Energy Market Update 6-23-2023

Crude is down $1.38???August RB is down 4.81 cents????August ULSD is down 5.79 cents

Overview

Rate jitters continue to cast a pall on energy prices. The dollar is firmer today, which is weighing on energy prices. Adding to the drag on prices is weaker Eurozone data.

Thursday, the Bank of England raised interest rates by a bigger-than-expected half a percentage point. Central banks in Norway and Switzerland also hiked rates. In addition, Fed Chairman Powell reaffirmed that 2 more rate hikes of 25 basis points are likely.

Eurozone flash PMI data for June seen today disappointed. The euro zone’s flash composite Purchasing Managers’ Index dropped to 50.3 in June from 52.8 in the previous month. This was below the 52.5 expected by analysts. Today as well, the German flash composite PMI fell to 50.8 in June from 53.9 in May. This was below market expectations.(CNBC)

DOE petroleum data issued Thursday was supportive, but did not stem the slide in energy prices. Product demand rose, net crude imports fell, U.S. crude production dropped. Gasoline demand rose by 182 MBPD to 9.375 MMBPD, beating last year's figure by 870 MBPD, but lagging that of 2 years ago by 65 MBPD. Distillate demand rose by 404 MBPD this week to a total of 3.978 MMBPD, beating both of the prior 2 years. Net crude imports fell by 1.493 MMBPD to a very low total of 1.618 MMBPD. U.S. crude output fell by 200 MBPD to a total 12.2 MMBPD.

The Dallas Fed's survey of the oil and gas industry showed oil production increasing at a slowing rate. The 2nd quarter rate index was 8.0, down from 10.5 in the first quarter. Survey respondents see year end WTI priced at $77.

The crude oil weakness is amplified when looking at the front month spread in WTI. The August September spread has fallen to a fresh contract low at minus 16 cents.

Technicals

Momentum?has?turned?negative?after?the?sharp?falls?seen?Thursday.

WTI spot futures see support at 67.95-67.97 and then at 66.77-66.82.?The first support has been tested with a low of 67.85. Resistance lies at the $70 area.

August RB support comes in at 2.4105-20, which is being tested as we write. Below this support lies at 2.3723-35. Resistance lies at the 2.46 then 2.48 levels.

August ULSD support comes in at 2.3432-45 and then at 2.3234-54. Resistance is seen at the 2.41 area. the high today is above that at 2.4156.

Natural?Gas--July?NG?is?down?6.4?cents

NG is down today after yesterday shrugging off the slightly larger than expected EIA storage build. NG demand is set to increase next week. The following comment was seen on a popular chat platform for NG : "The question on everybody’s mind is will the Texas blast furnace manage to single-handedly placate the trade until the real heat shows up everywhere else? Seems like it,”. Meanwhile, in much of the East, the north-central U.S. and parts of the West are expected to be slightly cooler than average.

The EIA data issued Thursday showed a build of 95 BCF, which was 2-4 BCF over estimates. Total storage rose to 2.729 TCF. This is 571 BCF (+26.4%) over year ago level and +362 BCF (+15.3%) over the 5 year average.

Refinitiv sees U.S. NG demand next week at 98.2 BCF/d from 94.7 BCF/d this week.

NGI's National Spot Gas average price rose Thursday by 11.5 cents to $2.205.

The Dallas Fed's survey issued Thursday showed natural gas production increasing at a slowing rate in the second quarter from the first quarter. The NG production index fell to 2.1 from the first quarter's 7.4 reading. Survey respondents see the NG price at year end at $2.97.

One colleague suggested yesterday that there was a lack of follow through selling off of the EIA storage data "miss".?And he added that near-term weather forecasts have moderated, which he thought should have precipitated some further selling. So he asked : "has the selling exhausted itself?"

Another colleague, who has not looked at NG curve values of late, was surprised to see the September/October spread having widened to 10 cents.?He remembered values as narrow as 3-5 cents. Five cents was the value last winter, when the spot futures flat price was near $7. The September/October spread recently was as wide as 13.5 cents. Momentum for the spread looks to be cresting, thus suggesting that the spread has a greater chance to revisit the 13.5 cent support area than the 8 cent resistance area seen over 1 month ago when the spot futures flat price rose to $2.685.

With a near 15% gain for June, gas futures on the New York Mercantile Exchange’s Henry Hub are headed for their best performance since August, as per Investing.com reporting. While summer weather hasn’t hit its typical baking point across the country, cooling demand is inching up slowly — sparking the realization in the trade that higher price lows might be more common from here than new bottoms, they added. We agree with this assessment, seeing overall good support below in the 2.20-2.25 area basis the spot DC chart, which is above the lows seen below $2 in late March/early April.

Technically NG has positive momentum that looks to be cresting. Support for spot futures at 2.53 held yesterday with a low of 2.529. A break below that level sees next support at 2.446-2.448. Resistance lies at 2.646-2.653. The former is today's overnight high. Are July futures a bit overpriced near 2.60 with HH next day cash prices near 2.25 ??

Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC