Energy Market Update 6-27-2024

Crude is up 98 cents     August RB is up 2.74 cents        August ULSD is up 3.94 cents

Overview

Energies are higher on the back of Mideast tension that is said to offset demand concerns, which were raised by the DOE data. Although today we see good air travel demand figures.The DOE stats were disappointing and led to the energy prices falling to their lows of the day in the 15 to 30 minutes after the data release; yet, product prices then rebounded within the following 3 hours to fresh highs for the day.

Crude and gasoline supplies rose, validating the API stats. Supplies were forecast to fall. Crude supplies rose by 3.591 MMBBL, as refinery runs fell by 233 MBPD to 16.532 MMBPD, which is the lowest level in a month. Net crude imports were up a mere 65 MBPD. thus not really a factor for us. Gasoline supplies rose by 2.654 MMBPD. Total Gasoline inventories grew to a three and 1/2 month high of 233.9 million barrels, up 5 MMBBL in the last month. This week's was the fourth build in five weeks. Thus, gasoline inventories are now 5.35% above the same time last year. (Quantum Commodities) Product demand fell this week. Gasoline demand fell by 417 MBPD to 8.969 MMBPD, about equal to 2022 demand, but below the 2023 demand of 9.306 MMBPD. Distillate demand fell by 441 MBPD to 3.536 MMBPD, basically in line with 2022 demand and better than last year's demand by 222 MBPD. Notable for distillates, is the export level of 1.533 MMBPD. This is the highest export amount in almost 2 years, since the week of September 16, 2022, as per EIA data.

Air travel demand has risen as per data from Asia and Europe seen today. The Association of Asia Pacific Airlines (AAPA) said that in May, the region’s airlines carried a combined total of 27.9 million international passengers, 23.9% more than in the same month last year. It was due to strength in long haul travel markets. The air traffic averaged 89.4% of 2019 levels. Overall “In the first five months of the year, Asia Pacific airlines carried a total of 144 million international passengers, reflecting a 44.8% increase compared to the previous corresponding period. During the same period, international air cargo demand grew by 16.0%.”, as per the AAPA Director General. (airline ratings.com) European summer travel demand continued to rise in mid-June, according to Eurocontrol’s latest network update. They say that travel is up 5% in June. June has seen the busiest travel day of the year. (Quantum Commodities) Last month the following headline was seen : Taylor Swift fans are causing a spike in European air travel, United says. (CNN)

Cross-border strains between Israel and Lebanon's Hezbollah have been escalating in recent weeks, and, on Wednesday, Turkish President Tayyip Erdogan added to these by saying his country stood in solidarity with Lebanon and called on the region's countries to show their support. He also accused Western nations of backing Israeli “plans to spread the war” into Lebanon, after fresh Israeli airstrikes on southern Lebanon. (Investing.com / daily sabah.com)

The dollar hit a fresh 38-year high against the yen on Wednesday. (live mint.com) The dollar index rose Wednesday to its best value since April 30. ( Market Watch)

Earlier this week, news reports said that Russia’s weekly crude exports fell by the most in more than three months in the seven days to June 23, with maintenance at key ports also trimming the less volatile four-week average. Russia’s seaborne crude flows in the week to June 23 dropped by 660 MBPD to 3.04 MMBPD.  The less volatile four-week average was also down, falling by about 45 MBPD to 3.37 MMBPD. Separately, the vessels that Moscow relies on to transport its oil are increasingly being targeted by the Western authorities. The European Union is the latest to impose sanctions on specific Russian ships, identifying 17 crude oil and refined products carriers in its current round of sanctions, as per Bloomberg.

Technicals

WTI momentum is negative, as it has just in the last few minutes managed to test over the highs seen earlier this week. Product momentum is neutral, as RB & HO for August have risen to their highest level in almost 2 months. The products have upward trending looks since making their lows just over 3 weeks ago.

WTI spot futures is testing resistance at this week's high at 81.90. Next resistance lies at last Thursday's high at 82.41. Support lies at 80.18-80.23, which are the lows of Monday/yesterday. Below that support lies at 79.77-79.80. News wires are touting the fact that famed oil trader Pierre Andurand has exited his crude oil trades as he sees "mixed signals" in the market. He says that he will re-engage in oil once there is greater clarity on the supply side. (Forex Live)

ULSD for August has risen over its 100 day moving average. That value lies at 2.5475. Chart based support comes in at 2.5451-2.5467. The overnight low is just below that at 2.5433. Below that support comes in at 2.5311-2.5326. Resistance is seen at 2.5980-2.600 and then at 2.6121-2.6136.

August RB's 100 day moving average lies today at 2.4983. Chart based resistance comes in at 2.5620-2.5633. Support is seen at 2.5043-2.5058, which are prior highs.

Natural Gas--NG is down 0.6 cents

NG are down slightly as the market is grappling this week with increased supply versus strong cooling demand as the heat wave persists across much of the U.S.

The EIA storage data is seen as a build of 51 to 54 BCF. This compares favorably to the +85 BCF five year average for the period and last year's +81 BCF number.

On Wednesday, NG prices slipped as higher production was seen offsetting demand from hot weather across much of the U.S., as per WSJ commentary. Also weighing on NG is the news that feed gas demand had fallen back the past 2 days, thus further weighing on prices. Feed gas volume on Tuesday fell to 11.2 BCF/d, which was the lowest amount since April 20. Volume on Wednesday was seen rising to 11.9 BCF/d. But, this still was below the average amount of 12.9 BCF/d so far in June, as per LSEG data seen Tuesday.

The Texas power-grid operator ERCOT forecast on Wednesday that electricity use will break peak-demand records for June and July over the next week as homes and businesses crank up air conditioners to escape a heat wave. In response to that demand spike, spot power and natural gas prices jumped to their highest levels since earlier this year.  As a result of the power demand, next-day gas at the Waha hub in the Permian Basin in West Texas soared 352% to a five-month high of positive $2.52/MMbtu for Wednesday, up from a negative $1 for Tuesday. (Reuters) ERCOT said the system was operating normally with enough supply available to meet expected demand. High temperatures in Houston are likely to remain in the mid-90s through mid-August, according to AccuWeather meteorologists. (Reuters) Officials are projecting that there is a 12% chance of rolling blackouts in Texas this August between the hours of 8 and 9 p.m., according to The Dallas Morning News.

TTF prices in Europe continue their sideways trading pattern as worries over supply hiccups are countered by gas storage in Europe standing at 76% full, broadly in line with levels seen at the same stage last year and above the 5-year average of 66%. However, investment funds continued to build their net long in TTF over the last reporting week, increasing their net long by 2.3TWh to almost 131TWh. This is the third consecutive week of buying and leaves the position at its largest since January 2022. (ING)

The International Gas Union (IGU) said in a report on Wednesday that the global LNG market is in a "fragile equilibrium"  due to lack of spare supply in the near-term. "LNG market conditions remain tight, despite lower prices. The global market's newfound equilibrium is still fragile and sensitive to uncertainties from supply and demand sides," said the IGU President. (LSEG)

NG technically still has negative momentum on the DC chart as August spot futures have fallen to the level seen the last few sessions for the expired July contract. Today's high of 2.784 tested the downtrend resistance line on the DC chart that comes off of the high of $3.159 seen just over 2 weeks ago. Chart based resistance lies at the 2 highs seen for July on Monday/Tuesday at 2.834-2.844. Support lies at the low for July seen on expiration at 2.605-2.613.

Disclaimer

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