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Crude Oil Inventories Declined by 3.4 Million Barrels
By: Vladimir Zernov | July 10, 2024
Key Points:
• Gasoline inventories decreased by 2.0 million barrels from the previous week.
• Strategic Petroleum Reserve increased from 372.6 million barrels to 373.1 million barrels.
• WTI oil is trying to settle above the $82.00 level.
On July 10, 2024, EIA released its Weekly Petroleum Status Report. The report indicated that crude inventories decreased by 3.4 million barrels from the previous week, compared to analyst consensus of -3.0 million. At current levels, crude inventories are about 4% below the five-year average for this time of the year.
Total motor gasoline inventories declined by 2.0 million barrels from the previous week, compared to analyst forecast of -0.5 million barrels. Distillate fuel inventories increased by 4.9 million barrels.
Crude oil imports increased by 214,000 bpd, averaging 6.8 million bpd. Crude oil imports averaged 6.7 million bpd over the past four weeks.
Strategic Petroleum Reserve increased from 372.6 million barrels to 373.1 million barrels as U.S. continued to buy oil for reserves.
Domestic oil production increased from 13.2 million bpd to 13.3 million bpd. This is an important development which shows that current prices provide sufficient incentives to boost production.
WTI oil made an attempt to settle above the $82.00 level as traders reacted to the EIA report. Interestingly, rising domestic oil production did not serve as a beraish catalyst for WTI oil in the near term. Traders focused on falling crude oil and gasoline inventories, which indicate that demand is strong. A move above the $82.00 level will push WTI oil towards the nearest resistance at $83.50 – $84.50.
Brent oil settled near the psychologically important $85.00 level after the release of the EIA data.
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Inflation Not The Only Risk We Face. The Energy Report
By: Phil Flynn | July 10, 2024
Fed Chairman Jerome Powell knows how to throw cold water on a commodity rally, and he did so after he told a Senate Banking committee inflation is not the only risk the economy faces.
And while I can scare myself to sleep thinking about the many risks posed by this governments reckless spending and crazy foreign policy moves, one risk that is real and one that we have been warning about is a coming energy shortfall created by crazy climate policies and crazy regulations. And while folks believe that those concerns are somewhere far off in the future, the reality is, it’s a small way and we are already there.
The Energy Information Administration (EIA), in their Short-Term Energy Outlook, not only raised their price and demand projections but acknowledged that we are going to see a supply versus demand imbalance when it comes to oil. In plain English, the EIA said that global oil demands this year will reach a record 103.80 million barrels a day. But at the same time their projection of daily global oil production is inside 101.98 million barrels a day. So that means that based on those assumptions we will see global oil inventories decline by 1.82 million barrels every day.
The EIA says they estimate that global oil inventories will only fall by 0.5 million barrels per day (b/d) in 1H24 and will fall by 0.7 million b/d in 2H24. Because of that, the EIA also had to raise their oil price forecast now saying that Brent crude will average $89 a barrel in the second half of the year and that is up from $84 a barrel in the first half of the year. Regardless of how you do the math, it’s clear that because we’re heading into a supply deficit the chances of upside price spikes have increased.
Any weather-related supply disruptions or geopolitical events could leave the market vulnerable. And the market must price in this risk especially because we have seen our strategic petroleum reserve gutted in recent years. This comes as EIA had to raise its 2024 demand estimate to 1.11mbpd (was 1.08) and raised the 2025 estimate to 1.77mbpd.
On the plus side the EIA said that gasoline expenditures are not as bad as you might think. They say that a combination of falling gasoline prices, increased vehicle efficiency, and rising incomes mean U.S. households will spend about 2.3% of disposable income on gasoline in 2024 and 2.2% in 2025, less than average for the 2015–2023 period. Even though that may be the case when directly tied to gasoline prices to income, it doesn’t consider the fact that inflation is much higher than it had been during 2015 to 2023. That is why this pronouncement for the average consumer doesn’t really make them feel much better. Still the EIA projects that regular grade retail gasoline price of around $3.50 per gallon (gal) for 2025 which is slightly less than the 2023 annual average and $0.50/gal less than the 2022 annual average.
Yet the real issue going forward is the ability to power the economy of the future. The economy of the future is not electric cars, but on the bill to power artificial intelligence and data centers which will consume massive amounts of electricity that cannot be powered by interruptible resources and while the Energy Information Administration counts the fact that wind power is the fastest growing source of energy it is inefficient, and wind is losing the wind behind its sails.
The EIA reported that the amount of offshore wind generating capacity that is under construction or planned in the United States is in flux after two projects in New Jersey were canceled last year. Of the 7,200 megawatts (MW) of capacity reported in May in EIA’s latest Preliminary Monthly Electric Generator Inventory, projects totaling about 2,400 MW have been canceled since last December while others totaling 4,800 MW remain active in various stages of development. Besides the EIA said that, “Electric vehicles only expected to account for 7% of light vehicles by 2030. Yet the Power grid is going to have to expand quickly to meet demand and keep our economy dynamic.
The EIA said that, “The U.S. electric power sector generated 5% more electricity in 1H24 than 1H23 because of a hotter-than-normal start to summer and increasing power demand from the commercial sector. They are calling for a 2% increase in U.S. generation in 2H24compared with 2H23, with solar power, the fastest growing U.S. source, generating 36 billion kilowatthours (BkWh) more electricity in 2H24 than in 2H23 (an increase of 42%).
They say that after reviewing the responsiveness of fossil fuel generation to natural gas prices, we now expect more power generation from coal and less from natural gas than we did in our previous forecast, especially during the winter. The EIA on natural gas said that the Henry Hub natural gas spot price will average almost $2.90 per million British thermal units (MMBtu) in 2H24, up from $2.10/MMBtu in 1H24.
They say that, “Natural gas prices fell in early 2024 because of mild winter weather that reduced demand for natural gas for space heating. However, low prices reduced natural gas-directed drilling and led producers to curtail some production.
They expect dry production of U.S. natural gas in 2H24 to remain near 104 billion cubic feet per day (Bcf/d) compared with a record of more than 106 Bcf/d in December 2023.
Natural gas inventories. At the end of June, there was 19% more natural gas in U.S. inventories than the five-year average (2019–2023). 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. They forecast inventories will end the injection season in October with 6% more natural gas in storage than the five-year average.
We are facing a very tight market for oil and gas natural gas is holding up pretty well suggesting that a bottom is in the making. Be sure your hedge on your oil and gas needs.
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Natural Gas Bullish Reversal Challenges 200-Day MA
By: Bruce Powers | July 9, 2024
• Natural gas shows bullish reversal, testing key resistance levels around the 200-Day MA, setting the stage for either further gains or a continued correction.
Natural gas triggered a bullish reversal on the daily chart today as it broke out above Monday’s high of 2.39. Subsequently, the 200-Day MA was successfully tested as resistance as price was rejected below the 200-Day line from the day’s high of 2.45. Today’s high was 2.45 and the low of the day was 2.33. This sets up the first day in eight with a higher daily low and a higher daily high.
It is not surprising that resistance was seen around the 200-Day line as it was previously marking a support area. Either resistance will continue around the 200-Day MA, followed by either an upside breakout, or a bearish reversal and continuation of the correction is sustained.
Bearish Sentiment Dominates Until Rally Above 200-Day MA
Arguably, the retracement may be complete but there is not enough information yet to make that determination. There remains a lower target zone from 2.23 to 2.17 that has yet to be tested as support. If the 200-Day line continues to reflect resistance, a test of the lower support target becomes more likely. Nevertheless, the bearish scenario begins to soften on a decisive rally above last Tuesday’s high of 2.48. That will put natural gas above the 200-Day line, currently at 2.46. Strength would be confirmed on a daily close above 2.48.
Rally to Test Prior Support at 2.63?
The last breakdown price level was at the swing low of 2.635 (B) from June 24. Therefore, a swing back up to test that price area as resistance may play out if today’s daily bullish reversal can be sustained. Other price levels to watch on an upside move include the 50-Day MA at 2.54, the 38.2% Fibonacci upside retracement at 2.61, and the combined 50% retracement and 20-Day MA at 2.71. Each price area could see resistance on the way up.
Downward Pressure Remains
Given the bearish reaction today when encountering the 200-Day line resistance area, downward pressure remains. Unless there is a decisive rally above the 200-Day line with a daily close above it, the correction is set up to continue. As noted, there is a slightly lower target support zone that is derived from four price levels. Two come from previous support or resistance levels and two are from Fibonacci calculations. Just using the 61.8% Fibonacci retracement as a target level is enough. The other levels further confirm the likelihood of a 61.8% retracement prior to the correction being complete.
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Crude Oil Tests Key Support Levels Amid Bearish Retracement
By: Bruce Powers | July 9, 2024
• Testing key support at the 20-Day MA, crude oil could see a bullish breakout if the line holds and strength returns.
Crude oil continued its bearish retracement with a test of support at two lines. Today’s low was 81.42, putting the price of oil in the vicinity of the purple 20-Day MA (81.58), an earlier downtrend line, and the 50% retracement (81.23) of the full advance starting from the June 4 swing low.
Finding support and completing a retracement around the 20-Day MA would be bullish and certainly is possible. Being a trend indicator, a successful test and subsequent advance off the 20-Day line would set the stage for oil to attempt another breakout of a top trend line. That trend line is also where resistance was encountered last week following the high of 84.74.
First Test of 20-Day MA Support
Today is the first day that crude tested the 20-Day MA as support since it rallied back above the line on June 10. If the line continues to act as an area of support, crude has a chance to again attempt a bull breakout above the trendline. But a breakout above the trendline will also trigger a symmetrical triangle bull breakout.
Preparing to Break Out of Large Symmetrical Triangle
Crude has been ranging within a large symmetrical triangle consolidation pattern since last. Given characteristics of the triangle pattern, the trading range for crude has been shrinking as uncertainty prevails. Following a bullish breakout above last week’s high of 84.74, crude oil will begin to break out and get free of the triangle pattern. It has the potential to see an acceleration of the advance once there is a daily close above 84.74.
Rest Before New Breakout Attempt is Constructive
A period of retracement and/or consolidation prior to a renewed rally above last week’s high will better prepare crude for a sustained bullish breakout. Last week’s high completed a 12 point or 16.5% advance in a short 23 trading days. That put crude in an extended position and due for a correction. If the 20-Day MA continues to show support, it will put crude in a bullish position to continue its advance once there are signs of strength.
Alternatively, a decline below the 20-Day line that doesn’t quickly recapture the line is prone to a deeper retracement. In other words, bullishness is retained if there is a quick drop to the 50% retracement at 81.23 or the previous swing high at 81.00. As long as the price of crude quickly recaptures the 20-Day MA, it is showing strength that could eventually lead to a breakout above last week’s high.
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$Oil $WTIC - Tried to pop the 'Coil' last week but dropped over the last three days back inside the pattern...
By: Sahara | July 9, 2024
• $Oil $WTIC - Update
Tried to pop the 'Coil' last week but dropped over the last three days back inside the pattern...
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To Recovery Mode. The Energy Report
By: Phil Flynn | July 9, 2024
The Port of Galveston and the Port of Houston are in recovery mode as well as refiners where the biggest damage from hurricane Beryl seems to be the lack of power. There are 2.3 million still without power in Texas post Hurricane Beryl and that is one of the reasons the recovery from the storm is taking time.
Corpus Christi, the largest crude oil export port in the US, is in recovery mode. They reported that, “In response to the impacts of Hurricane Beryl, the Port of Corpus Christi Authority has now fully transitioned to Post-Storm Recovery in accordance with the 2024 Hurricane Readiness Plan. Port personnel are continuing to assess impacts; however no significant impacts have been reported. Port facilities, including the Emergency Operations Center (EOC), Security Command Center and Harbormaster’s Office have maintained continuous uninterrupted operations. Port offices will open as scheduled tomorrow, July 9, for normal operations.
Power outages shut down Marathons Galveston Bay refinery yesterday as well as tripping units at Valero’s Texas refinery. When the power comes back online they should be able to resume operations and we will be watching for updates. Hours ago, the Port of Galveston reported that Galveston Harbor and port operations remain closed as the port and federal agencies assess the impact of Beryl. The U.S. Army Corps of Engineers expects to begin surveying federal portions of waterways on Tuesday. That port is a major exporter of liquefied natural gas and oil but at the same time it is also a spot where many cruise ships start their voyage.
