Energy Market Update 7-15-2024

Crude is up 2 cents       RB is down 1.33 cents       ULSD is down 0.69 cents

Overview

Crude oil prices are near unchanged, while products are lower as a stronger dollar and weaker than expected Chinese GDP data weigh. But, the words used in news wire commentaries are :" steady", "drifting sideways", "waver" & "holding ground".

China's 2nd quarter GDP grew at a +4.7% pace, less than the Reuters forecast of +5.1%. The second quarter reading was the slowest since the first quarter of 2023. A +5.3% pace was seen in the first quarter this year. Reuters commentary was as follows: " protracted property downturn and job insecurity knocked the wind out of a fragile recovery, keeping alive expectations Beijing will need to unleash even more stimulus."

Additionally, weak Chinese data was seen in the refinery thruput for the first 6 months of this year. Output for the first six months ran at a pace of 14.44 MMBPD. This was down 0.4% from the corresponding period last year, the data showed, for the first decline in year-to-date volumes since the end of 2022, according to Reuters’ records. China's refinery output in June fell 3.7% from the pace seen a year earlier, official data showed on Monday, down for a third month amid planned maintenance and as lower processing margins and lackluster fuel demand pushed independent plants to cut runs. Refiners processed 14.19 MMBPD, the lowest levels so far this year.  Smaller independent processors in the eastern refining hub of Shandong province dropped their run rate further in late June to 50.92% of their capacity, according to estimates by Chinese consultancy Oilchem. That is the lowest since at least the start of 2023 and down from 61.08% a year earlier, Oilchem data showed. Smaller plants are really struggling with very weak margins, as demand, especially diesel, is falling behind expectations,” said a Shandong-based crude oil trading manager with an independent refiner. During January and May, Chinese gasoline demand dropped nearly 2% on the year, with diesel down 14%, according to commodities consultancy Sublime China Information. (Reuters)

Supportive for the energies is the expectation of an interest rate cut by the Fed. Markets are pricing in a 96% chance the Fed will cut rates in September, up from 72% a week earlier, as per the Fedwatch on the CME.

The Baker Hughes oil rig seen Friday showed a showed a decrease of 1 unit.

Friday's CFTC COT report showed money managers trimmed their ULSD position, while adding to their RB length and keeping their WTI position basically unchanged in the week ended Tuesday July 9. RB length rose by 5,079 contracts. Money managers raised their ULSD net short positioning by 6,653 contracts. Net long WTI positioning on ICE/CME combined rose by 559 contracts. ING offers the following information and commentary on Brent oil positioning by money managers : " Speculators increased their net long in ICE Brent by 4,438 lots to 200,249 lots, which still leaves the net long some distance from the recent high of almost 335k lots in mid-April. The market needs a fresh catalyst to bring in a new round of sizeable speculative buying, particularly with demand concerns hanging over the market. " ING added the following re Gasoil positioning : "ICE gasoil saw a fair amount of speculative longs liquidating. The managed money net long fell by 12,449 lots to 82,798 lots over the last week. (That is a drop of 15% in the net long position.) Given the bearish fundamentals for middle distillates, ING still believes that speculators are overextended and could see further selling in the weeks ahead."

Technicals

Momentum remains negative for the energies on the DC charts. The highs of today's session were seen on the opening last night. Also technically, the current prices seen for the spot energy contracts are below all of the highs seen last week, suggesting an overall trading range for now.

WTI spot futures see support at the overnight low at 81.61-81.64 via the August 60 minute chart. Below that support lies at 80.81-80.88. Resistance lies at 82.66-82.72 and then at 83.32-83.35.

RB spot futures see support at the overnight low at 2.4859-2.4865. Support lies below that at 2.4501-2.4517. Resistance comes in at 2.5331-2.5346 and then at 2.5655-2.5660.

ULSD for August sees support at 2.4857-2.4872, tested with an overnight low of 2.4861. Below that support lies at 2.4675-2.4693. Resistance is seen at 2.5295-2.5310 and then at 2.5500-2.5510.

Gasoil spot futures see their momentum to the downside waning. Does this suggest that the long liquidation seen above is nearly finished? Support lies at 765.75-766.00. Resistance comes in at 787.00-787.50

Natural Gas - NG is down 11.0 cents

NG spot futures are lower as a cooler weather pattern is forecast after the heat wave in the East ends in the next few days and LNG feed gas volumes remain low due to Freeport's facility still being offline. It is said to be due back in 3-4 days.

The weather forecast from the NOAA suggests that overall, the next 4 weeks will barely see any above average temperatures through much of the U.S.. But, the heat is still on for a few days this week. The National Oceanic and Atmospheric Administration (NOAA) is a federal agency.

LSEG estimated on Friday that we will see 257 cooling degree days (CDDs) over the next two weeks in the Lower 48 U.S. states, slightly higher from the 252 CDDs estimated on Thursday. The normal is 204 CDDs for this time of year.

Baker Hughes' NG rig count seen Friday showed a decrease of 1 unit.

The CFTC COT report issued Friday showed money managers flipped their position from a small net long to net short. Money managers added 36,907 contracts of new shorts in futures/options on the CME in the week ended Tuesday July 9. This made their total position net short 34,317 contracts.

Technically August NG has light support at 2.214, tested with a low so far today of 2.213. Better support lies down at 2.133-2.142. Resistance comes in at the highs seen Thursday/Friday at 2.343-2.350. Momentum on the DC chart is neutral at an oversold level, but this has been the case for the past 10 days.

The following question was posed by a technical analyst: " How Long Will “Sell the Rally” Dominate the Market?"

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