Energy Market Update 6-19-2023

August Crude is down 13 cents???August RB is down 2.5 cents???August ULSD is down 3 cents

Overview

Energies?have?retreated?as?Chinese?demand?concerns?are?in?focus.

Goldman Sachs and UBS have dialed back their growth forecasts for China for this year. Goldman sees China's growth in 2023 at +5.4%, down from their prior estimate of +6.1%. UBS cut theirs to +5.2% from their April estimate of +5.4%. China is seen cutting interest rates Tuesday and adding some stimulus later on in the year. Concerns remain due to weak consumer and private sector demand, as concerns over debt and capital outflows remain significant factors to be considered.(Reuters) Bloomberg reports a weakening credit demand in China, signaling a loss of momentum in the country’s economic recovery. In May, aggregate financing amounted to 1.6 trillion yuan ($224 billion), significantly below the expected estimate of 1.9 trillion yuan.

China added to crude oil stockpiles at the fastest rate in nearly three years in May, as robust imports outweighed near-record refinery processing. A total of 1.77 MMBPD was added to inventories in May, the most since July 2020 and reversing the small, and rare, draw of 340 MBPD in April. A Reuters analyst writes the following : "While strong imports and refinery runs are undoubtedly bullish signals, it's possible that large flows into inventories are a more medium to long-term bearish indicator, as stockpiles give Chinese refiners options should they deem prices are rising too high or too fast." China's refiners processed 14.6 MMBPD, according to data released on June 15 by the National Bureau of Statistics. This was up 15.4% from the same month in 2022, and was the second-highest monthly total, eclipsed only by the 14.91 MMBPD from March. The Reuters analyst adds : "It's worth noting that for the first five months of 2023 China's crude oil imports are up 6.2% to the equivalent of 11.13 MMBPD. This is an increase of about 650 MBPD from the same period in 2022. Product exports out of China have increased this year. Product exports in the first five months of this year are about 1.42MMBPD, up some 443 MBPD from the 977,483 bpd in the same period in 2022. Reuters' analyst concludes : " If the flows into (crude) storage and the rise in product exports are factored in, suddenly the increase in China's crude oil imports doesn't look quite as bullish as it may first appear." (Reuters)

The Baker Hughes oil rig count issued Friday fell by 4 units. This was the 7th straight weekly drop in the rate. In the week ending June 16, the total count of oil and gas rigs, which serves as an early predictor of future production, experienced a decrease of 8, reaching a total of 687. This marks the lowest count since April 2022.

Money Managers reduced their net length in WTI futures/options on ICE/CME combined by 13,191 contracts in the week ended Tuesday June 13. ULSD length held by money managers fell by 578 contracts. RB length held by money managers?rose by 3,734 contracts in the week ended Tuesday June 13.?Money managers added length in Gasoil on ICE bringing their net total position to a positive one for the first tome in 2 1/2 months, as per Quantum Commodities reporting.

The?July?WTI?futures?expire?at?the?session?close?Tuesday.

Technicals

Momentums?are?positive?for?the?energies.

August ULSD though shows a double top from Friday/today at 2.5069-2.5081. Support lies at 1.4614-36 and then at 2.4456.

August RB sees support at 2.5464-78. Resistance lies at 2.5905 and then at 2.6182.

August?WTI?sees?support?at?70.26-29?and?resistance?at?73.29-73.37.

Natural?Gas--July?NG?is?down?2?ticks

NG has eased slightly this morning as the heat that was due to invade Texas this week has been pushed back to next weekend.

Imports out of Canada rose on Friday to 8.3 BCF/d from 7.4 BCF the day before.

Demand is set to rise this week to 96.0 BCF/d from last week's level of 93.2 BCF, as per Refinitiv. Then it will rise further next week to 101.8 BCF/d with the impending heat in Texas.

The NG rig count issued by Baker Hughes fell by 5 units. The conclusion made in news wire accounts is that the drop seen recently in the rig count should tighten supplies / inventories come the winter.

Money managers reduced their net short position by 8,553 contracts in NG futures/options on the CME in the week ended Tuesday June 13. They covered short positions rather than adding longs, reducing their net short total to 58,514 contracts.

NG settled higher Friday for the 10th time in 11 sessions. (Reuters) Technically, NG has a mean reversion set up from Friday's close. The upper bollinger on the DC chart intersects today at about 2.64. This suggests a close below that band may see some further easing of prices. Resistance on the DC chart is seen at the high from one month ago at 2.685. Support comes in at the 2.53 area and then at 2.465. Momentum remains positive.

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