The Port of Houston said that, “after conducting preliminary assessments of our facilities, power, and systems, all Port Houston terminals will remain closed tomorrow (Tuesday, July 9, 2024). They will continue to assess and repair damage this afternoon and tomorrow and will send an update by 4 PM CT tomorrow if there are any further disruptions to operations for Wednesday. The key thing is whether the flooding has impacted shore production and how quickly they can get the power back on.
The futures market already is looking ahead past the storm. It will now start to focus on supply and demand, and we will get a snapshot of that today with the American Petroleum Institute (API) report that comes out at 3:30 pm central standard time. That should be the biggest market mover that we could be impacted by and any comments from Fed Chairman Jerome Powell who speaks today in front of a Senate committee. Oil traders will be listening very carefully to get a sense on whether the recent signs that The US jobs market is starting in the private sector is starting to weaken and signs that inflation has slowed impact the value of the dollar and the price of oil.
The one thing that we do know is that tonight’s API report and tomorrow’s Energy Information Administration (EIA) Petroleum Status Report will be the last reports for a while that won’t be impacted by Hurricane Beryl. This is going to give us our best snapshot of current supply versus demand and give us an idea about expectations of supply and demand going forward.
And if air travel is any indication, it looks like we are going to really be taking off. Taking to the air! The 4th of July holiday saw over 3 million people go through TSA checkpoints breaking all-time records. And lava land there’s a one-man band that will toot its flute for you! Now the question is whether that record-breaking air travel demand will translate into gasoline demand. Gasoline demand while growing has been a bit disappointing. Perhaps the 4th of July travel weekend may rewrite the weak gasoline narrative that is held back the market.
From a technical perspective, if you look at the crude oil daily chart, it could be on the precipice of a major breakout to the upside. While we haven’t broken out yet, the momentum and technical setup could be wildly bullish, and a breakout would confirm that the market is going to see a supply deficit later in the year. We think the market is flashing warning signs and while we may get a pullback from resistance, the overall fundamental suggests that you really need to be hedged because the market has a lot of room to move if we get an upside breakout.
Meanwhile gas demand in the US has still been questionable but in Brazil it seems to be rising. Bloomberg reported that Brazil’s state-controlled oil company is raising domestic gasoline prices for the first time in 11 months as crude prices have climbed and the value of the nation’s currency. Petroleo Brasileiro SA will increase gasoline prices for distributors by 7.1%, to 3.01 reais ($0.55) per liter, according to a statement Monday. The company also raised prices for liquefied petroleum gas used for cooking and heating. It left diesel prices unchanged.
China has been the beneficiary of imports of cheap Russian crude oil as world governments have to admit that the Russian price cap fantasy turned out to be a total failure. Saudi Arabia has lost some market share to Russia on exports to China but are trying to get it back. Reuters is reporting that Saudi crude oil exports to China will rebound in August to at least 44 million barrels after deep price cuts by state energy firm Saudi Aramco. August exports to China will rise for the first time in four months, from about 36 million barrels in July, the sources said. The rebound will help the biggest oil exporter regain its share in the largest import market.
Perhaps the biggest surprise in the aftermath of the hurricane with the fact that natural gas prices held up well. It’s amazing when you think that LNG exports were delayed, and production could have been impacted and massive power outages that would decrease demand so when the market holds up that well even in the face of those challenges, it makes you feel like the bottom is in. It’s probably a good time to put on some bullish strategies for natural gas because the market seems to know something.
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Natural Gas Rallies off Strong Support, Yet Lower Target Remains
By: Bruce Powers | July 8, 2024
• Natural gas saw support at 2.27, sparking a rally, but faces potential resistance at the 200-Day MA, currently at 2.47.
Following a decline to a new retracement low of 2.27 earlier during Monday’s trading session, natural gas subsequently showed signs of support and the potential for a bullish reversal day. Once support was seen from the 2.27 retracement low, a rally followed setting up a potential wide range green candle for the day.
At the time of this writing, trading continues near the highs of the day. Until there is a rally above a prior day’s high, the downtrend remains as there remains a series of lower daily highs and lower daily lows. Friday’s high was at 2.44. Following today’s close, the high for today, currently at 2.39, will be the near-term price level to watch for signs of strength.
Downward Pressure Remains
Moreover, since the downtrend price structure remains, a decline to test the next lower support zone is still a possibility. Keep in mind that rallies will be heading up into potential resistance around the 200-Day MA, currently at 2.47. Since it is a long-term moving average and the price of natural gas continued to fall after an initial decline below the line last Tuesday, it can be expected to mark an area where resistance may be encountered on the way up.
Lower Price Zone Begins at 2.23
The next lower support zone looks to be around 2.23 to 2.17. It begins with a prior swing low from December and a resistance level from early-February. A 61.8% Fibonacci retracement completes within the price zone at 2.18, while an extended falling ABCD pattern completes at 2.20. In summary, there are four indicators pointing to the 2.23 to 2.17 price zone as potential support.
Further, on the weekly chart, the 20-Week MA shows within the price zone at 2.20. The 2.17 price level is shown to have a harmonic relationship with the price drop seen in the first AB leg of the decline. Rather than the AB and CD legs of the decline being equal, a Fibonacci ratio of 127.2% is applied to the price distance seen in the AB leg and that amount is subtracted from the beginning of the CD decline.
When more than normal indicators point to a price range, the market is telling us to pay attention. Therefore, natural gas may rally further from today’s low, but it is heading into potential resistance. If resistance is strong enough it may turn the price of natural gas back down for a potential test of support beginning from the 2.23 price area.
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Sliders On The Storm. The Energy Report
By: Phil Flynn | July 8, 2024
Oil and products are sliding on the storm as some of the worst-case scenarios of Hurricane Beryl thankfully, won’t come to won’t come to be. Still as Fox Weather reports, “Hurricane Beryl made landfall around Matagorda, Texas at 3:50 a.m. CT Monday as a Category 1 hurricane with gusts over 80 mph and while the storm had 90 mph gusts and life-threatening storm surge, the markets believe that the storm will have more impact on demand than it will on supply. While Texas is seeing the storm surge inundate roads and high winds will do some damage, the long-term impact on refining and oil production will be short lived.
Reuters reported that the largest ports in Texas had closed operations and vessel traffic on Sunday to prepare for Tropical Storm Beryl. The ports of Corpus Christi, Houston, Galveston, Freeport and Texas City said they closed after condition “Zulu” was set by Coast Guard captains on Sunday. All vessel movement and cargo operations are restricted as gale force winds are expected within 12 hours.
