Energy Market Update 4-21-2023

Crude is up 80 cents??June RB is up 3.47 cents??June ULSD is up 1.79 cents

Overview

Energy prices have stabilized after the sharp falls seen this week. Euro zone PMI data today is cited for the stabilization.

Euro Zone PMI data issued today was seen overall as strong. The flash Composite PMI rose to an 11 month high of 54.4, up from March's figure of 53.7. April's services sector PMI came in at 56.6, up from March's reading of 55.0 and well above the forecast for a 54.5 reading. Manufacturing PMI data disappointed though as it fell to its lowest since the pandemic at 45.5, down from March's figure of 47.3. One bright spot though was the drop in raw material costs. They fell by the most in 3 years and this has calmed some inflation fears, even as the ECB is still seen raising rates by 25 bp on May 4. (Reuters)

On Thursday, the Cleveland Fed President said rates need to rise above 5%. She, though, is not sure if a rate rise is needed in May or whether it should be later. She says that banking system stresses have eased, but some of the interest rate rises and tightening financial conditions have yet to be felt. She sees inflation as still too high. (Yahoo Finance)

Reiterating the reports seen this week about weakening refining margins, South Korea's SK refiner is set to drop their run rate in July. (Bloomberg) SK is the largest refiner in S.Korea and has the 2nd largest refinery complex in Asia. (IQPC.com) Elsewhere in Asia, gasoline prices this week fell to their lowest level this year. Quantum cites ample supply from China and "lacklustre demand" for the slippage.?Bloomberg reported that gasoline supplies in Asia were the highest seasonally since 1995. The RN gasoline crack from Brent crude in Singapore fell to a 3 month low this week at $10.02. ARA gasoline values are the lowest in 15 weeks. Quantum adds that European and Asian diesel markets are the most oversupplied since the pandemic with the forward curve the flattest in 2 years. Yesterday, the May/November Gasoil spread in Asia was 10 cents, down from 60 cents last week and down from $7 in January.

Technicals

Momentum for the ULSD is getting oversold on the weekly chart as it has tested its lower bollinger on the June daily chart in the past 24 hours. These items give bears some cautionary signals. June ULSD has support at the double bottom from yesterday/today at 2.4608-2.4614 and then at the 2.430 area. Resistance lies at 2.5056-82 and then at 2.5346-53.

June RB sees support at the overnight low at 2.5530-2.5540. Resistance lies at 2.6156-2.6166.

Spot?WTI?futures?see?support?at?76.05-12?and?resistance?at?78.53-59.

Natural?Gas - May?NG?is?down?1?cent

NG prices are near unchanged even as EIA data disappointed and forecasts are for mostly spring like weather.

Platts cites several sources who suggest that TTF prices have found support near 40 Euros/Mwh. Platts writes that the TTF front month still has yet to decisively breach Eur40/MWh despite the support level having been tested, and confirmed, many times in April trade. Energy Intelligence says that there have been deals done in Europe out to 2030 and 2031 on ICE in recent months, which they classify as "a sign of potential increased appetite for risk management". Increased hedging activity (along much of the forward curve) in Europe’s benchmark Dutch TTF natural gas trading hub this year has been prompted by lower prices and reduced volatility compared to the market upheavals experienced in 2022.

El Nino weather patterns are setting up in the U.S., which cuts the chance for hotter than average temperatures in the U.S.?Conditions will be wetter than normal due to this weather pattern. One analyst sees 14% fewer Cooling Degree Days (CDD's) this summer than last.

Yesterday's EIA NG data came in worse than expected. The build of 75 BCF raised total storage to 1.930 TCF. This is +388 BCF (+33.8%) versus last year and +329 BCF (+20.5%) versus the 5 year average.

Technically NG still has positive momentum though it looks to be cresting. There is now a double top at 2.271-2.274 from yesterday/today. Above this resistance lies at the prior double top seen this week at 2.383-2.385, with the 50 day moving average below that at 2.350. Support lies at 2.140-2.146, with the gap to 2.132 just below that. It is somewhat bullish that the entire gap was not filled yesterday. One colleague said : "who is left to sell the market?"

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