Energy Market Update 7-3-2024

Crude is  up  21 cents        RB is down 1.40 cents     ULSD is down 1.61 cents

Overview

Crude oil is up slightly, while the products are down, which is somewhat befitting the API data from last night. Crude supplies fell much more than forecast, while gasoline supplies built, which is contrary to the expected draw.

Yesterday's selloff in the energies was attributed to technical indicators and less fear of disruption to oil facilities due to Hurricane Beryl. Today's limited rally is said to be due to economic headwinds from China and the euro zone, as per Reuters commentary.

The Caixin Chinese Services PMI reading for June was the lowest in 8 months. Confidence hit a four-year low in June, dragged by slower growth in new orders. The Caixin Services PMI eased to 51.2 from 54.0 in May, marking the lowest reading since October 2023, but remaining in expansionary territory (over 50)  for the 18th straight month. Business confidence levels eased to the lowest level since March 2020 with concerns about the global economy and rising competition. (Reuters)

API               Forecast         Actual

Crude Oil      -0.7/-1.1         -9.163

Gasoline       -1.1/-1.3        +2.468

Distillates       -1.2              -0.74

Cushing         +0.334         +0.404

Higher production in Nigeria and Iran boosted OPEC’s oil production in June for a second month in a row, according to the monthly Reuters survey published on Tuesday. OPEC’s 12 producers pumped 26.7 MMBPD of crude oil in June, up by 70 MBPD from May. Nigeria boosted output by 50 MBPD, as per the Reuters survey. Bloomberg's production survey for June saw OPEC producing 26.98 MMBPD, down 80 MBPD versus May. The survey showed that Iraq and the United Arab Emirates have yet to fully implement cutbacks agreed in tandem with other leading members at the start of this year. Baghdad has also failed to follow through on additional compensation curbs pledged to offset earlier cheating. In June, Iraq reduced output by 30 MBPD to 4.25 MMBPD. A pullback in exports brought the country closer to its designated ceiling, but Baghdad still remains about 250 MBPD above that quota, even before the lack of extra “compensation cuts” are factored in. (World Oil.com)

On Wednesday in Asian trading, Cash Dubai's premium to swaps fell 25 cents to $1.67 per barrel. (Reuters) Expectations are for Saudi Arabia to lower their flagship A-Light OSP for Asian customers for August loadings by 60-80 cents when they are issued. The OSP's are normally released on the 5th of the month.

The US National Hurricane Center also said that modelling indicates that the storm will begin to deteriorate as Beryl encounters moderate-to-strong vertical wind shear. The storm will also weaken as it makes landfall on the Yucatan peninsula as a low-category hurricane before emerging as a tropical storm over the Gulf of Mexico.

Technicals

Momentum for the products on the DC charts have turned negative, while those for the crude oils remain positive, though nearly overbought.

Brent spot futures yesterday filled the gap on the DC chart to 87.46 to a tee. Above that resistance comes in at 88.78-88.83. Support lies at 85.79-85.80 and then at 84.85-84.88.

WTI spot futures see support at 82.39-82.44 and then at 81.38-81.44. Resistance lies at 83.85-83.91 and then at 84.38-84.46.

ULSD for August sees support at 2.5785-2.5790 and then at the 2.54 area. Resistance lies at today's and yesterday's highs at 2.6355-2.6360 and 2.6595.

August RB sees support at 2.5300-2.5317 and then at 2.5090-2.5105. resistance lies at 2.5930-50 and then at Tuesday's high of 2.6150. The market today has tested the 100 day moving average on the DC chart. That average lies at 2.5570.

Natural Gas--NG is down 4 ticks

NG is near unchanged as the market yesterday sold off to a 7 week low on Tuesday due to rising production and some reductions in demand forecasts. Will a storage build number today that is bullish versus last year and the 5 year average and a technically oversold condition for the spot futures be catalysts for a small rally today??

"Rising production continues to be a big concern with volumes continuing to hover steady close to 101 BCF/d, up more than 3 BCF/d from the Spring lows and “only” down -1-2 BCF/d versus last year. This has been accentuated by steadily rising production receipts on the Mountain Valley Pipeline, which were revised above 1 BCF/d for Monday," which is more than 50% of available capacity on the line. (Celsius Energy)

On Tuesday, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 98.5 BCF/d this week to 104.5 BCF/d next week. These forecasts were down a total of 2.6 BCF/d from Monday's estimate and down a total of 4.6 BCF/d from Friday's estimates.

Demand will be hurt by Hurricane Beryl that will drop temperatures in Texas by about 7-8 degrees below normal next Monday through Wednesday.

The EIA storage number to be issued today at Noon today is forecast as a build of 28 to 33 BCF. This compares favorably to last year's build of 76 BCF and the 5 year average build of 69 BCF.

In the spot market, next-day gas prices at the Waha hub in the Permian basin plunged by about 123% to a negative 52 cents/MMbtu for Tuesday as pipeline constraints trapped gas in the Permian Shale. It was the third time in six days that Waha prices fell into negative territory during the current heat wave and the 20th time so far this year. (Reuters)

Technically NG spot futures are having an inside day today versus the price range seen Tuesday. Momentum is oversold basis the DC chart. Support for the spot futures is seen at 2.385-2.389 and then at 2.306-2.313. Light resistance lies at 2.508-2.510 via the August 60 minute chart. Above that resistance is seen at 2.573-2.575.

Disclaimer

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