Corpus Christi, about 200 miles (322 km) from Houston, is the top crude oil export hub in the United States. Texas City, and Freeport also are major oil and refined products shipping hubs on the U.S. Gulf Coast. Port closures could bring a temporary halt to crude exports, oil shipments to refineries, and motor fuels from those plants.
The 52-mile Houston ship channel, which on Sunday operated under transit restrictions before halting all traffic, allows access to 8 public facilities and some 200 private terminals. Almost 14,000 customers in Texas had lost electricity on Sunday evening, according to PowerOutage.us. Power provider Centerpoint Energy(CNP) said it was monitoring the storm and making preparations.
Energy infrastructure company Kinder Morgan (KMI) said on Sunday it shut its West Clear Lake and Dayton natural gas storage facilities, and its Texas City natural gas processing facility ahead of the storm.
Freeport LNG’s liquefaction trains 1, 2 and 3 and a pre-treatment facility were proactively shutdown due to impacts associated with Beryl. Plant operators later restarted them “as efficiently as possible to minimize flaring,” according to a filing with The Texas Commission on Environmental Quality. Freeport said on Sunday that it had ramped down production at its liquefaction facility and intends to resume operations once it is safe to do so after the weather event. Liquefied natural gas producer Cheniere Energy said on Sunday its Corpus Christi facility was operating without interruptions, but all nonessential personnel were released. “Our Gulf Coast assets have robust and proven severe-weather preparedness,” it said in a release. Chemical maker Chemours Co(CC), which has a production facility near Corpus Christi, said on Sunday it escalated its hurricane preparedness plans “to include planning for safe and adequate staffing during and after the storm and securing equipment and assets, should the storm make landfall near our site. “Enbridge Inc (ENB), which operates large crude export facilities near Corpus Christi, said all U.S. Gulf assets were operational, adding that they had activated emergency plans. Gibson Energy (GBNXF), which also operates an export facility in the area, said on Sunday all Gateway and Houston based employees were safe, and facilities and docks were secured after the port of Corpus Christi closure.
Citgo Petroleum Corp was cutting production at its 165,000 barrel-per-day Corpus Christi refinery on Saturday, sources said. The refiner plans to keep the plant in operation at minimum during Beryl’s passage. Some oil producers, including Shell and Chevron (CVX) , had also shut in production or evacuated personnel from their Gulf of Mexico offshore platforms. Yet, the one thing that we do know is that even though we have seen some significant shutdowns most of them will start reopening later today.
There is some talk that the prospect of a ceasefire deal in Gaza could lower energy prices but it has really been a situation where the prospect of a ceasefire in Gaza seems to be a delaying tactic that we have seen time and time again from Hamas.
The AP reported that, “Several officials in the Middle East and the U.S. believe the level of devastation in the Gaza Strip caused by a nine-month Israeli offensive likely has helped push Hamas to soften its demands for a cease-fire agreement. Hamas, over the weekend, appeared to drop its longstanding demand that Israel promises to end the war as part of any cease-fire deal. The sudden shift has raised new hopes for progress in internationally brokered negotiations. Israeli Prime Minister Benjamin Netanyahu on Sunday boasted that military pressure — including Israel’s ongoing two-month offensive in the southern Gaza city of Rafah — “is what has led Hamas to enter negotiations.”
There’s been a lot of questions about Chinese oil demand. The reality is that demand for oil in India is continuing to be very strong. It was reported this morningthat India’s well demand rose 2.6% year over year to 5.3 million barrels a day. And for diesel increase by 1% to 7.984 million metric tons in gasoline demand was up 4.6% to 3.266 metric tons.
OPEC is showing signs that they are serious about production cuts. Argus reported that, “Opec+ crude output by members subject to cuts fell for a third straight month in June, as lower Russian production offset rises from some serial overproducers.” Argus said that OPEC Plus production fell by 90,000 b/d to 33.98mn b/d in June, according to Argus estimates, the lowest in three years. But it could have been lower, with the alliance overshooting its target for the month by 130,000 b/d.
The nine Opec members subject to cuts were 150,000 b/d above target in June, but this was partially offset by the nine non-Opec members of the group, which produced 20,000 b/d below.
Leading non-Opec producer Russia has driven much of the alliance’s output falls in the past three months, as a pre-existing export cut pledge was replaced with an output reduction. And while it reduced production by 120,000 b/d to 9.14mn b/d last month, this was still well above its target of 8.98mn b/d. Much steeper falls could be on the horizon from Russia if it makes good on a promise to compensate for producing above target in recent months.
Kazakhstan was another big overproducer last month, with its output rising by 80,000 b/d to 1.56mn b/d — 90,000 b/d above target. Despite outlining a plan to drive down output and compensate for overproducing this year, Kazakhstan has not met its target in any of the first six months of 2024. But lower production is on the horizon, with Kazakhstan undertaking maintenance at key fields later in the year — probably in August and October, according to its initial compensation plan.
Iraq was again the alliance’s largest overproducer last month, with output rising by 40,000 b/d to 4.2mn b/d — around 200,000 b/d above target. Like Kazakhstan, Iraq has failed to meet its target in any month this year, despite also outlining a plan to compensate for producing above quota. Rising summer temperatures boosted crude burn for power generation last month, but most of its overproduction is down to Baghdad’s unwillingness to acknowledge surging production from the semi-autonomous Kurdish region. Iraq and Kazakhstan’s combined overproduction has averaged 290,000 b/d this year, making their task of compensating much harder in the coming months.
In contrast, an emerging number of Opec+ members have been unable to hit their production targets in recent months. Grappling with natural decline and upstream challenges, Azerbaijan produced 80,000 b/d below its target of 550,000 b/d in the first six months. Malaysia also underproduced, by an average of 40,000 b/d in the same period. War-torn Sudan’s production has fallen to just 20,000 b/d from pre-conflict levels of around 70,000 b/d. And South Sudan, which is entirely reliant on Sudan for its exports, has seen its production more than halve owing to the continuing war.
We think both oil and natural gas are going to see some pressure off the storm but will present good opportunities for longer term hedges. Be patient and get ready to put on a hedge. The key thing here is that demand for oil is going to continue to be strong and we should see significant drawdowns in in the coming weeks. We are looking for crude oil supplies to be down 3,000,000 barrels this week and we also expect diesel supplies and gasoline supplies to be down by the same amount at 3,000,000 barrels. Refinery run should uptick by 1.0.
