Energy Market Update 4-29-2024

Crude is down 53 cents???????? June RB is up 86 points???????? June ULSD is up 1.27 cents

Overview

Crude oil is lower, products are higher as Gaza peace talks are being revived, making for hopes of reduced tension in the Mideast. But, Israel has continued its assault on Southern Gaza. News wires tout the OPEC+ oil cuts as being supportive overall.

The White House on Sunday said U.S. President Joe Biden had again spoken with Israeli Prime Minister Benjamin Netanyahu as pressure builds on Israel and Hamas to reach a deal that would free some Israeli hostages and bring a cease-fire in the nearly seven-month-long war in Gaza. U.S. Secretary of State Antony Blinken embarked on a trip to the Middle East to press for a truce and hostage deal between Israel and Hamas? A Hamas delegation will visit Cairo on Monday for talks aimed at securing a ceasefire, a Hamas official told Reuters on Sunday. But, Israeli airstrikes on the southern Gaza city of Rafah on Monday killed at least 20 Palestinians and wounded many others. Israeli media quoted officials saying that the IDF is still preparing for a ground operation in the southern city of Rafah, despite facing international pressure over the growing humanitarian crisis.? (Reuters/MarketWatch/Quantum Commodities)

Further weighing on the outlook for oil demand, China's industrial profit growth slowed down in March, official data showed on Saturday. Cumulative profits of China's industrial firms rose 4.3% to 1.5 trillion yuan ($207.0 billion) in the first quarter from a year earlier, National Bureau of Statistics (NBS) data showed, slower than a 10.2% rise in the first two months. (Reuters)

The Saudi June OSP for Asian customers for its flagship Arab Light crude may rise by 70 to 90 cents to close to a $3 per barrel premium to the average of Dubai and Oman quotes, seven refining sources said in a Reuters survey, which would be the highest level since January. The increase is seen due to Middle East benchmarks strengthening this month, as the curve for Omani and Dubai crudes widened in favor of the prompt months. Medium heavy grades of crude were helped over the past month on the reduced exports for the grade out of Abu Dhabi as they process more crude in their own refineries, and due to Mexico reducing exports of its medium crude.

On the subject of Mexican exports, Mexico’s crude oil exports sank below 700 MBPD last month for the first time in at least 20 years. (Quantum Commodities) U.S. weekly imports of Mexican crude oil fell to the lowest on record in early April, as Mexico's state energy company Pemex cut exports to supply more to its domestic refineries. The imports of Mexican crude into the U.S. dropped to 209 MBPD in the week ended April 5; these imports averaged about 733 MBPD in 2023. A trader with direct knowledge of the matter said that while operational issues typically lead to significant variations in exports, the low export levels in April and May are likely to continue over the coming months. (Reuters)

Russia has warned Kazakhstan its oil transit to Germany could stop in June due to a payment impasse in a stark reminder of the landlocked country's reliance on Russia for its exports, sources said. The warning from state-controlled pipeline operator Transneft is a reminder of Kazakhstan's exports fragility with most of its flow of 1.5 MMBPD or 1.5% of global supply going via various Russian pipelines. (LSEG)

"The end of oil is not in sight", OPEC's top official said, as the pace of energy demand growth means that alternatives cannot replace it at the needed scale, and the focus should be on cutting emissions not oil use. Th OPEC official wrote that the world has invested over $9.5 trillion in transition costs over the past two decades, yet wind and solar still only supply just under 4% of the world's energy, while electric vehicles have a total global penetration rate of between 2% and 3%.(Reuters)

Following up on our comments from Friday regarding U.S. retail gasoline prices possibly falling in the coming weeks, an AAA spokesperson added : "The recent national average price of $3.67 could be the peak until hurricane season is well underway." He cited demand slowing, as the DOE data showed last week. (Fox Business) The average gasoline price hit $3.679 on 4/19.? Today's price is $3.659.

The Baker Hughes report from Friday showed the oil rig count fell by 5 units. The total of 506 units is down 86 (-14.4%)? from a year ago.

CFTC data seen Friday showed a total of 26,240 contracts were dropped from net length in WTI held by money managers. The drop in net length was due to longs being sold, not shorts added. This week's net length drop comes after the prior week showed a drop of 35,049 contracts in WTI net length. Speculators also reduced their net long in ICE Brent by 39,101 lots to 295,831 lots as of last Tuesday. This move was exclusively driven by longs liquidating, as per ING reporting. The CFTC report seen Friday showed money managers shed 6,563 contracts of net length in RB. ULSD positioning was unchanged. But, in Gasoil, there was a big reduction in positioning. Speculators reduced their net longs by 31,589 lots to 49,536 lots - the smallest position speculators have held in gasoil since January, as per ING reporting.

ING adds, in Europe, gasoil stocks in the ARA region increased by 52kt last week to 2.18mt, taking stocks above the 5-year average for this time of year. While middle distillate fundamentals are more bearish, there are still lingering risks in the market. There were reports over the weekend of another Ukrainian drone attack on Russian refining capacity. The Slavyansk oil refinery in Krasnodar was the latest to be attacked, and reportedly led to a halt in its operations. The refinery has a capacity of around 82 MBPD. This worry over Russian refineries is likely behind the boost being seen in product prices.

Technicals

Momentum for the Rb and WTI remain positive, while that for ULSD is neutral. The price pattern seen over the past few weeks suggests a possible trading range, as the stepladder highs pattern seen last week for WTI has been broken.

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?June WTI sees support at 82.55-82.60 and then at 81.80-81.85. Resistance lies at 84.46-84.49.

June RB sees support at 2.7242-2.7257 and then at 2.6861-2.6873. Resistance lies at 2.7608-2.7627 and then at the 2.78 area.

June ULSD shows the most sideways pattern of all the energies. Resistance lies at 2.5950-2.5960 and then at 2.6142-1.6151. Support comes in at 2.5279-2.5309.

Natural Gas - NG is up 4.0? cents

NG is higher as the weather forecast gained some cooling degrees over the weekend. WSJ commentary says prices are "cautiously higher".

The May futures rallied some into its expiration --trading over $1.60 during its 1/2 hour closing period on Friday. There is thus a double bottom on the DC futures chart from the low for May seen Friday at 1.482 and a prior low on the chart at 1.481 from data from late March. The May June spread traded wider than 30 cents for much of the last 3 days while May was the spot contract. This suggests to us that if cash prices rally to the $1.60 area, that June can stay above $1.90.?On Friday, HH cash prices were near to $1.40, but as a colleague said: "Cash will rebound significantly from weak weekend demand levels but will be curious by “how much”? Today, next day HH is quoted near $1.55 / $1.57.?

CFTC data issued Friday showed money managers shed 25,998 contracts of their net short position in the week ended Tues. 4/23. This was achieved mostly through buying back shorts, rather than buying new longs. The net short total fell to 88,391 contracts.

The NG rig count fell by 1 unit in Friday's Baker Hughes report.? It was the fourth straight weekly decline & eighth in the last 10 weeks. That put the total down 56 rigs (-35%) versus a year ago. The total is the lowest since January 14, 2022. (Celsius Energy)

The EIA in a report detailed how electricity generation from units that primarily consume natural gas in the U.S. Lower 48 states has increased for all hours of the day since 2021. The key to this pattern is the greater use of natural gas versus coal fired power, as coal plants are being retired. They add that in 2023 NG usage was further boosted by the low price for the fuel.

?Technically June NG is bumping against the upper bollinger band on the DC chart. That band lies at 1.935. Momentum has turned positive on the DC chart with the June contract becoming the spot futures. There is a rollover gap down to 1.628 from the May expiration. Support lies at the double bottom on the June contract at 1.907-1.909, then at 1.848-1.853 via the Dc chart. Resistance lies above at 2.009.

Disclaimer

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