Energy Market Update 6-22-2023

Crude is down $1.54??August RB is down 6.57 cents?????August ULSD is down 5.10 cents

Overview

Interest rate concerns are weighing on energy prices today. Rb is leading the way down as the API data showed a build in gasoline supplies versus the forecasted drawdown.

Fed Chairman Powell yesterday spoke of strong support amongst Fed members for 2 more rate hikes this year. He said that the economy remains very strong with the labor market as the driver. He added that the Fed has a ways to go to bring down inflation and he reiterated the Fed's goal to get to a 2% inflation rate target over time. He said that they are far from that target at present. (WSJ)

The Bank of England today raised rates by 50 bp to 5.0%. This was more than the 25 bp hike most had anticipated. The rate hike was the 13th in a row. Rates are now at their highest level since 2008.?(Reuters)

Wednesday's crude rally was said to have been partially aided by further sanctions planned by the EU. Among them is a ship to ship transfer ban, which might affect Russian crude exports, although some will point to Russia having its own sizable fleet, thus denting some of the impact of a ship transfer ban.?(Quantum Commodities/Reuters)

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

Crude?Oil???????-0.1/+0.3????????????-1.2456

Gasoline????????--0.5/+0.1???????????+2.935

Distillate???????+0.6/-0.7???????????-0.301

Cushing??????????-0.386??????????????+0.05

Runs?????????????-0.1%????????????????n/av

WSJ adds the following comment re petroleum inventories : "Investors will also watch to see if implied US gasoline demand stays above the key, 9M bpd level for a fifth straight week."

A fire on a reformer at Exxon Mobil Corp's 564,440 barrel-per-day (bpd) Baytown, Texas, refinery was quickly extinguished on Wednesday, said people familiar with plant operations. "We're continuing to meet our contractual commitments,", an Exxon spokesperson said. (Reuters)

Technicals

The notion of a range bound market is well supported when looking at price action for the last 5 weeks on the charts for the crude oils. Currently, momentum for the crude oil is positive, while that for the products look to be cresting and set to turn negative.

WTI spot futures have been basically between $67 and $74 over the past 5 weeks. For now we see support at the $70 area. There is a double bottom from yesterday/today at 70.80-70.83. Resistance comes in at the double top from yesterday/today at 72.65-72.72 and then at 73.19-28.

August?RB?sees?support?at?2.4415-23.?Resistance?is?seen?at?2.5477-92.

ULSD for August sees support at the past 4 lows which lie at 2.4456-65 and then at 2.4074-92. Resistance comes in at 2.5069-81. A wall seems to have formed above 2.50 for the contract.

Natural?Gas--July?NG?is?down?4?ticks

NG is near unchanged as Texas heat is offset by below average temperatures in much of the rest of the U.S.

The EIA storage build is expected to add more than last year and more than average. The build is estimated at 91-93 BCF. Last year saw a build of 76 BCF and the 5 year average for the period is +86 BCF. Refinitiv said last week saw 52 cooling degree days. That compared with the 30-year norm of 63 CDDs for the period.

Yesterday's rally was fueled by the heat in Texas and production concerns. Katy Hub ( near Houston) cash prices rose to their highest since March on Wednesday. U.S. NG production in June so far is seen at 101.6 BCF/d, down from May's record level of 102.5 BCF/d. This is due in part to ongoing pipeline maintenance in the Haynesville shale in Arkansas, Louisiana and Texas, and other basins, as per Refinitiv data.

Russia could shut off one of the last arteries carrying Russian gas to Europe by the end of next year when Ukraine's supply contract with Gazprom expires, the Financial Times said on Thursday, citing an interview with the Ukraine energy minister. Europe though has been adapting to the loss of Russian NG supply as demand has been reduced and LNG imports have been increased.

Technically the rally seen Wednesday is likely to have been due to some degree to short covering as open interest in the July contract feel by quite a bit as per preliminary data from the CME. Momentum is positive, though the DC chart based momentum looks to be cresting. Support for July NG is seen at the 2.53 area, then at 2.446-2.448. Resistance comes in at the recent highs at 2.653 and then 2.696.

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