Energy Market Update 5-22-2024

Crude is down 68 cents?????? July RB is down 2.79 cents??????? July ULSD is down 1.72 cents

Overview

Energies are lower as the market remains concerned about interest rates staying higher for longer. Also, the API data for crude oil and gasoline disappointed.

API?????????????? Forecast??????????? Actual

Crude Oil????? -1.9/-1.5??????????? +2.48

Gasoline?????? -0.48/-1.1?????????? +2.1

Distillate?????? Unch/-0.4?????????? -0.32

Runs?????????? +0.5/+0.7%? ? ? ? ? n/av

The DOE announced Tuesday the intention to sell 1 MMBBL of gasoline from the Northeast Gas Supply Reserve. Congress in March passed an appropriations package funding the DOE and other agencies through fiscal year 2024 that included language mandating the closure of the reserve. The DOE's solicitation seeks to maximize impacts on gasoline prices by delivering gasoline supplies to awardees, likely retailers and terminals, no later than June 30, the department said. (Platts) Analysts have said 1 MMBBL is unlikely to make a significant difference in the East Coast region, which burned through more than 3 MMBBL of gasoline a day last June. (Bloomberg)

The AAA says that 38.4 million people will travel by car over the Memorial Day weekend May 23-27, marking a 4% increase from last year which would be the highest number of drivers for the holiday since the association began tracking in 2000 and could drive more demand for gasoline. US Atlantic Coast gasoline stocks stood at 55.5 MMBBL in the week ended May 10, putting inventories 7.4% behind the five-year average but still around 6% above year-ago levels, according to the latest DOE data. (Platts)

Refinery margins around the world have been trending lower for some time, raising the prospect of cuts in refinery runs, particularly in Asia, according to a note from ING.

WTI July put option open interest on the CME rose quite a bit with Tuesday's activity. The increase was due to one large trade in which the July $67 put was traded against twice the volume of the July $62 puts at a zero cost.

The dollar rose on Wednesday as investors awaited Federal Reserve meeting minutes for insight into the central bank's interest rate path. Fed Governor Christopher Waller on Tuesday said he would need to see several more months of good inflation data before he would be comfortable supporting rate cuts. (Reuters)

Technicals

Momentum remains positive for the energies, although price action is not so positive.

WTI spot futures see support at 76.70 and then at 76.36. Resistance lies at 79.30-79.32 and then at 79.72-79.80.

?July RB support lies at the recent low at 2.4324. Resistance comes in at 2.5045-2.5055.

?July ULSD support is seen at 2.4379-2.4385 and then at 2.4179. Resistance lies at the overnight high at 2.4803-2.4817, and then at the 2.50 area.

Natural Gas -June NG is down 2 ticks

NG prices are currently near unchanged after retreating further overnight, after yesterday's pullback snapped a sharp 4 day rally. The pullback has been attributed to some profit taking and some easing of cooling demand in the Eastern part of the U.S., even as Texas bakes. Also hurting prices was news regarding the Golden Pass LNG plant.

Today's WSJ commentary from 1 analyst reads as follows: "Profit-taking, technical consolidation, and a pause in short-covering heading into the historically weak Memorial Day weekend, and next week's monthly Nymex rollover pose bearish concerns over the next 7-10 days."? Next week's roll will be the 2 month index roll, which would presumably see funds move their positions by selling the front month July contract and buying the September contract.

The lead contractor building the Golden Pass plant for Qatar Energy and Exxon Mobil filed for Chapter 11 bankruptcy protection on Tuesday, citing challenges at the project, and announced plans to exit the project. Exxon said it would review construction timing and provide an update in the future. Golden Pass LNG issued a statement in response on Tuesday afternoon saying that they are committed to completing the project which is currently "75% progressed." It was due to open within the next 12 months.? (ABC 12Newsnow / Reuters)

A mixed weather outlook sparked long liquidation in natural gas prices Tuesday after the Commodity Weather Group said forecasts for the eastern part of the US would move cooler from May 26-30. (Nasdaq.com) The forecast for Texas remains hot, with temperatures for May 24 thru 28 seen well above average.? Power demand in the ERCOT region hit a preliminary record high for the month of May on Monday and will likely keep breaking that high over the next week, as per Reuters reporting.

In Europe, the TTF gas futures have risen to their best spot futures value since January 5. European gas has been supported of late by some planned maintenance in Norwegian fields, which regularly occurs in summer, and also by the rise in U.S. NG prices, as well as due to cooling demand out of Asia, that has seen the JKM futures rise to its best value since late December.?

The JKM spot futures are overbought basis the DC chart and are trading above their upper bollinger band on the DC chart.?

The TTF chart shows momentum not yet overbought, but the spot futures are trading today over the upper bollinger band on the DC chart, thus tempering some of the bullishness. There is a gap on the DC chart to fill above from 35.200 to 35.500 Euro/Mwh.

Yesterday's options activity on the CME saw a large amount of LN put options traded. Notable were a Q3 $2.75/$2.25 put spread, which traded at a value of 13.9 cents, with a 25 delta amount of futures in each of the 3 months traded for the strip at a price of $2.91. Also seen was a trade in the July through October strip of the $2.50 versus $2.00 puts at a price of 7.8 cents with a 16 delta futures trade additionally done at a price of $2.92 for the 4 month strip. Also, the July $2.25/$2.00 put spread traded at a price of 1.2 cents.

Technically momentum for NG has turned negative form an overbought condition. Spot futures have support at 2.537-2.541. Resistance lies at the prior 2 sessions' highs at 2.756 and 2.798.

Disclaimer

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