Energy Market Update 7-10-2024

Crude is down 7 cents          RB is  down 2.56 cents      ULSD is down 1.98 cents

Overview

Energy prices are lower, ignoring decent data for gasoline and crude oil from last night's API's. Poor Chinese CPI data, which reinforced concerns about Chinese demand, the restarting of oil operations along the U S Gulf Coast and a possible resumption of ceasefire talks in the Mideast are said to be the culprits for the weaker energy prices today.

API              Forecast         Actual

Crude Oil     -1.1/-1.3         -1.923

Gasoline      -0.221/-1.4      -2.954

Distillates     +0.8/-1.5        +2.34

Cushing        -1.096             -1.2

China's consumer prices grew for a fifth month in June but missed expectations, while producer price deflation persisted, with domestic demand mired on a slow recovery track despite support measures for the world's second-largest economy, as per Reuters commentary. The consumer price index in June rose 0.2% from a year earlier, against a 0.3% uptick in May, the slowest in three months, data from the National Bureau of Statistics showed on Wednesday, below a 0.4% increase forecast in Wall Street Journal and Reuters polls. The producer price index fell 0.8% in June from a year earlier, less than a 1.4% decline the previous month, and matched a forecast 0.8% fall as per Reuters polling. The fall in the PPI was the 21st straight month of contraction, as per WSJ reporting.

OPEC, in their monthly oil report issued this morning, kept their oil demand growth forecasts for 2024 and 2025 unchanged from last month. They said world oil demand will rise by 2.25 MMBPD in 2024 and by 1.85 MMBPD in 2025. Total global oil demand in 2024 is seen reaching 104.5 MMBPD.  "Expected strong mobility and air travel in the Northern Hemisphere during the summer driving/holiday season is anticipated to bolster demand for transportation fuels and drive growth in the United States," OPEC said in the report. They added :" Healthy oil demand levels will be supported by a resilient global economy, with inflationary pressures projected to continue easing in the second half and major central banks expected to lower interest rates." Overall OPEC crude-oil production fell by 80 MBPD to 26.57 MMBPD in June, the cartel said, citing secondary sources.

The EIA, in its monthly Short Term Energy Outlook (STEO) issued yesterday, raised their second half 2024 oil price forecasts. "" Higher prices in the second half of the year result from our forecast of persistent withdrawals from global oil inventories. We estimate global oil inventories decreased by 0.5 MMBPD in 1H24 and will fall by 0.7 MMBPD in 2H24. Inventory withdrawals stem in part from OPEC+ production cuts, which the group announced in early June would remain at current levels until at least the end of September."" The EIA raised its forecast for Brent oil prices for 2024 by $2.22 to $86.37 from June's estimate. In 2025, Brent is seen averaging $88.38, which is an increase of $3.00 from last month's forecast. WTI prices are seen averaging $82.03 in 2024, up $2.33 from last month. The 2025 price average is seen as $83.88, up $3.00 from June's estimate. U.S. crude output and the U.S. Consumption estimates for this year were both raised marginally from last month. U.S. crude supply in 2024 is seen at 13.25 MMBPD, up 0.01 MMBPD from last month's forecast. In 2025, U.S. crude production is seen averaging 13.77 MMBPD, up 0.06 MMBPD from June's estimate. U.S. energy demand in 2024 is seen at a pace of 20.4 MMBPD, up 0.1 MMBPD from June's forecast. Demand was left unchanged for 2025 at 20.6 MMBPD. The global oil demand forecast for 2024 was little changed from June's forecast. Global demand in 2024 is seen at 102.9 MMBPD. This is down 0.1 MMBPD from last month. Worth noting is that the EIA is thus forecasting global oil demand growth in 2024 of 1.1 MMBPD. This demand growth forecast is well below that of +2.25 MMBPD seen from OPEC today.

