Energy Market Update 6-28-2023

Crude is up 22 cents????August Rb is up 2 cents????August ULSD is up 5 points

Overview

Crude oil and ULSD are a little higher, with gasoline in better shape. News wires talk of demand concerns and mixed economic signals causing choppy, rangebound trading. The API data was supportive, which helped keep crude in positive territory most of the overnight. Gasoline data from the API was better than expected.

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

Crude?Oil???????-1.47/-1.8?????????-2.4

Gasoline??????????-0.4???????????? ?-2.85

Distillate??????? ?+0.4????????????? +0.77

Cushing???????????n/av???????????? ?+1.5

Runs??????????????+0.1%????????????n/av

The rally in crude prices seen overnight did not stem the weakness being seen in the forward curve with the August November WTI spread falling to as low as -45 cents. Similarly in Brent, the August February six month spread has fallen to a contango of 20 cents, down 28 cents from yesterday's settlement. Reuters offers this comment regarding the Brent curve weakness : Brent calendar spreads are softening along the curve as traders anticipate an economic slowdown will dampen petroleum consumption compared with previous forecasts.

In addition, the Brent crude has fallen below the Dubai crude for the first time since November, 2020 as per Refinitiv reporting. In Asia, Brent was seen at minus 4 to 8 cents vs Dubai, down from a value in the previous session of +47 cents.

Yesterday's sell off in crude prices was said to be due to interest rate concerns. Good economic data from the U.S. was interpreted as causing the Fed to have to raise rates in the future. Durable Goods orders rose by 1.7% in May, the third rise in a row. The WSJ forecast for the number was -0.9%. Consumer confidence in June was the highest seen in 17 months. (MarketWatch)

Technicals

Momentum remains negative for the energies, with the lower bollinger band for the Brent having been tested today.

September Brent has its lower bollinger in the daily chart at 71.97. The low seen overnight is 71.86. Support below this is seen at 71.33-43. Resistance lies at 74.11-17 and then at the 75 dollar area.

Spot WTI futures see support at 66.77-66.82 and then at 65.65-65.71. Resistance lies at 69.65-69.69. The DC chart's lower bollinger intersects at 67 dollars. WTI is again testing the 200 week moving average on the continuation chart. That value lies at 67.49.

August Rb support lies at 2.3986-2.3999. Resistance comes in at 2.4692-99 and then at 2.4826-34.

ULSD for August sees support at 2.3432-2.3445 and then at 2.3234-2.3254. Resistance is seen at 2.4084-97.

Natural?Gas?--August?NG?is?up?1.6?cents

NG is higher as Texas power usage is setting new records. Hot weather is seen lasting through July 4th, longer than we had seen prior. Some 62 million Americans in central Arizona, across Texas and the Deep South and into Florida's panhandle were under excessive heat watches, warnings and advisories that were expected to last until the Fourth of July, the National Weather Service said Tuesday. (Reuters)

Tuesday's power usage in Texas along ERCOT's system peaked at 80,828 MW, besting the previous record of 80,148 MW seen July 20,2022. ERCOT projects that Wednesday will see a new record of 83,040 MW. ERCOT, which operates the grid for more than 26 million customers representing about 90% of the state's power load, said it has enough resources to meet current demand. (Reuters)

Cash prices at the Henry Hub rose yesterday to over $2.70 thus supporting the front end futures July contract. This HH cash price had been down near $2.25 last Friday.

The July futures expire today. There may be some extra volatility to this expiration as we see CME open interest for the July futures of 964 contracts, which is a very low amount.

NG prices retreated Tuesday on what is dubbed profit taking by news wire accounts. This is borne out by the large drop in total open interest seen on the CME of over 30,000 contracts. Open interest dropped mostly in the July through October contract months.

One analyst offers the following reason for some of the recent drop in NG production.?Gelber’s analysts estimate that about 1.5 BCF/d of gas production has been halted as plants underwent maintenance to prepare for ramped-up demand for the holiday and beyond, as summer progresses in earnest. (Investing.com)

Technically the monthly NG continuation chart reinforces the themes we have mentioned in recent days of rig counts dropping, producers cutting back production and a price as low as $2 being unsustainable. The monthly chart shows lows below $2 for 3 months in a row from February to April.?Momentum on the monthly continuation chart is basing and trying to turn positive from an oversold condition. Several comments we have heard are calling for a $3 print in the coming days or weeks. That would revisit the high seen in March.

For today we see August futures with resistance at the prior 2 sessions' highs at 2.895 and then 2.936. Support lies at the low from Tuesday at 2.755-2.759. Momentum is positive, though is has a cresting look as the futures are having an inside so far today.

Disclaimer

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