Energy Market Update 4-30-2024

Crude is up 58 cents      June RB is down 0.16 cents        June ULSD is up 2.13 cents

Overview

Crude oil and distillates are higher, while RB is near unchanged. The market is supported by good Chinese PMI data and continued Houthi attacks near the Red Sea. Prices today were also seen supported by the "uncertain Gaza ceasefire negotiations." (Quantum Commodities)

China's official PMI for April stood at 50.4 in April from a 50.8 the previous month. The reading was slightly above expectations of 50.3. The private manufacturing PMI data released on Tuesday painted a slightly more optimistic picture of the sector. The Caixin Manufacturing PMI rose 51.4 in April, more than expectations of 51.0 and the 51.1 seen in the prior month. April's growth was boosted by solid new export order growth. But, while business confidence remained positive it eased from March, due to concerns about rising costs and increased competition. Employment levels fell for an eighth straight month in April.  (Reuters/Investing.com)

The US military confirmed that Yemen's Houthi rebels launched several missiles at a merchant vessel in the Red Sea on Monday, while a drone also targeted a US patrol ship. (Quantum Commodities) Hamas negotiators left Cairo late on Monday to consult with the group's leadership after talks with Qatari and Egyptian mediators on a response to a phased truce proposal that Israel presented over the weekend. The delegation was expected to report back within two days, two Egyptian security sources said. (Reuters)

As the Canadian Trans Mountain pipeline expansion is about to enter service in May, Reliance Industries ( the large Indian refiner) has purchased 2 MMBBL for delivery in July at a cost of -$6  on a delivered basis vs. September Brent. The oil purchased is a type of heavy and highly acidic diluted bitumen used as feed stock in the refining process. Chinese interests have already bought Canadian crude from the pipeline for June delivery. (LSEG) The new pipeline is expected to ship primarily heavy crude, while the existing line moves mainly light barrels. The expanded pipeline will ship an extra 590 MBPD from Alberta to Canada's Pacific Coast, giving Canada's heavy crude producers access to U.S. West Coast and Asian markets. Thus, some analysts predict the discount on benchmark Canadian heavy crude Western Canada Select will narrow to less than $10 a barrel versus U.S. crude, from a $14 a barrel discount currently.  (Reuters)

The Oxford Institute for Energy Studies said Monday that Russian crude processing is expected to return to normal levels by the end of the second quarter after a spate of drone attacks. (Quantum Commodities)

We note a large increase in open interest in the June LO/WTI put options on the CME in Monday's activity. Especially in the $75, $80, $82.00 and $82.50 strikes. One trade seen was buying of the $82.50 put for $1.27 against selling of the $75 put taking in 13 cents and also buying of the June futures at $83.50.

Today is the last trading day for the May RB & ULSD and June Brent futures.

Technicals

Momentum for the WTI has turned neutral. RB's remains positive, while that for ULSD looks poised to turn downward.

June WTI has support at the $82 area and resistance at 84.46-84.49.

June ULSD sees support at the double bottom of today/yesterday at 2.5381/2.5405. Resistance comes in at 2.5950-2.5960.

June RB sees support at 2.7150-2.7175 and then at 2.6861-2.6873. Resistance is seen at 2.7608-2.7617.

June Gasoil seems framed by resistance at 796.00-796.50 and support at 768.50-769.00. Momentum here on the June daily chart is neutral.

Natural Gas-- NG is up 2.0 cents

NG has rallied further today boosted by by a full restart of Freeport LNG’s third train, supply interruptions in the Permian Basin and expectations for a below-average storage injection. (NGI Commentary)

Overnight spot futures traded to its highest level since February 5th.

Total supply yesterday came in at 103.6 BCF/d, down -4.1 BCF/d vs 2023, the largest YoY decline (excluding transient freeze-offs) since 2021. NG production was seen sub-99 BCF/d Monday while imports from Canada fell to 4.8 BCF/d, as per Celsius Energy. Lower-48 state dry gas production Monday was 97.9 BCF/d  (-3.3% y/y), according to Bloomberg data.  LSEG said gas output in the Lower 48 U.S. states fell to an average of 97.7 BCF/d so far in April, down from 100.8 BCF/d in March. LSEG put April's average at 96.8 BCF/d on April 22.

Monday's feed gas volume going to the Freeport LNG facility was 0.46 BCF coming off of the Gulf South pipeline, out of a possible total capacity of 1.78 BCF/d from that pipeline source. This was versus volume near 0.1 BCF/d Thursday of last week. LNG net flows to US LNG export terminals Monday were at a 3 week high at 12.9 BCF/d up from 12.2 BCF/d seen Sunday. (Reuters)

Wholesale energy prices in Texas nearly hit the offer cap of $5,000/MWh Sunday night. Simultaneously, battery discharge to the grid peaked over 2,000 MW, a level that has happened only once before. While that represents only 4% of the total load, it is the highest percentage ever recorded in ERCOT according to the data tracked by the analyst at Grid Status.

Yet, power and gas prices in the West have been very soft. In California, next-day power at South Path-15 in Southern California fell to a record low of negative $20 per megawatt hour (MWh) on April 26, down from positive $4 on April 25. That compares with the prior all-time low of negative $15 on April 5. Next-day gas at the Southern California Border NG fell to positive $1.35/MMBTU, its lowest since hitting a record low of $1.14 in June 2019, while spot gas at the PG&E NG hub in Northern California fell to $1.85, its lowest since July 2019. (Reuters)

Initial EIA gas storage estimates for this week's data that we have seen are calling for a build of 47 to 56 BCF. This compares to last year's build of 62 BCF and the 5 year average build of 72 BCF.

Yesterday on the CME block board we saw the following trades: A) buying of the NG July $2.50 Call for 11.9 cts against selling delta futures at $2.36 --and pairing that with selling the Oct $3.50 Call against buying delta futures at $2.60 (2) someone sold 4,00 penultimate ( = 1,000 NG lots equivalent) of the the 30 cent call in the June July spread, taking in 3.6 to 3.7 cents. The underlying spread was trading at about 35.5 cents. and (3) in the June thru Oct strip :  the $2.00 put was bought against buying the futures strip. The put traded for a cost of  8.7 cts vs. buying the futures strip at a price of $2.32.

Technically, the one drawback to the bullish narrative is the spot futures contract trading over the upper DC bollinger. That band comes in today at $2.020. Yesterday's close shows a mean reversion set up, with the settlement for June being over the upper DC bollinger band.  June futures settled at $2.030 on Monday, which was a jump of almost 26% versus the may settlement of $1.614 on its expiration Friday. Resistance for June NG lies at 2.100-2.102, above the overnight high of 2.092. Support lies at 1.955-1.956. Momentum remains positive.

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.

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