Energy Market Update 5-2-2023

Crude is down 90 cents???RB is down 3.82 cents??ULSD is down 3.17 cents

Overview

Energies are lower today as the themes of weak Chinese PMI data and expected rate hikes persist.?WSJ says crude pricing is turning into rangebound trading.

The Fed and ECB are seen raising rates this week. That prospect seems to us more likely after the news heard today of the Bank of Australia surprising with a 25 bp rate hike, while they had been expected to keep rates steady. In announcing their rate hike, the Australian Central Bank suggested that further rate hikes may be forthcoming as they say inflation has stayed way too high. (Reuters)

Despite the weak Chinese PMI data seen the weekend, news we have seen today shows some pockets of positive from China. The 5 day holiday ongoing in China has seen a record number of rail trips. Also, local media reports say traffic is up 20% over 2019. State broadcaster CCTV said that major retail and catering companies have seen sales jump 21% year on year, based on Ministry of Commerce data. Standard and Chartered Bank analysis says an oil surplus in April will turn to a 1.3 MMBPD deficit come June. (Reuters/Bloomberg/Quantum)

Quantum Commodities says that the Gasoil crack from Brent crude in Asia fell to its worst value since January 2022 this past Friday. The spot crack value was said to be $11.68 and for May that value was $11.17.?The notion of weakness in distillate/diesel pricing is being reflected in the fact that traders turned net short Gasoil last week on ICE for the first time in 2 1/2 years, as per Quantum Commodities reporting. With regard to European diesel supplies, Russia's Rosneft is not scheduled to export any diesel from the Baltic port of Primorsk in May as demand from Europe was set to decline amid tightening sanctions on Moscow, traders said on Friday. Reuters adds that exports of Russian diesel from Primorsk are a key supply source for Europe. Trading sources said that Rosneft is diverting the excess diesel volumes to domestic markets with the conflict in Ukraine leading to higher demand for diesel.

Correction-the RB sell off in money managers positions on the CME, as per CFTC data in the week ended Tuesday April 25, totaled 13,002 contracts, not the amount we wrote yesterday of 10,002 contracts.

Technicals

WTI and ULSD are seeing their momentums trying to turn positive. ULSD overnight traded over the highs seen in the prior 3 sessions.

Spot ULSD futures tested over the past 3 days' highs at 2.39 area with an overnight high of 2.3974. If broken, next resistance is seen at 2.4400-2.4425. Support lies at 2.3320-2.3351.

RB for June sees support at 2.4919-2.4944. Resistance comes in at the double top from yesterday/today at 2.5580-2.5600. Above that resistance lies at 2.5950-66. The 100 day moving average on the DC chart comes in at 2.5072, which is being tested as we write.

Spot WTI futures see support at 73.93-74.05. Resistance lies at 76.93-76.97. The 50 day and 100 day moving averages intersect today at 76.02 and 76.70 respectively.

Natural?Gas?-?NG?is?down?6.3?cents

NG is lower as a confluence is seen of lower feedgas demand, near record US NG output and a forecast for weak mid-May weather demand. Add to this the fall in TTF pricing. NGI adds today that the large mid May injections expected are overwhelming a market that is waiting for summer heat.

TTF prices today have fallen to their worst spot futures value since July 2021, having broken below 38 Euros ($11.14/MMbtu). Bloomberg cites "subdued" demand in Europe, even as a steady stream of LNG vessels is seen there as the continent adds to storage. BP today said that they expect Asian and European prices to be supported by efforts to add to storage -as well as by recovering Chinese demand and coal-to-gas switching. (Bloomberg)

A Reuters analyst has detailed how Asian LNG imports fell in April as Chinese and Japanese buying remained subdued. Yet, Europe in April bought the most seen since December. Spot JKM Asian prices fell as of last Friday to $11.05, which is the lowest seen since June 2021. The Reuters analyst though added that current pricing is still at the upper end of the range that was seen from 2015 to 2020. Prices then ranged from $1.80 to $11.60. He thus says that prices now may not seem like quite the bargain, although they are down dramatically from the record high of $70.50, reached in late August. The lower spot price may well encourage higher imports of LNG by China, although in the past volumes have only picked up significantly when the spot price dips below $10 per mmBtu, as this allows LNG to be competitive in China's domestic markets. Similar to China, it will probably take even lower spot prices to meaningfully boost imports by India and other South Asian nations. he adds.

Technically NG for June has fallen below the 50 day moving average on the DC chart. That value lies at 2.324. Resistance lies above that basis the DC chart at 2.376-2.385. Support comes in at 2.211-2.220 and then at 2.179-2.181. Momentum is poised to turn neutral from a positive stance that it has had since making the low below $2 in late March.

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