Energy Market Update 4-5-2024

Crude is? up 3 cents??????? RB is down 1 tick??????? ULSD is up 1.68 cents

Overview

Crude oil ad RB are near unchanged, but distillates are higher as the main theme remains geopolitical tension. Also supportive are concerns over tightening supply and expectations about demand growth as economies improve, as per a Reuters comment.

Oil was supported Thursday as Mexico's President on Thursday confirmed that state-owned oil company Pemex will reduce crude oil exports as its 340 MBPD Dos Bocas begins commercial fuel production.? A source close to Pemex trading unit PMI on Wednesday said the company plans to cut exports in half as part of the government's push to make Mexico self-sufficient in the production of refined products.? Reuters on Tuesday reported that Pemex had been asked to cancel more than 430 MBPD of exports in April. That includes 122 MBPD of Maya (a heavy sour crude) and 314 MBPD of lighter crudes. (OPIS/Dow Jones) This cut in exports comes on the heels of reports earlier in the week that the UAE had cut exports of its Upper Zakum crude in March diverting more supply to its own refinery and boosting shipments of its lighter Murban oil. The swap in oil grades at ADNOC's refinery has tightened medium-sour crude supply in Asia. (Reuters)

Oil also was supported Thursday by a statement from Israeli Prime Minister Netanyahu, in which he said that Israel would harm "whoever harms us or plans to harm us." (Reuters) Escalating tensions came as the CIA cautioned Israel that Iran could launch its own drone attacks, with the warning coming after the Iranian President said that the Damascus attack “will not remain without answer.”? The attack killed high-ranking Iranian military personnel. Israel has not claimed responsibility for the attack.? (Reuters /Quantum Commodities)

Today's U S Non Farm Payroll data came in much stronger than forecast as March saw 303,000 new jobs added, while estimates called for 200,000 to 215,000 new jobs to have been added. This strong number will likely cause the Fed to rethink any rate cuts in the near term.

Crude oil loadings from the Black Sea port of Novorossiisk are expected to fall around 20% from March to 2.32 million metric tonnes (17.00 MMBBL) in April, according to brokers on Wednesday citing loading schedules. April exports of ULSD loadings are also set to drop around 20% at Russia's primary products terminal in Primorsk to a six-month low of 1.4 million metric tonnes (10.44 MMBBL).?? (Quantum Commodities)

"Asian demand has accelerated in recent months, with LSEG Oil Research data showing March imports of crude oil having reached 27.33 MMBPD, up from 26.68 MMBPD in February and the highest since June last year." "China, the world's top crude importer, led the way with March arrivals of 11.68 MMBPD, up from February's 11.16 MMBPD. "India, Asia's second-largest crude buyer, saw imports of 5.07 MMBPD in March, up from February's 4.55 MMBPD." " The question for the market is whether higher crude prices and under pressure refining margins will result in Asian import demand growth weakening.", a? respected Reuters analyst adds. (Reuters)

The AAA reported today that the national price of gasoline at the pump has risen to $3.582, which is the best price since October 17, 2023. One month ago the price was $3.366 and one year ago it was $3.528.

With regard to the $90 Brent price that we spoke of yesterday, a well respected Reuters analyst wrote the following Thursday : " the trick for OPEC+ is getting $90 to act as an anchor."? "The risk is that $90 a barrel is surpassed and crude heads back toward $100, which is likely to fuel a new round of inflation in importing countries, as well as hurting anticipated demand growth."

Technicals

The crude oils have momentum that is overbought.

The Brent DC chart's momentum looks to be cresting, ready to turn negative.

RB has made a fresh high since August 31, but there is currently a double top in RB spot futures from yesterday/today at 2.8062-2.8078. RB spot futures have resistance above that at 2.8192-2.8199. Support comes in at the 2.76 area and then at 2.7393-2.7398.

May ULSD sees resistance at 2.7729-2.7740 and then at 2.7961-2.7973. Support is seen at 2.7130-2.7150.

WTI spot futures see resistance at 87.75-87.83. There is a gap on the DC chart above from 88.29 to 88.33. Support is seen at 85.56-86.60 and then at 84.64-84.67.

Natural Gas-NG is down 0.5 cents

NG is near unchanged as soft demand as we head to shoulder season is offset by the lower production seen of late and a slight pickup in feed gas demand seen the past 2 days, thus suggesting a market stuck in a range.

NG demand has declined of late as evidenced by residential/commercial consumption falling by 22,2% in the week ended Wed. 4/3, as per the EIA's weekly NG update.

The EIA storage data seen Thursday showed a draw of 37 BCF, which was seen as mildly bearish, as it missed expectations by a few BCF. Total storage fell to 2.259 TCF, which is +422 BCF / +23.0% versus last year's level and +633 BCF / +38.9% versus the 5 year average. Thursday's draw is likely the last one for the winter withdrawal season. The upcoming injections though are seen reducing the surplus to the 5 year average by a small amount. Celsius Energy has the surplus shrinking by 23 BCF over the next 4 weeks.

On a daily basis, LNG feedgas was on track to rise from a 10-week low of 11.3 BCF/d on Tuesday to around 13.0 BCF/d on Wednesday and Thursday as flows increase to Cheniere Energy’s Sabine Pass in Louisiana and Corpus Christi in Texas. Flows to Freeport LNG’s export plant in Texas, however, remained reduced. Analysts do not expect US LNG feedgas to return to record levels until all three liquefaction trains at Freeport return to service. (Reuters)

Colorado State University, a widely watched predictor, forecast an "extremely active" 2024 Atlantic hurricane season, because of warm sea surface temperatures and less wind shear to break up storms in the summer and fall. They forecast that there will be 23 named storms this year, 5 of which will be major hurricanes of Category 3 strength or more. They project that there will 11 hurricanes in total.? Forecasters noted that the 2024 outlook was the highest prediction for named storms that CSU has ever issued. (Reuters/Fox Weather)

Technically NG has momentum that is turning negative on the DC chart basis, as prices look to have carved out a range between 1.70 and 1.90, as defined by prices seen this month so far. Support comes in at 1.704-1.706. Resistance lies at 1.853 and then at the high seen Wednesday at 1.906

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