Fed chief Jerome Powell testifies before Congress, with inflation data due later in the week.
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Energy Sector $XLE Concerning that Crude is very strong and this sector can't get going
By: Options Mike | July 7, 2024
• $XLE Concerning that Crude is very strong and this sector can't get going.
Back under the 8/21D not much to do here
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Natural Gas Hits New Low as Bears Dominate Market
By: Bruce Powers | July 5, 2024
• Natural gas is trading near its daily lows, reinforcing a bearish weekly outlook and increasing the chance of hitting the next lower support zone.
Natural gas continued its retracement on Friday with a new trend low of 2.32. That puts it below a potential support range identified from 2.37 to 2.34. Therefore, the lower support zone from around 2.23 to 2.17 is the next lower target zone. The low of the day was 2.32 at the time of this writing, and trading continues near the lows of the day.
It will likely end the session in a weak position, closing in the bottom quarter of the week’s range. This would keep natural gas in a bearish position for the weekly time frame heading into next week and consequently improve the likelihood of reaching the next lower target zone before the retracement is complete.
Significance of Correction?
So far, the correction down from the 3.16 peak (A) has seen the price of natural gas decline by 0.86 cents or 26.7%. How does that compare with prior bearish corrections? Since the initial February 2023 trend bottom there have been five corrections with a decline of greater than 20% and three that saw drops of more than 26%. Those three corrections were 55.1%, 38.7%, and 35.7%.
Given the history, since a 26% decline has already been exceeded as well as the support zone, the potential of a minimum 35.7% has become more likely. This does not mean that it will happen, but the chance for it to happen has increased. If natural gas reaches 2.03 it will have dropped by 35.7% from the most recent swing high. That will be a pivot zone to watch if it gets that low.
Bears Dominate Bigger Picture
In the bigger picture the bears dominate as there remains a series of lower swing lows and lower swing highs on the chart. That pattern will remain unless there is a rally above the most recent swing high of 3.16, followed by a daily close above it to confirm strength. From the February bottom, the first upside breakout triggered on a move above the top of a symmetrical triangle bottom at 2.00. If a roundtrip is in process, the area around 2.00 could be tested as support given its significance initially as resistance. Of course, that would also more than match a 35.7% price correction.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | July 5, 2024
• Top Movers
Tokyo Palladium Futures 3.92 %
AU - Victoria Base-Load Electricity Futures 3.39 %
Tokyo Silver Futures 2.65 %
Palm Kernel Oil 1.93 %
ICE Newcastle Coal Continuous 1.1 %
• Bottom Movers
NSW Baseload Electricity Continuous 3.23 %
AU - Queensland Base-Load Electricity Futures 2 %
London Aluminum Spot 1.02 %
London Nickel Spot 0.56 %
Tokyo Rubber Futures 0.45 %
*Close from the last completed Daily
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Oil Independence! The Energy Report
By: Phil Flynn | July 3, 2024
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness and if possible, a couple of barrels of oil. The threat to American Energy Independence is clear as the Biden administration campaign to end fossil fuels has had any real effect on global energy demand that will hit all-time highs and sadly has empowered our adversaries and challenged US energy producers. In fact for years one of the biggest threats to our like liberty and sacred fortunes was our dependence on oil supply from countries that did not have our best interests at heart. Yet by the daring risk taking from our founding fathers in the shale patch, like George Mitchell and the late Aubrey McClendon and many others, they were able to start a shale revolution that against all odds set an unlikely path to energy independence.
America was always been thought of as exceptional and these men has made it so. In 2020 the United States became a net exporter of petroleum for the first time since at least 1949. In 2022, total petroleum exports were about 9.52 million barrels per day (b/d) and total petroleum imports were about 8.33 million b/d, making the United States an annual net total petroleum exporter for the third year in a row according to the Energy Information Administration (EIA).
Yet instead of building on this progress, sadly we have a political environment that has seen the Federal government become more hostile to the energy freedom to the oil and gas industry fought so hard to preserve. Instead of working with the US oil and gas industry, they have made them enemies, accusing them of price fixing and war profiteering. I anyone has interfered with prices it has been the Biden administration.
In another desperate attempt to curb gasoline prices, it was announced very conveniently just a few minutes before the 1:30pm central settlement time yesterday that the Biden administration was going to release 1.0 million barrels of gasoline from the reserve. While it won’t impact gasoline prices that are back on the rise going into the Independence Day holiday too much, it is yet another attempt by Biden to deflect blame for his inflationary policies.
This is the same administration that tapped the Strategic Petroleum Reserve to try to cool prices before the Russian War with Ukraine. New reports released saying banks are cracking down on Russian oil and gas exports and it was just reported that India’s crude oil imports from Russia zoomed to a 13-month high in June even as the discounts on Russian crude have narrowed, according to an analysis of data provided by intelligence firm Kpler.
The significant increase in Russia’s share in India’s oil imports can also be attributed to the resumption of imports of more grades of the commodity other than Urals, including Sokol, which faced some issues in the beginning of the year. The country imported 2.13 million barrels of crude oil per day from Russia last month, up 7.2% from the previous month, the data showed. This was the highest since May 2023 when imports from Russia stood at 2.15 million barrels per day. In fact, imports from the Urals reached their all-time high of 1.6 million barrels per day in June reported by Financial Express.
Yet have here in the US, the American Petroleum Institute reported that we saw a significant 9.163-million-barrel drop in crude oil supplies which could be the first of many in the coming weeks. And while we saw a 2.468 increase in gasoline supplies that are raising concerns about weak gasoline demand once again, the preponderance of evidence suggests that we’re going to see further crude draws in the coming weeks.
The API reported that diesel supply fell by 74,000 barrels.
The other thing that is going to keep the market tight is OPEC production cuts. We saw a report that OPEC oil output did rise by 70,000 barrels in May to just 26.70 million barrels for the 2nd consecutive month.
Thre is a perception that OPEC will continue to stay committed to holding the line on production as oil prices have recovered from the OPEC taper tantrum.
Even concerns that OPEC revenues falling might break the will of the cartel seem to be overstated. OPEC revenue fell by $149 billion year over year to $680 billion. The expectation is that they’re going to hold the course and keep supplies tight and that increases the odds of a supply deficit as we move forward.