Negotiations to secure a ceasefire in the Gaza war will resume in Doha on Wednesday, with the intelligence chiefs of Egypt, the United States, and Israel in attendance, Egypt's state-affiliated Al-Qahera News TV and sources said on Tuesday. (Reuters) Yet, Hamas warned that the latest raids and displacement in Gaza City could lead to the collapse of long-running negotiations over a ceasefire and hostage release, according to the Associated Press.

OPEC and its Russia-led allies moved closer to quota compliance in June, cutting crude output by 130 MBPD to 40.87 MMBPD, the monthly Platts OPEC+ survey from S&P Global Commodity Insights showed July 9. Russia led the drop in non-OPEC production, cutting output by 140 MBPD to 9.1 MMBPD in June. That was its lowest output level since December 2020, but above its quota of 8.98 MMBPD. Iraq cut its output by 60 MBPD to 4.22 MMBPD; its quota is 4.0 MMBPD. Meanwhile, Kazakhstan increased output by 50 MBPD. These three producers have pledged to submit plans to compensate for their overproduction at the start of 2024. The next meeting of the OPEC+ joint ministerial monitoring committee overseeing their production agreement is scheduled for August 1, followed by a full ministerial meeting December 1.

Technicals

Technically the energies have a stepladder down look from the past several days price action. Momentum is negative for the energies on the DC charts. Notable are the large increases in open interest in WTI, Rb & ULSD from Tuesday's activity. We suspect new short positions were added, primarily in the September and October contract months.

WTI spot futures see support at 80.88-80.95, tested with a low of 80.81. Below that support lies at 80.18-80.23. Resistance comes in at 82.41-82.48 and then at 83.30-83.32.

RB for August sees support at 2.4845-2.4860 and then at 2.4501-2.4517. Resistance lies at 2.5330-2.5335 and then at 2.5655-2.5660.

ULSD for August sees support at the 2.47 area. Resistance lies at 2.5295-2.5310, tested today with a high of 2.5300. Above that resistance is seen at 2.5560-2.5580.

Natural Gas - NG is down 6 ticks

NG prices are near unchanged today even as the weather forecasts call for continued heat in much of the US. The WSJ headline today reads as follows : " U.S. NG futures struggle for traction." They add :" Prices have been trading sideways this week as higher production and a drop in LNG exports offsets weather-related demand from the power sector."

Yesterday's NG price selloff during the latter half of the day was attributed to some dialing back of the heat in mid-July. But, despite consistent gains in wind & solar generation this year, Monday saw natural gas generation's share of the power stack reach 48.6%, which is the highest on record for any day, easily topping the 48.0% from August 28, 2023. It is also the only date ever in the month of July of a record NG percentage power burn share of total electrical generation in the Top 10 list of all power burn shares for NG, as per Celsius Energy.

The EIA in its monthly Short Term Energy Outlook (STEO) projects Henry Hub spot prices to average $2.90 in 2H24, up from $2.10 in 1H24. The EIA expects storage to end the injection season at 3.968 TCF, which is 6% above the five-year average, compared with the current 19% above average. "We expect less natural gas injected into storage than the five-year average this summer season because of relatively flat production in 2H24 and a seasonal increase in demand from the electric power sector." Last month, the EIA projected the end of October gas storage to be 3.979 TCF. The EIA in its STEO forecast that U.S. gas production will average 103.5 BCF/d in 2024. This is 1.4 BCF/d more than they forecast last month. In 2025 gas production is seen rising to 105.2 BCF/d, which is 0.8 BCF/d more than the estimate seen last month. NG demand in the U.S. in 2024 of 89.4 BCF/d was left unchanged versus last month's estimate, while that for 2025 was lowered by 0.7 BCF/d from last month's estimate. In 2025 demand s seen at 89.2 BCF/d. The expected rise in NG prices is said to be behind the drop in demand in 2025, as per the EIA.

Technically NG has neutral momentum on the DC chart, befitting the WSJ comment of a sideways market seen this week.. Support at 2.306-2.313 was almost tested today with a low of 2.315. Below this we see support at 2.262-2.268, which is the Sunday night low. Resistance lies at the highs seen the past 4 days at 2.380-2.384 and then at 2.440-2.448.

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.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC