Energy Market Update 5-24-2023

Crude is up $1.34 July RB is up 4.75 cents    July ULSD is up 3.65 cents

Overview

Energies are higher on the back of strong draws in crude oil and gasoline seen in last night's API data. News wires also tout the Saudi Oil minister's comment yesterday warning short sellers as supporting prices today.

Re short positions, Standard Chartered research says that money managers' positioning in crude oil is the most bearish for the past 5 years. Managers are equally as bearish as they were at the start of the pandemic in 2020. Standard adds that they believe that the short positioning increases the likelihood for OPEC+ to further cut their production.

The crude draw seen last night is the largest in nearly 6 months as per Investing.com.

API              Forecast             Actual

Crude Oil       +0.5/+0.7            -6.8

Gasoline        -1.1/-1.3             -6.4

Distillate        -0.5/+0.3           -1.8

Cushing           n/av                +1.7

Runs              +0.7%              n/av

Quantum Commodities adds that Canadian wildfires and the cessation of Iraqi crude exports through Turkey continue to keep supply below where it was weeks ago, thus supporting crude oil overall.

Platts reporting has the number of airplane flights having risen to pre-pandemic level. Flights are up 20% over a year ago. But, jet fuel demand is lagging as longer haul flights have not been restored to pre-pandemic levels. Also, aircraft are more fuel efficient. S&P Global sees jet demand at 6.95 MMBPD, up 840 MBPD from a year ago, but below the 8 MMBPD level seen pre-2019. S&P does not see demand rising to 8 MMBPD until 2027.

Technicals

Crude has risen to its best value since the beginning of May and has tested the 50 day moving average on the DC spot futures chart today. That value lies at 74.42.

WTI spot futures have support at 73.21-24 and then 72.56-61. Resistance lies at 74.90-92 and then at 75.83-92.

ULSD for July has negative momentum. Resistance above is seen at 2.4143-58. Support lies at 2.3653-54 and then at 2.3442-47.

RB for July sees support at 2.5732-45 and resistance at 2.6190-2.6200. Momentum here is quite overbought.

Natural Gas -July NG is up 6.8 cents

NG is higher in what seems a more technical rise than fundamentally based given that the backdrop of the past few days has been one of ample production, even as the rig count fell drastically 10 days ago, as well as a lack of sustained summer heat forecast through the beginning of June and a drop recently in feedgas demand. RBN Energy puts feedgas demand at 11.71 BCF/d, down 0.46 BCF/d from last week's level. Celsius Energy has pointed out that recent lower wind generation has allowed NG to grab a greater share of power generation. Celsius puts this amount at 2.5 BCF/d.

Euro TTF prices have fallen again today to their lowest value since June,2021. Bloomberg cites ample storage and a lack of industrial demand for the drop in price. The one supportive element is that the RSI indicator is suggesting a well oversold condition, but the RSI has been below 30 for the past 8 days. The low today of Euro 28.30/ Mwh equates to $8.29/MMbtu. Reuters adds European storage is on track to rise to 1.237 Twh, which is above the available storage capacity of 1.139 Twh. Reuters says that June and July prices continue to fall in order to stimulate industrial demand and to allow for cargoes to be diverted to Asia.

Technically NG still has negative momentum on the July chart, but has a double bottom from yesterday/today at 2.484/2.495. Support below lies at 2.415-2.424. Resistance is seen at 2.630-2.638.

Disclaimer

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