Energy Market Update 5-17-2024

July Crude is up 56 cents????? July RB is up 3.46 cents????? June ULSD is up 3.92 cents

Overview

Energy prices are higher as demand prospects have improved this week and inflation worries have eased. In addition, today a drone attack set fire to a Russian refinery and storms in Texas caused an issue at a refinery. Also, news out of China was seen as supportive.

The Tuapse refinery in Russia on the Black Sea was hit by drones. The fire at the Tuapse refinery was extinguished, local authorities said. The extent of damage was not clear. The refinery had undergone several months of repairs, completed only at the end of April, after a previous fire in January. Tuapse has a capacity of 240 MBPD. It produces naphtha, fuel oil, vacuum gasoil and high-sulphur diesel, supplying mainly to Turkey, China, Malaysia and Singapore.

Valero Energy Corp, on Thursday said the refinery light ends compressors experienced a sudden feed disruption at its 195 MBPD Mckee, Texas, refinery during adverse weather conditions, according to a notice filed with the Texas Commission on Environmental Quality. The refinery is located in the Northwestern part of the state. (Reuters)

News out of China today showed industrial output grew 6.7% year-on-year in April, National Bureau of Statistics data showed, accelerating from the 4.5% pace seen in March and above the 5.5% increase tipped in a Reuters poll of analysts. Industrial production was helped by export demand. However, retail sales rose just 2.3%, the slowest increase since December 2022, off the 3.1% increase in March and far short of the forecast 3.8% rise. "The data pattern remains one of strong external demand and weak domestic demand. The weakness in domestic demand is clearly a result of the deterioration in real estate", said one analyst. To aid the slumping property sector, China today announced plans for local governments to buy "some" apartments and pledged forceful efforts to deliver unfinished homes. Mortgage rules were relaxed. The central bank on Friday cut the minimum down-payment ratio for first-time buyers to 15%, a record low according to the research director at E-house China Research and Development Institute. Second-home buyers now need to put forward 25%, with both moves representing a 5 percentage-point trim. The need for support for the real estate sector is underscored by the fact that China's new home prices fell at the fastest monthly pace in over nine years. China said it will begin a massive, $1 trillion bond issuance this week- Beijing’s first major act of fiscal stimulus as it struggles to shore up a sluggish economic recovery. (Reuters/Bloomberg/Investing.com)

Technicals

Momentums have turned positive for the energies in the sharp rally off the lows seen 2 days ago.

July Crude oil on its daily chart has the 100 day moving average rising above the 200 day average in what is called a "Golden Cross", which is considered bullish technically. The 100 day moving average intersects at $77.69, while the 200 day average lies below that at $77.54. Resistance on the July WTI daily chart lies at 79.43-79.47 and then at 80.90. Support lies at 78.43-78.46 and then at 77.73-77.75.

July RB support is seen at 2.5337-2.5350 and then at the 2.51 area. Resistance lies at 2.5650-2.5675 and then at 2.5888-2.5898.

June ULSD sees support at 2.4458-2.4472, just below the overnight low of 2.4509. Resistance is seen at 2.5012-2.5037 and then at 2.5264-2.5282.

Natural Gas--NG is up 7.0 cents

NG futures are higher this morning, as the tone this week has been quite bullish with heat in the Southern part of the U.S. and an EIA storage number that beat expectations. But, some caution may be seeping in at these prices, given some technical indicators and options trades seen.

NG spot futures were propelled over $2.50 Thursday by a bullish EIA storage number. The injection of 70 BCF beat survey estimates by 6 to 9 BCF. Key to the data was the mere 10 BCF addition to storage in the South Central region where total storage is 1,097 BCF. The region includes Alabama, Arkansas, Kansas, Louisiana, Mississippi, Oklahoma, and Texas. So, clearly the recent heat wave in Texas had a profound effect for storage/gas usage. Total storage nationwide rose to 2,633 BCF, which is +620 BCF / +30.8% versus the 5 year average and +421 BCF / +19.0% versus last year's level.

June put options open interest on the CME rose a lot in Thursday's trading. The increase was concentrated in the $2.40. $2.25, $2.15 and $2.10 strikes. We lean to this being downside protection being put in place. The $2.15/$2.10 put spread traded at a price of 4 cents.

China’s LNG imports are projected to reach record levels in 2024, driven by industrial and commercial sector demand. PetroChina forecasts imports between 78-80 million metric tons, up 9-12% from 2023. This demand surge could further impact global LNG markets, influencing natural gas prices. (Reuters)?

The Houston area suffered a power outage Thursday.? According to CenterPoint Energy's outage tracker as of 7:30 p.m. on Thursday, 852,412 customers were without power. Non essential workers were asked to stay home by the Mayor. Officials urged residents to keep off roads, as many were impassable and traffic lights were expected to be out for much of the night. Flight delays and cancellations occurred as well.? (abc13.com/Bloomberg/nbc washington)

Comments heard today are : " we have come a long ways to get above $2.50 so quickly" ..."limited upside from here"..."Valuations Aren’t Keeping Up With Surging Gas Prices, But Will That Stop Them?"

Technically the uptrend channel on the NG DC chart remains intact with the support line of the channel intersecting today at $2.367. Momentum though is overbought on the DC chart. In addition, a caution flag is raised based on the very heavy volume (666,248 contracts)? of NG futures that traded Thursday on the CME. Tops and bottoms are often punctuated by heavy volume. Resistance for the spot futures lies at the Thursday high at 2.575 and then at 2.620-2.621. Support comes in at 2.408-2.412. There is some light support at the overnight low at 2.484-2.485 via June's 60 minute chart.

Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC