Energy Market Update 7-16-2024

Crude is down $1. 47        RB is down 4.28 cents         ULSD is down 5.34 cents

Overview

A WSJ headline sums up why energies are lower today :  Oil prices ticked lower on concerns over China's demand outlook, despite dovish comments from Jerome Powell ramping up bets on a September rate cut.

Monday's weak Chinese GDP data and lower crude imports are weighing on the energies. Diesel demand for the first 5 months of the year is down 14%. The second quarter GDP reading was the slowest since the first quarter 2023. Crude imports in June were the lowest seen this year. (Reuters)

Fed Chair Jerome Powell made remarks on Monday, which market participants interpreted as indicating that a turn to interest rate cuts may not be far off. (Reuters)

Today some fundamental news underscores somewhat why the crude curve's front end is receding :  "The North Sea physical market was also in retreat as flagship Forties traded in Monday's MOC window at +$0.60/b to the underlying Dated Brent swap on a FOB basis, having last traded at +1/b on Wednesday." (Quantum Commodities) The August September WTI spread is trading near $1.00 , after testing the upper bollinger band Friday with a high of $1.56. That sharp price drop has caused the momentum for the spread to turn negative

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Technicals

Momentum for the energies on the DC flat price charts is still negative. But, supports in WTI and ULSD have been tested overnight and held so far today.

WTI spot futures support lies at 80.18-80.23. The low is 80.22. Below that support comes in at 79.77-79.80. Resistance lies at 81.92-81.99, also tested today with an overnight high of 81.93. Above that resistance lies at 82.58-82.66.

ULSD support was tested at the overnight low at 2.4581. Below that support lies at 2.4230. Resistance comes in at 2.5043-2.5045 and then at 2.5268-2.5276.

RB August futures see support at the 2.43 area and then at 2.3988-2.3990. Resistance lies at 2.4914-2.4921, which is the prior double bottom. The overnight high is 2.4942. Above that we see resistance at 2.5209-2.5216.

Natural Gas -NG is up 2.9 cents

NG is up in what may be a relief rally as it has fallen over 15 cents in the past week with speculators seemingly having gotten quite bearish in the process. Freeport's LNG plant returning to near full capacity (yesterday it was at 5%) would be supportive for NG.

Today, Freeport's LNG facility has seen volume rise to to 0.41 BCF/day or 18% of capacity. Of course, this could be revised back lower in tonight’s late-cycle data. But, as of yesterday, despite power returning to the facility, Freeport LNG 's feed gas volume was only at 0.1 BCF/d or 5% of capacity Monday. That was the 9th day of the plant being down due to Hurricane Beryl, which has resulted in approximately 16 BCF of total lost demand. (Quantum Commodities) The company said it anticipated it would restart the first train this week and the remaining two trains shortly thereafter. (Reuters)

However, the recovery in LNG volumes at Freeport will be more than countered by a sharp (but temporary) decline at Corpus Christi such that total LNG feed gas demand will actually drop by -0.45 BCF/day to 10.75 BCF/day today, down -2.1 BCF/day versus last year, as per Celsius Energy reporting.

LSEG said gas output in the Lower 48 U.S. states rose to an average of 102.3 BCF/d so far in July, up from an average of 100.2 BCF/d in June. Celsius Energy reported Monday that U.S. NG output was holding near multi-month highs just shy of 102 BCF/d. This together with the loss of LNG export demand has weighed on prices this month.

The downdraft in NG prices Monday came even as Saturday and Sunday were the hottest days so far recorded in the U.S. this year and Monday and Tuesday were forecast to be even hotter, according to meteorologists. Power generators burned a record 54.1 BCF of gas on Tuesday July 9, according to LSEG data. (Reuters) Yet, Weather-related demand, seen strong today, is expected to cool as the week progresses. (WSJ Commentary)

Open interest on the CME for NG futures from Monday's activity rose by over 16,000 contracts ( even as August open interest fell by over 10,000 contracts.) We see the rise in open interest as being new shorts given the price action. The open interest rose in the September through January strip in Monday's data. This open interest data is in addition to Friday's news from the CFTC showing that money managers added a lot of new short positions in the week ended last Tuesday.

Technically, there is currently a double bottom on the NG DC chart from yesterday/today at 2.147 / 2.149. Below that support lies at 2.100-2.102. A move and settlement back over 2.21 would suggest a near term bottom in place. NG prices have been down in 18 of the prior 22 sessions, as per WSJ reporting. Resistance above is seen at 2.246-2.249 via the August 60 minute chart. Above that resistance lies at 2.284. Momentum remains near oversold, but is neutral

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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