Energy Market Update 5-9-2023

Crude is down 56 cents???RB is down 43 points????ULSD is down 1.64 cents

Overview

Energy prices are down as Chinese import/export data disappointed. Some cite the market taking a breather ahead of key U.S. CPI data due out tomorrow morning.

China's trade import data for April showed a year on year decline of 7.9%. Reuters' survey had the number forecast as unchanged.?Exports out of China were up 8.5% year on year in April. The figure was forecast as +8.0%. But, some point to the fact that April's level fell from March's year on year +14.8%. Reuters commentary added that the import of several major commodities fell in April putting China's growth in question. Crude imports fell by 16.4% in April from March. Aprils' average crude import level was 10.3 MMBPD versus March's 12.32 level. April's crude imports were the lowest since January. China exported 31.2% less refined oil products in April from March. A Reuters analyst suggested that China imported less crude oil due to the lower level of refined product exports.

Wildfires in Alberta, Canada have prompted energy producers to shut in at least 280 MBPD of oil equivalent, more than 3% of Canada's output. (Reuters) Bloomberg says that the wildfires are in Canada's main natural gas production area, but we have not seen any figures concerning outages.

The dollar has strengthened today on the back of the supportive jobs data seen last Friday. An ECB policymaker says that the European Central Bank may have to raise rates for longer than currently anticipated. He says that September may be the earliest that they can tell if rate hikes have worked. The ECB has raised rates at each of its last 7 meetings.?Markets currently see another 40 basis points of increases in the ECB's 3.25% deposit rate, indicating that investors fully expect another move but are split on subsequent steps, and even anticipate rate cuts in early 2024. (Reuters)

U.S. gasoline prices at the pump have continued their drift lower today, falling to $3.526, as per the AAA. One month ago the price was $3.601.

U.S. CPI data is due out tomorrow. A figure of +0.4% for April is forecast, with a year on year increase of 5.5% forecast in consumer prices. Ahead of that, today the EIA will issue their Short Term Energy Outlook. This will be followed by OPEC's monthly report on Thursday and the IEA's on Friday.

Technicals

Energies have positive momentum, but seem to have paused for now in their sharp 3 day rally.

WTI for June sees support at the $71 area. Resistance is seen at yesterday's high at 73.69.

RB for June sees support at 2.4021-2.4064 and then at 2.3770-95. Resistance comes in at 2.4700 and then at 2.4840-50.

ULSD June futures see support at the 2.3150 area and resistance at 2.3900-2.3935.

Natural?Gas-?NG?is?up?3.0?cents

NG is a little higher as supply out of Canada has been curtailed due to the wildfires. Bloomberg says that Monday imports into the US out of Canada were down 18%?versus levels seen last Thursday. One firm shut its gas plants that have a capacity of 0.44 BCF/d. WSJ commentary cites a bullish view for summer NG helping NG today. Cash HH next day prices yesterday rebounded back over $2--after slipping below late last week; this is seen as supportive for NG futures.

Rumblings supporting NG have been heard of late with hopes for summer demand. A report issued by ERCOT late last week underscores this. ERCOT issued a Seasonal Assessment Resource Adequacy (SARA) report for the summer that projected peak power demand would reach 82,739 megawatts (MW). That would top the current record of 80,038 MW set in July 2022. ERCOT says that they have enough resources to meet demand up to 98,000 MW. The grid operator, however, warned that generation reserves could run short if demand is higher than expected, power plant outages are higher than expected or wind and solar output are lower than expected. (Reuters)

JKM prices in Asia fell under $10/mmbtu Friday. They were assessed at $9.882 for June. This is the lowest level in 2 years, as per Quantum reporting. China's spot demand for LNG has been below expectations to date in 2023 as it continues to utilize coal and renewable energy to meet its requirements. Added to that, inventories in Japan and South Korea were sufficient amid stable weather conditions and weak domestic demand. These 2 nations are big importers of LNG. Asian LNG prices are also under pressure as Europe's pull on summer LNG flows has been muted, reducing competition for Atlantic Basin LNG. (Platts)

TTF prices are stable today near 36 Euros/Mwh ($10.55/Mmbtu). The Telegraph cites a Goldman Sachs report as warning that European gas prices could rise to 100 Euros this winter. Goldman sees European demand rising and LNG global demand getting stronger.?Platts has a very different view : " Along with higher summer inventories, strong availability of LNG cargoes is expected to maintain bearish pressure on European gas prices, with support coming from storage refill and power sector switching from coal to gas, SPGCI said, adding that "the bearish pressure could become more difficult to mitigate in late summer as storage space becomes less available in Europe."

Technically NG futures have negative momentum, although it looks poised to turn neutral in a day or so. Resistance to the upside in spot NG futures is seen at 2.312-2.314. The 50 day moving average on the DC chart lies just below that at 2.304. Support basis the DC chart is seen at 2.140-2.146. Most technical analysts we read still see NG prices as range bound.

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