Market Update 6-27-2022

Overview

Energies are mixed with crude higher, RB near unchanged and ULSD lower as the market is buffeted by a few items.

The G7 is meeting and discussing further sanctions against Russia. They are looking to finalise plans for a price cap on Russian oil. "The dual objectives of G7 leaders have been to take direct aim at Putin's revenues, particularly through energy, but also to minimize the spillovers and the impact on the G7 economies and the rest of the world," (Reuters)

Ecuador is likely to cease all crude oil production within 48 hours, as per Bloomberg reporting, as protests about high fuel and living costs roil the country. As of Sunday, production has dropped more than 50% below the average 520,000 barrels a day Ecuador extracted from its Amazon territory before the protests began.(Bloomberg)

Iran and the EU are seen restarting nuclear pact talks in a few days. (AP News)

OPEC member Libya's national oil company said on Monday it might have to halt exports in the Gulf of Sirte area within 72 hours amid unrest that has restricted production. (Reuters) Fears of the loss of Libyan crude has supposedly fed into record prices for Atlantic Basin and N.Sea barrels as per Reuters. Among those are Ekofisk, Oseberg, Qua Iboe and Forcados. (Reuters)

Friday's Baker Hughes oil rig count rose by 10 units to its highest level since March 2020.

CFTC data issued Friday showed money managers pared length in WTI, Rb and ULSD. RB length fell by 3,221 contracts. ULSD net length fell by 3,670 contracts. WTI net length on ICE/CME combined fell by a rather large amount. That amount is 34,690 contracts. Longs were shed and shorts increased.

Gasoline prices at the pump will drop by up to 20 cts/gallon by July 4, fuel price tracker GasBuddy says, but they warn relief will only be temporary. GasBuddy gave no clarification as to why this may happen. "We still could see a super spike in gas prices later this summer, should a hurricane threaten Gulf Coast oil refineries or oil platforms.'", Gasbuddy adds. (DailyMail.com)?AAA reports today gasoline prices at the pump in the U.S. averaged $4.897, down from the record set June 14 of $5.016.

Technicals

RB and the Crude oils are seeing their momentum turning positive from oversold condition. Gasoline is showing a stepladder up look from the past several sessions.

RB futures for August see support at 3.7334-57 and resistance at 3.8239-57.

August ULSD sees support at 4.1769-80, which are the lows from Friday/today. Below that support is seen at 4.1375-4.1400. Resistance lies at 4.2725-50.

Spot WTI futures see support at 105.80-94. The low is 105.60. Resistance lies at 109.76-81.

Brent September futures see support at 107.65-79. The overnight low is 107.15. Resistance lies at 111.57-70.

Natural?Gas

NG is lower as the July NG options expire today.?A large,10-to-15-degree drop in temperatures in cities such as Dallas and Oklahoma City is forecast, according to The Weather Channel. (WSJ) NGI cites higher production and weaker LNG demand for today's selloff. Dry gas production readings are up more than 1.0 Bcf/d since late last week and may continue to climb through Thursday,” EBW analysts say. (NGI) None of the LNG terminals “seem able to operate at maximum capacity recently, likely due to the higher heat across the region,” Bespoke said. (NGI)

The EU is grappling with filling storage by winter. Risks of deeper supply cuts are mounting as Russia’s Nord Stream pipeline to Germany, already operating at just 40% of capacity, will shut for maintenance for 10 days next month.The concern is that Europe will fail to reach its target of 80% storage filling by Nov. 1 if Nord Stream operates at its limited capacity or halts completely, according to Wood Mackenzie Ltd. European countries have proposed allowing coal fired power plants to re-open as a result. Asian coal prices hit record highs?over $400 today due to that prospect. Also a heat wave in China has raised demand for coal there. (Bloomberg)

The?Baker?Hughes?NG?rig?count?rose?by?3?units?in?data?seen?Friday.

CFTC data issued Friday showed money managers increased their net short position on the CME in NG futures/options in the week ended Tuesday 6/21. The total rose by 9,402 contracts to 35,620 contracts.

The July NG options expire today with the $6 strike on the CME showing decent open interest that may see the spot futures want to gravitate to the $6 level for settlement. The $6 calls see 13,066 contracts oustanding as of Friday, while the $6 puts have 12,975 contracts open.

2 items we see are somewhat supportive for NG at present. Momentum is oversold and there is a double bottom presently on the August futures at 6.062/6.065 from Friday/today. Below that support is seen at 5.915-5.919. Resistance above lies at 6.409-6.415.

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