Yet there is hope. Never trade liberty for security. I think the days of the Federal government crucifying a few innocents to send a message to others are coming to an end. The AP reported, “The Supreme Court The court’s 6-3 ruling on Friday overturned a 1984 decision colloquially known as Chevron that has instructed lower courts to defer to federal agencies when laws passed by Congress are not crystal clear.
The 40-year-old decision has been the basis for upholding thousands of regulations by dozens of federal agencies but has long been a target of conservatives and business groups who argue that it grants too much power to the executive branch, or what some critics call the administrative state. This should be a huge win for the economy, as the government now will have to make very clear goals of what producers can do and this should open up the investment and gas projects and not have to be so concerned that after massive investments have been made, the government can change the rules of the game on a whim. And I’m not even talking about the Keystone XL pipeline. ALSO a judge blocked Biden’s LNG export pause.
Stay tuned to Fox Business and load the Fox Weather app to the track of hurricane Beryl, the earliest category 5 storm on record. It could become an issue for oil and gas. Currently most of the computer models have the storm missing the key oil platforms, refineries and infrastructure in the US. But if the track changes so could the fortunes of oil and gas.
The biggest risk is if the storm boomerangs up closer towards Texas that could put some of the LNG export terminals at risk as well as some US refineries. Fox Weather is reporting that, “Deadly Hurricane Beryl slowly weakened to a Category 4 hurricane on Tuesday as the historic storm continued to spin across the Caribbean Sea with Jamaica and the Cayman Islands in its crosshairs Wednesday. It’s the next move for Hurricane Beryl after the storm made landfall Monday in Carriacou Island, Grenada, as a powerful, high-end Category 4 hurricane with winds of 150 mph. At least six people were killed across the region, and government officials on several islands fear that number could rise as surveys are conducted.
And now, as Hurricane Beryl continues to make its way closer to Jamaica and the Cayman Islands, residents are holding their breath and rushing to complete last-minute preparations while praying for the hurricane to wobble further south and spare the region. But with the storm just hours away, it appears likely the island will feel nearly the full fury of the storm as the eye may scrape or pass just south of the island.
We get the Energy Information Administration report on time at 9:30a but also we will get the natural gas report at 11:00a central time. We are looking for an injection of 33 BCF.
EBW Analytics on Natural Gas says that Near-term weather continues to underperform, shedding an incremental 17 CDDs over the past week to allow NYMEX futures to sag below the $2.50 threshold. Key technical support at $2.37/MMBtu may offer support.
After the 4th of July weekend passes, rebounding heat and post-holiday demand—the subsequent four EIA storage weeks may average 99 CDDs/ week—may lead to rising power burns and stem the bleeding for natural gas. Scorching heat is forecast to endure into August. If forecasts verify, NYMEX futures could trend higher. Still, the weather bust of the past three weeks has led the market to refocus on bloated storage levels—mitigating upside.
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Crude Oil Reverses at Key Resistance, Forms Bearish Pattern
By: Bruce Powers | July 2, 2024
• Crude oil's rally to 84.64 reversed at key resistance, forming a bearish shooting star pattern and indicating a likely pullback before another breakout attempt.
Crude oil rallied to a high of 84.64 on Tuesday before sellers took back control and turned it back down. That high completed a 78.6% Fibonacci retracement and a 11.91 point or 16.4% rally from the trend low at 72.73. Further, resistance around the higher downtrend line was successfully tested as resistance as well as crude reversed lower shortly after.
Subsequently, crude is on track to close weak, in the lower quarter of the day’s trading range, and with a bearish red shooting star candlestick pattern. Today is the first sign of weakness. So, a continuation lower is the most likely path before buyers return to take another attempt at a bullish trendline breakout. Therefore, crude remains within a large symmetrical triangle price formation.
Test of Trendline Support
Support was seen today at a low of 82.98, close the 83.02 resistance from Friday. That low completed a test of support at the lower internal uptrend line. Over the coming few days the 83.02 to 82.98 rough price zone can be used as a proxy for potential support around the line. The top of a small expanding triangle may provide another price area where support is seen. Other possible support areas to watching during a pullback include this week’s low of 81.69, followed by the prior swing high of 81.00 from late-May.
Completed 16.4% Advance
Crude just had a healthy aggressive rally that stopped and reversed right on target (downtrend line/78.5% Fibonacci level) It shouldn’t be surprising that momentum has reversed to the downside. Profit taking has become more aggressive as the target is relatively obvious.
If crude had instead continued above the downtrend line, the further it went the greater the chance for a sharper correction. The developing pullback should eventually provide a more reliable launching pad for another attempt at an upside breakout. The second breakout may have a better chance of seeing a sustained advance above the downtrend line.
Monthly Bullish Reversal Triggers
Finally, the monthly chart (not shown) confirms a bullish move. A bullish monthly reversal was triggered yesterday as crude rallied above last month’s high of 83.02 and then closed above it on a daily basis. Since the longer-term time provides the more dominant pattern, crude has a good chance of again breaking out of the symmetrical triangle pattern with another rally and daily close above the downtrend line.
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Natural Gas Breakdown Signals Lower Targets
By: Bruce Powers | July 2, 2024
• Natural gas broke below the 200-Day MA and prior swing low, signaling a bearish reversal with the next target zone between 2.37 and 2.34.
The 200-Day MA failed to hold as support on Tuesday as natural gas broke below it to reach a low of 2.415 for the day. It is on track to close below the 200-Day line as well. In addition, the prior swing low of 2.47 from May 28 was broken to the downside triggering a bearish reversal. This puts the next lower target zone of 2.37 to 2.34 in line as a downside target. The price zone is comprised of the 50% retracement of the full upswing and the completion of a descending ABCD pattern, respectively. As of today’s low, natural gas was down by 23.6% from the June peak.
200-Day Line Fails to Hold as Support
Both the long-term 200-Day MA and intermediate 50-Day MA failed to stop the descent in the price of natural gas. And it is on track to close clearly below the line today. This increases the short-term bearish outlook and the chance to reach lower targets before the retracement is complete. Below 2.34 begins a price zone from 2.235 to around 2.18.
Nonetheless, this does not mean that natural gas continues straight down as it has the past several days. A bounce is coming sometime. If it comes soon, the first sign of strength would be on a rally above today’s high of 2.48. Potential resistance around the 200-Day MA at 2.47 and the 50-Day line at 2.49 should also be considered, followed by this week’s high of 2.60.
