Energy Market Update 6-14-2023

Crude is up 80 cents   RB is up 1.80 cents    ULSD is up 3 cents

Overview

Energies are higher on the back of a weaker U.S. dollar, better than expected Eurozone industrial production and a fresh batch of Crude import quotas issued by the Chinese government. U.S. PPI data seen today was supportive as well.

May's PPI reading came in at -0.3% versus a forecast for a -0.1% reading, adding to the the CPI data seen yesterday. Yesterday's CPI data has reinforced the belief that the Fed will keep rates steady at their meeting today. The Fed will update their quarterly economic projections, including a forecast of what their key rate will be at year's end. Most economists expect that rate to tick up from the current 5.1% to 5.4%. That would signal that the central bank doesn't think it has yet curbed inflation. In addition, analysts say the policymakers will likely project that the economy will expand 1% this year — a sluggish figure but up from a forecast in March of an anemic 0.4%. They will likely raise their inflation estimate, with year-over-year core inflation envisioned to reach 3.8% by the end of this year, up from a forecast of 3.6% in March. This suggests that another rate hike is forthcoming, and that may happen in July. (AP) The U.S. dollar and interest rates have fallen over the past 24 hours.

The API data registered bigger builds than expected for the products and showed a build for crude oil, while a draw was forecast.

API                  Forecast              Actual

Crude Oil          -0.3/-0.51            +1.024

Gasoline           +0.1/+0.32          +2.075

Distillate          +1.0/+1.21           +1.45

Cushing              n/av                 +1.5

Runs                  Unch                 n/av

The IEA today in its monthly report said that "Global oil markets could tighten significantly in the coming months, as production cuts by the OPEC+ alliance temper an upswing in global oil supplies. However, the multifaceted strains on markets look set to ease in the following years, according to the new report."(IES.org) The IEA raised their oil demand growth forecast for 2023 by 200 MBPD from previous, but they also raised their supply forecast for the year by 200 MBPD. Demand in 2023 is seen rising by 2.4 MMBPD to 102.3 MMBPD. 60% of this year's demand is to be driven by China. India though by 2027 is seen as the leading driver to demand growth the IEA says. Supply in 2023 is forecast to rise by 1.4 MMBPD to reach a record-high annual average of 101.3 MMBPD. Separately, the IEA has predicted that fossil fuel oil demand will peak by the end of the decade as EV's boom. OECD countries' demand may even peak this year as government's drive the change from fossil fuels. (IEA.org)

The Chinese government today issued a third batch of crude oil import quotas, putting the current total allowed up 20% over year ago level. (QuantumCommodities)

Today is the last day for the July WTI/LO options.

Technicals

RB has seen its momentum turn negative even as prices look steady. Crude oil still have negative momentum, but their price action the past few sessions suggest a temporary low in place.

WTI DC based support lies at the overnight low at 69.03-69.07. Resistance comes in at 70.98-71.07.

RB for July sees support at the overnight low at 2.5343-2.5362. Resistance lies at the 2.60 area.

July ULSD sees resistance at the recent high at 2.4481 then at the 2.47 area. Support lies at 2.3872-2.3896 then at 2.3644-48.

Natural Gas --NG is up 0.4 cents

NG is near unchanged now after rallying earlier. The fall back seems due to a dialing back of heat in Texas. ERCOT expected record peak electricity demand Thursday and Friday. Production this week has fallen off, aiding the rally.

Thursday's peak load on ERCOT was seen at 80.3 Gigawatts. Friday's load was expected to be even higher. The current record of 80,148 MWs was set on July 20, 2022, according to ERCOT. (Barchart/KXAN.com) Those estimates seen yesterday may be dialed back as the forecast for temps near 100 degrees starting tomorrow have been lowered. 100 degree temps will not begin until Monday.

On Tuesday, Bloomberg said U.S. NG output was 97.7 BCF/d, well below the record they have as 101.7 BCF/d back in April.

Front month TTF prices have eased back today after they rose 16% yesterday. They hit a high yesterday of 36.675 Euros/Mwh. They have been supported this week by above average temperatures in much of Europe, raising the A/C load demand. Also, we suspect some short covering has been at play. Outages at Norwegian processing plants has also been supportive. Goldman Sachs estimates that the outages due to maintenance will reduce supply by 1.4 BCM (49.44 BCF). But, Goldman believes that demand losses in May and June combined in Europe amount to 3 BCM (105.95 BCF). (Bloomberg)

Technically NG looks steady as it tried to clear resistance at 2.380 today. Next resistance is seen at 2.410-2.415, then at 2.465-2.470. Support lies at 2.317-2.318, then at 2.271-2.277. The 100 day moving average on the DC chart was tested today. The average lies at 2.382. The high seen today is 2.390. The pattern shows a steady slow climb since the low seen June 2 , but is not a steep upward pattern.

Disclaimer

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