rose by 1,294 contracts and ULSD by 2,663 during the same period.

The London Metal Exchange has banned delivery of new Russian metal following sanctions imposed by the US and UK for Russia’s invasion of Ukraine. No Russian nickel, aluminum and copper produced from 13 April onwards will be eligible for delivery to the LME or the Chicago Mercantile Exchange. The US is also banning Russian imports of all three metals. Russia accounts for about 6% of global nickel production, 5% of aluminum and 4% of copper. For nickel, Russia is the world’s second-largest producer of refined class 1 nickel behind China, the only type that is deliverable on the LME. The move as seen as bullish in the short term. However, the market is likely to adapt to the new dynamics while Russian material will continue to find new sanction-neutral buyers. (ING) Aluminum surged by as much as 9.4% today before slumping back again, as per Bloomberg. Copper prices are currently up 1.5% at $4.324/pound on the CME.

Technicals

Momentum for the ULSD and crude oil remains negative, while the RB momentum remains positive. We have switched to June analysis for the products as the volume is greatest in those months now.

WTI spot futures on Friday reached its best value since October 23, but in the process left the DC chart with a double top at 87.63/87.67. We see resistance below that even at 86.32-86.38, just above the overnight high of 86.20. Support comes in at 83.83-83.87 and then below that at 82.60-82.70.

RB was repelled from its test of the upper bollinger band seen Friday as the RB spot futures hit its best value since August 28th. The June RB daily chart sees the upper bollinger intersect today at 2.7865. June RB has resistance above that at the 2.80 area. The overnight high is 2.7968. Support lies at 2.7280 and then at 2.7150-2.7175.

June ULSD has support at 2.6326-2.6339 and then at the 2.61 area. Resistance lies at the 2.70 and then at the 2.72 areas.

Natural Gas--NG is down 3.7 cents

NG is lower as the market grapples with lower production vs. weaker feed gas volumes of late and spring like weather demand in most of the country, even as Texas may see some heat demand this week.

ERCOT asked electricity generators on Friday to delay or cancel planned outages early next week, when high temperatures are expected to lead residents and businesses switch on cooling systems and drive up power use in the state. ERCOT urged power suppliers to postpone outages on Tuesday and Wednesday. (Reuters) Dallas is set to see highs between 86 and 89 degrees Tuesday thru Thursday. Houston will have highs between 84 and 86 degrees from Tuesday thru Friday.

LNG feedgas demand dropped to 11.5 BCF/d Saturday & 11.4 BCF/d Sunday. Coupled with volumes hitting record highs this time last year, LNG exports are now down a steep -3.4 BCF/d vs 2023, the largest year-over-year decline since December 22, 2022, as per Celsius Energy analysis. This was due to volumes to Freeport falling to 2024 lows of 0.12 BCF/d, Celsius added.

TTF futures rose today to their best value since January 31. The futures settled Friday with a mean reversion set up by settling over the upper bollinger band on the DC chart basis. That band today lies at 30.29. The high today is 31.40 Euro/Mwh, almost testing our resistance at 31.65. Today's high equaled the high seen Jan. 31. Support lies near 26 Euro/Mwh. The TTF spot futures for May are printing 30.86 Euro/Mwh, which equates to $9.04/MMBTU. TTF prices have risen of late due to concerns over supply due to Russia’s intensification of attacks on Ukrainian energy infrastructure (Oil Price) and as Europe is set to continue to rely on Russian LNG in short term, as per a recent Platts article. In 2024 so far, Russia has supplied more than 16% of the Continent's total LNG supply, in comparison with 12.74% for the first four months of 2023, data from S&P Global showed April 9. Pipeline gas continues to flow to the Continent via Ukraine, which highlights the worries as Russia attacked Ukraine underground gas storage facilities last week.

The Baker Hughes NG rig count issued Friday showed a drop of 1 unit.

Money managers added to their net short position by liquidating more longs than shorts. They upped their net short amount by 5,204 contracts to a total 88,386 contracts in the week ended Tuesday April 9.

Technically NG has negative momentum as support at 1.704/1.706 has been tested today with a low of 1.705. Below that lies the DC gap that goes from 1.686 to 1.647. Resistance comes in at 1.823 and then at 1.853.

Disclaimer

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