Result of Failed Trendline Breakout
Natural gas is reacting to a failed trendline breakout that began in early-June. It was able to stay above the long-term downtrend line for only four days before it succumbed to selling pressure. Bearish implications were confirmed today with the drop below the 200-Day line. This means that the recovery could take some time.
Possible Time Symmetry
Let’s quickly analyze the timing of the current retracement. As indicated above, it takes the shape of a falling ABCD pattern. The AB decline of the pattern occurred in eight days while the current CD down leg is now in its fourth day. Will a retracement low be reached after an eight-day decline for the CD leg of the pattern? If it does, time symmetry will be represented. As with price, once swings match in time a potential pivot point has been identified.
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Falling Apart. The Energy Report
By: Phil Flynn | July 2, 2024
The Biden administration’s warped energy policy is continuing to fall apart as they lose in the courts and lose with scientific realties. This comes as hurricane risk and geopolitical risk factors are adding to the bullishness in the market. Fox Weather is reporting that Hurricane Beryl has been upgraded to a Category 5 hurricane in the Caribbean with sustained wind speeds at 160 mph. This storm is ‘extremely rare and extremely dangerous’ and the earliest category 5 on record.
Yet storm risk is taking a back seat to geopolitical risk factors and signals of the potential for record breaking holiday demand. Not only do we have US military bases on high alert for a credible threat of terror attack now we have the Iranian backed Houthi rebels daring the US to defend international waters tweeting that, “The next Aircraft Carrier that comes into the Red Sea will be our primary target”.
Even without the storm, the markets are starting to price in a global oil supply deficit as the spreads are suggesting that the markets are already starting to tighten significantly. In the big picture, the market is realizing that the lies that alternative fuels and electric cars would lead to a demand slowdown was greatly exaggerated. Demand is on track to hit a record high and massive Energy Information Administration (EIA) Adjustments could be swinging back which could lead to some big-time crude draws in the coming weeks. Fox News reports that, “AAA forecasts a record 71 million people traveling 50 miles or more through the weekend after the holiday, beating pre-pandemic numbers. Over 60 million people will hit the road. More than 57 million will take to the air, and almost 5 million will be cruising or taking buses and trains.
Tonight, we get the American Petroleum Institute (API) supply report and we expect crude to draw by 3 million barrels. I also think that Gasoline supply and Distillate supply should fall by about 3 million barrels as well.
At the same time world events along with the Biden administration ceding more power to the OPEC Plus Russia cartel are looking more dangerous. Biden seems to want to clamp down on US and oil and gas producers but continues to offer oil production opportunities to Iran and Venezuela. After the Biden administration reimposed sanctions on Venezuela after they failed to follow through with their promise to allow free and fair elections, they are now concerned about the possibility of sharply rising gasoline and diesel prices going into the election. So why not go back to their favorite neighborhood dictator?
Oil Price is reporting Venezuela’s president, Nicolas, Maduro, has accepted a U.S. proposal for a new round of talks on local policies and the future of U.S. oil sanctions on Caracas. “I have received the proposal during two continuous months from the United States government to reestablish talks and direct dialogue,” Maduro said on Venezuelan television, as quoted by the Associated Press. “After thinking about it for two months, I have accepted, and next Wednesday, talks will restart with the United States government to comply with the agreements signed in Qatar and to reestablish the terms of the urgent dialogue,” the Venezuelan president said.
And based on what we’re seeing in the crack spreads here in the United States, you can see why the Biden team might be getting nervous. While today’s national average at $350.1 a gallon is slightly lower than a year ago and the lowest since 2021. The signs are that prices could jump higher as the week continues. So, the upside risks that we’ve been warning about are starting to come to fruition. We need to hold on to our hat as we get closer to the holiday weekend and the end of the week.
The EIA natural gas report will be released a day early. We are looking at a 33 bcf injection. Weather will continue to be the major factor driving prices.
Reuters is reporting that Federal judge halts US government’s ban on LNG permits. “A federal judge on Monday blocked the U.S. government’s ban on approving applications to export liquefied natural gas (LNG), in response to a lawsuit by Republican-led states. U.S. District Judge James Cain Jr, in Louisiana, a Trump appointee, ruled that the LNG export ban “be stayed in its entirety, effective immediately.” A coalition of 16 Republican-led states, including Texas, Louisiana and Florida, had filed suit in March in Lake Charles, Louisiana, arguing that the administration of Democratic President Joe Biden lacked the authority to broadly deny the permits. They claimed the U.S. Department of Energy’s (DOE) pause on exports would harm the U.S. economy and undermine efforts to supply foreign allies in Europe with steady supplies of LNG as the region seeks to wean itself off piped gas from Russia.
The Biden administration said in January the pause would allow officials to review the process for analyzing economic and environmental impacts of projects seeking approval to export LNG to Europe and Asia where the fuel is in high demand. The January move was cheered by climate activists, an important part of Biden’s base, and could have delayed decisions on new plants until after the Nov. 5 presidential election, when Biden will face off against Republican former President Donald Trump.
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Natural Gas Falls to Crucial 200-Day Moving Average
By: Bruce Powers | July 1, 2024
• Natural gas retraces to test 200-Day MA support at 2.47, facing bearish pressure with potential for further decline to 50% retracement and ABCD pattern targets.
Natural gas continued to retrace its prior advance on Monday and fell to test support around the 200-Day MA at 2.47. At the time of this writing, it had reached a low of 2.47 and it continues to trade near the lows of the day. Potential support around the 200-Day MA is enhanced by the 50-Day MA. Both moving averages have converged to identify a similar price area. Notice that the May 28 swing low of 2.475 further identifies the potential support area. Since the 200-Day line was last tested as support at the May 28 swing low, a key pivot zone has been reached today.
Rapid Drop to 200-Day Line Puts at Risk of Failing
Since selling continues to dominate during the later part of Monday’s trading session, there is no indication that support may be seen around the 200-Day line. It may fail to show support and a bearish breakdown could yet occur. If it does, natural gas next heads towards a potential support zone that begins with the 50% retracement at 2.37. Moreover, a falling ABCD pattern completes a little lower at 2.34. Given the increase in downward momentum the past couple of days, it is possible that the 200-Day MA is quickly exceeded to the downside thereby putting the 50% target zone next on the agenda.
