Energy Market Update 5-14-2024

Energy Market Update 5-14-2024?

Crude is down 95 cents?????? RB is down 4.16 cents??????? ULSD is down 1.96 cents

Overview

Energies are lower as this morning's U.S. April PPI number disappointed. In addition, Goldman offered the following comment : " OPEC+ is expected to extend output cuts at its June meeting, but recent mixed messages from Russia and Iraq suggest no final decision has been made yet," (WSJ)

OPEC's monthly oil market report did little to change prices overnight as they kept forecasts unchanged.

Aprils' PPI number showed inflation rose in April at a 0.5% pace, which was more than the consensus estimates for a reading of +0.2/+0.3%, thus reinforcing the likely notion that rates will stay higher for longer. Tomorrow will see the U.S. CPI released. Wednesday's U.S. CPI data is expected to show the cost of living likely increased 3.4% over the year in April, a moderation from March's 3.5%.

Commerzbank's commodity analyst adds the following re OPEC: " Meanwhile, OPEC+ members appear to want to keep "everything on the table" ahead of an early June meeting as they weigh whether to extend voluntary production cuts due to expire at the end of next month. Members "are likely to wrestle hard with each other at the beginning of June". (MarketWatch)

OPEC, in its monthly oil report issued today, left their global oil demand forecasts for 2024 and 2025 unchanged at +2.2 MMBPD and +1.8 MMBPD respectively. They also kept their non OPEC supply growth forecasts unchanged for this year and next at +1.2 MMBPD and +1.1 MMBPD respectively. Within the oil demand forecast, OPEC stated that they see a slight increase in first-quarter demand from developed economies in the Americas and China, which will be offset by a downward revision to second- and third-quarter demand from the Middle East. "Despite certain downside risks, the continued momentum observed since the start of the year could create additional upside potential for global economic growth in 2024 and beyond," OPEC said in the report.

The EIA's Drilling Productivity Report issued Monday says that crude oil output from the 7 major shale basins in June will increase by 17 MBPD from May's output, rising to a total 9.853 MMBPD.

Notable is the large drop in WTI futures open interest on the CME in Monday's trading. Preliminary data has total open interest down 27,033 contracts, with June down 33,608 contracts. Given price action, we suspect that this is largely short covering.

In sync with the weakness in the spot futures price seen for ULSD Monday to a near lowest price in months, the retail national average price for diesel fuel fell on Monday to $3.926, which was the lowest national average price seen since January 30. Today, Tuesday May 14, the average diesel price has rebounded to $3.935, but this is still well below the price seen one month ago of $4.047 and below the year ago price of $4.020.

Reuters analysis for gasoline stocks as of Friday May 3, as per DOE data, says that stockpiles are close to the 10 year average. Reuters' analysis sees stockpiles -2% / -4 MMBBL versus the 10 year average. In mid-March stockpiles were -6 MMBBL versus the 10 year average they say.

Technicals

Momentum has turned negative for the ULSD as a result of the fall in prices seen the past 3 sessions. RB momentum on the DC chart is oversold. The RB & ULSD spot futures prices have broken to fresh multi month lows this morning. This price movement reinforces a comment seen in Quantum Commodities reporting : " On the downside, sluggish margins have increased the prospects of refiners trimming crude throughputs."

But, WTI still has positive momentum on the DC chart as it has a sideways trading pattern look. Support for the spot futures is seen at 77.91-77.96 and then at 76.79-76.89. Resistance lies at 79.90-79.96.

June RB has support at 2.4482-2.4498 via the daily chart. Resistance lies at the overnight high at 2.5191-2.5192.

June ULSD sees support at 2.3810-2.3823 via the June daily chart. Resistance lies at the overnight high at 2.4472-2.4490. The DC chart's lower bollinger intersects at about 2.400.

Natural Gas -NG is down 4.4 cents

NG is lower as the PPI number is likely weighing as is the seasonal low demand expected this week, together with some possible profit taking from the recent sharp run up in prices. NGI cites LNG maintenance as restricting some LNG flow-causing some of the pullback.

The EIA's Drilling Productivity Report issued Monday says that NG output from the 7 major shale basins will decline by 0.33 BCF/d in June to a total 99.195 BCF/d.

Open interest rose by over 10,000 contracts in Monday's activity on the CME in NG futures. This looks to be possibly new length for the most part in July, September, October and November. June open interest saw a decline of only 4,700 contracts, suggesting much less short covering that had been seen in prior sessions.

LSEG said gas output in the Lower 48 U.S. states fell to an average of 97.2 BCF/d so far in May, and while that is down from 98.1 BCF/d in April, that is up from the 96.8 BCF/d average for May that LSEG stated last Wednesday. On a daily basis, output rose about 1.9 BCF/d over the past five days to a four-week high of 98.0 BCF/d on Sunday with the return from maintenance of some gas pipes in Texas from a 15-week low of 96.1 BCF/d on May 7, as per Reuters reporting.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 92.1 BCF/d this week to 92.9 BCF/d next week. This forecast was up a total of 1.7 BCF/d from the forecast seen last Thursday.

The following comment was seen in Reuters commentary yesterday : "The contract remained in technically overbought territory for a seventh day in a row for the first time since April 2022." There is a gap to fill to $2.411 from data from the NG DC chart from late January. Momentum is neutral at a near overbought condition. Resistance comes in at yesterday's high at 2.384 and then at the filling of the gap from late January at 2.411. Support lies at 2.235-2.242.

Disclaimer

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