Energy Market Update 7-8-2024

Crude is down 65 cents??? RB is down 1.80 cents???? ULSD is down 2.20 cents

Overview

Energy prices are down today as discussions have resumed over a U.S. cease fire plan to end the Gaza conflict and are being mediated by Qatar and Egypt. (Reuters) Hurricane Beryl made landfall today along the Texas coast, causing some disruptions to shipping and refineries. Yet, prices have not rallied on that news, despite the cuts in production and oil production that have been announced.

The largest ports along Texas were closed Sunday.? All vessel movement and cargo operations were restricted. Port closures could bring a temporary halt to crude exports, oil shipments to refineries, and motor fuels from those plants.(Reuters) Today, news was seen that Marathon Petroleum reported a temporary power loss at its Galveston Bay refinery Monday as Hurricane Beryl smashed into the Texas coast. (Quantum Commodities)? The entire refinery has a capacity of 631 MBPD. Citgo Petroleum Corp was cutting production at its 165 MBPD Corpus Christi refinery on Saturday, sources said. The refiner plans to keep the plant in operation at minimum during Beryl's passage. Some oil producers, including Shell & Chevron had also shut in production or evacuated personnel from their Gulf of Mexico offshore platforms. (Reuters)

One analyst suggested that? "The last couple of days represent the peak of the drive season." (Reuters) This is borne out clearly when looking at the last 3 years demand figures. Demand peaks at the end of June and or first week of July. This past week's DOE gasoline demand of 9.424 MMBPD was the best since early November of last year. In 2023, demand peaked in the week of June 28 and was the best until the week of September 1. In 2022, demand peaked the week of July 1 and was the best demand until May 19,2023.

The Baker Hughes oil rig count issued Friday was unchanged, but the following comments described how the recent rig count drop had not been reflected in a production drop. Efficiency gains in capital spending have led to record production with fewer rigs, although rising operating costs are a concern, according to producer comments submitted in the Dallas Fed's 2Q energy survey. Oil services companies mentioned industry consolidation as a challenge as "often the acquiring company will not pick up the existing service companies." (WSJ)

The teapot / independent refiners in Shandong in China reduced run rates to 50.5% of capacity in the week ended July 5, which was the weakest since the week of April 20. (ING)

Speculators increased their net long position in ICE Brent by 37,440 contracts in the week ended last Tuesday. The move was driven predominantly by fresh longs entering the market. (ING) The CFTC COT report about money managers' positioning in WTI, RB, ULSD & NG was delayed until today / Monday afternoon versus the normal Friday release due to the July 4th holiday.

This week will see the release of sevsral monthly oil market reports. The EIA will release its STEO tomorrow / Tuesday. On Wednesday, OPEC will release its monthly oil report, followed Thursday by the report from the IEA.

Technicals

RB and the crude oils made fresh highs for the recent rally Friday mid-morning, but fell off quite a bit into the close, especially in the RB spot futures. Today, prices are trading well below the highs seen last week and as a result, the momentum indicator on the DC charts for the RB & ULSD has turned downward.

ULSD resistance lies at 2.6175-2.6188, the latter being today's high. Support is seen at 2.5386-2.5398. We suspect that the soft jobs report seen Friday is negatively impacting ULSD prices as the report suggests weakening demand.

RB resistance comes in at 2.5930-2.5950 and support at the low seen last week at 2.5090.

WTI sees support at 81.80-81.85 and resistance at 83.91-83.93 and then at the high of Friday at 84.52.

Natural Gas --NG is up 4.5 cents

NG are higher today even as Hurricane Beryl has made landfall 54 miles from Freeport, Texas, where a large LNG export facility is located. Prices opened last night on the low of the session at $2.268. Since then prices basically held $2.30. Prices have been pressured the last few sessions due to increased production and the data miss of the DOE storage number. Some temporary NG demand boost has come in recent days due to less renewable power generation. And cooling demand is likely to ramp up again given current weather forecasts for continued heat in much of the U.S.

Beryl caused wind gusts over 90 MPH in Freeport.? Beryl has caused the Freeport LNG plant to shut for the 2nd day today. Freeport is running its plant at 14%, as per FX Street reporting. Kinder Morgan? said on Sunday that it shut its West Clear Lake and Dayton natural gas storage facilities, and its Texas City natural gas processing facility ahead of the storm. "We expect this to have minimal impact on our pipeline operations," it said. All the company's other facilities in the storm's path remain operational. (Reuters) The ports of Corpus Christi, Houston, Galveston, Freeport and Texas City closed on Sunday to prepare for hurricane. (Reuters)

In addition, Beryl is seen causing some demand drop as heavy rain will impact Texas today and move into the middle of the U.S. over the next few days, thus providing temporary relief from the heat. More than 1 million customers are without power in Texas. (NBC News)

Thanks to strong power burn demand that topped 45 BCF/d, Celsius Energy says that natural gas demand exceeded 100 BCF/d Saturday, driving a daily storage injection of +5-6 BCF/d, 1-2 BCF/d bullish versus the 5-yr average. A year-over-year decline in production was largely seen being countered by stronger imports, Celsius adds.? Saturday’s strong power burn came despite cooler temperatures infiltrating Texas & the Midwest. Power burn was supported by much weaker wind generating reducing the amount of fuel switching away from gas, as per Celsius. Wind-powered generation dipped to as low as 657 MW around 10 am Central Time in the U.S. on July 6, after averaging 15.674 GW since July 1, according to the US EIA's Hourly Electric Grid Monitor. Solar-powered generation slipped to about 6.85 GW July 5 after averaging 8.45 GW July 1-4, they also say. (Platts)

U.S. NG demand this week is seen at 105.9 BCF/d, rising to 106.8 BCF/d next week. These are well above last week's demand of near 98.4 BCF/d.

The Baker Hughes gas rig count seen Friday showed an increase of 4 units.

As per one noted meteorologist : " Once the Beryl-related rains and the incoming 500MB cold pool wash out, we go back to the business of having a sprawling heat ridge that covers most of the USA. Hot and dry air should dominate across southern Canada and the lower 48 states for the second half of July and well into August."? In much of Texas, after dipping below normal today and tomorrow, temperatures return to running near normal and even 3-4 degrees above normal with, in particular, Dallas to see highs of 99 degrees and San Antonio to see highs of 100 degrees at times in the next 10 days.

Bullish bets that European gas prices will rise have increased, strengthening a conviction in the market that supplies are set to tighten. The net-long position in benchmark Dutch gas futures held by investment funds is at the highest since November 2021, according to the most recent data from Intercontinental Exchange Inc. Yet, TTF prices have remained locked in a range for the past month with storage ample and forecast to hit the mid-90% range by the end of October, as per Goldman Sachs.

Technically, August NG futures ended Friday with a lower settlement price for the 8th straight session. Momentum is very oversold basis the DC chart's stochastic indicator, and looks to be turning positive on the back of the rally off the lows today. Several analysts have pointed out that hotter weather overall is forthcoming in July and August, thus they believe that ( as one analyst writes) : "prices may find support around these levels." That narrative is well in effect today as prices have rebounded 12 cents off of the overnight low. Support for the spot futures comes in at 2.313-2.315 and then at the overnight low at 2.262-2.268. Resistance comes in at 2.410-2.415 and then at the double top seen last week at 2.480-2.484.

For those believing in a rally, the August $2.50/$2.75 call spread at a cost of 4.7-4.8 cents looks like a possible way to situate oneself for a rally.

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