Drop Below Moving Averages Points to Lower Targets
In addition, a decisive breakdown below both the 50-Day and 200-Day MAs would be bearish in the near term and could be followed by further aggressive selling. Therefore, a deeper retracement to the 61.8% Fibonacci retracement zone would be possible. The 61.8% Fibonacci retracement is at 2.18. It is joined by a couple of other price levels that stand out and are in the general vicinity. Support was seen at the December 2023 swing low of 2.235 and an extended ABCD pattern target is at 2.20.
The ABCD pattern target takes the AB leg of the decline and extends it by the 127.2% Fibonacci ratio to arrive at a possible target for the CD down leg. Regular readers of this column will recognize the ABCD pattern as doing a good job historically of identifying key price levels. Therefore, it may do so again and deserves to be watched.
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Storm Surge. The Energy Report
By: Phil Flynn | July 1, 2024
Energy up on rising storms of different natures. Weather Risks, geopolitical risk, the possibility of an oil supply deficit and predictions of record Fourth of July travel are being tempered with Data from the Energy Information Administration that touts oil and gas production and disappointing Canada Trans Mountain Pipeline loadings suggesting weak Chinese demand. Is that anyway to celebrate Canada Day?
We should start with some of the geopolitical risk factors that are mounting. Fox News Lucas Tomlinson tweeted that, “All U.S. military bases in Europe have been put on heightened alert status due to a potential terrorist attack. There is credible intel pointing to an attack against U.S. bases in Europe over the next week or so,” a U.S. defense official tells Fox News.
ESSA News reported that NATO representatives have expressed concern over Russia’s actions in the North Sea. The issue pertains to the potential mining of key Western infrastructure. Russian ships reportedly performed up to 1,000 suspicious maneuvers. According to the British newspaper “The Times,” the suspicions are based on data from companies servicing key oil and gas drilling platforms, pipelines, power, and telecommunications cables. No sabotage has been detected on Belgian or Dutch cables. But explosives have been found on a British cable at the beginning of the Ukraine crisis, according to “The Times.”
The AP reports that U.S., European and Arab mediators are pressing to keep stepped-up cross-border attacks between Israel and Lebanon’s Iran-backed Hezbollah militants from spiraling into a wider Middle East war that the world has feared for months. Iran and Israel traded threats Saturday on what Iran said would be an “obliterating” war over Hezbollah.
These increased risk factors will add a premium for the shipment of oil and gas it should be reflected in the futures market especially as we get into a holiday week where trading is a bit thinner, and people are more nervous.
Reuters is reporting that, “About 20 ships loaded crude oil on Canada’s West Coast in the first full month of operation on the newly expanded Trans Mountain pipeline, according to vessel-tracking data on Sunday, slightly below the operator’s forecast. Loadings from the pipeline expansion are closely watched because the Canadian government wants to sell the $24.84 billion (C$34 billion) line. Questions about oil quality, pipeline economics and loading challenges have swirled since its startup, spurring concerns over demand and exports of crude.
The 20 vessels loaded were less than the 22 ships that Trans Mountain had initially expected to load for the month. Total crude exports from Vancouver were around 350,000 barrels per day with the last two vessels for June-loading at the Westridge Marine terminal, as of Sunday. Still Reuters reported that, “U.S. energy production overshadowed consumption by 9 quadrillion British thermal units (quads) in 2023, according to an analysis released by the U.S. Energy Information Administration (EIA) on Wednesday that showed the widest margin in records dating back to 1949. Energy production rose 4% to hit a record of nearly 103 quads in 2023, the analysis found, while energy consumption eased 1%.
Even with the numbers that are being touted by the Energy Information Administration (EIA) there is still an expectation that we’ll see a supply deficit later this year. Obviously demand from China continues to be a concern but overall, we still expect that things will get tight especially with what’s happening on the weather front.
The Atlantic weather pictures is still a concern. Also a concern, Fox Weather is reporting that the situation in the Caribbean is becoming more dire, and residents are being warned to finish preparations as soon as possible ahead of Hurricane Beryl. The storm rapidly intensified and strengthened into a Category 4 hurricane and could unleash catastrophic destruction across populated island nations starting early Monday morning. “Extremely dangerous Category 4 Beryl (is) approaching the Windward Islands,” the National Hurricane Center (NHC) said Sunday evening. “Life-threatening winds and storm surge expected there early Monday morning.”
Hurricane Beryl is now the second named storm of the 2024 Atlantic hurricane season and quickly strengthened from a tropical depression into a tropical storm and then a hurricane – all within 24 hours. Not only is Hurricane Beryl intense, but it’s also made history. Hurricane Beryl intensified from a tropical depression into a major Category 3 hurricane in less than 48 hours, a feat never achieved earlier than September.
Triple A reported last week that, “the national average shook off nearly three weeks of stagnation, moving a nickel higher since last week to hit $3.50. The move came as the cost of oil crossed the $80 per barrel mark, putting upward pressure on pump prices. With oil costs accounting for about 54% of what you pay at the pump, more expensive oil usually leads to more expensive gas.
“Summer got off to a slow start last week with low gas demand,” said Andrew Gross, AAA spokesperson. “But with a record 60 million travelers forecast to hit the road for the July 4th holiday, that number could pop over the next ten days. But will oil stay above $80 a barrel, or will it sag again? Stay tuned.
Several states will adjust fuel taxes and fees starting Monday, July 1. Indiana is increasing the tax on gasoline/gasohol by a cent to 35cts/gal. Virginia increased the tax on gasoline, gasohol, and alternative fuels such as CNG and LNG by a penny to 30.8cts/gal. However, Michigan will keep the current gas tax rate at 18.8cts/gal while reducing the clear diesel fuel and kerosene tax from 21.3cts/gal to 20.4cts/gal.
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | June 29, 2024
• Following futures positions of non-commercials are as of June 25, 2024.
WTI Crude Oil: Currently net long 303.6k, up 47.6k.
On the 4th (this month), West Texas Intermediate crude tagged $72.48 intraday before reversing higher. Earlier on April 12th, it retreated after ticking $87.67. That low just about tested the low end of a range between $71-$72 and $81-$82 that persisted for 19 months before the upper end gave way 14 weeks ago and was subsequently lost early May.
This Friday, with a high of $82.72, the top of the range was recaptured intraday but only to reverse and end the session lower at $81.54/barrel. For the week, the crude rallied one percent – its third straight up week after the low of early this month.
The daily is getting overbought, and it is hard to imagine the crude busting through the range-top right here and now. In the event this does happen, at $84 lies trendline resistance from last September when WTI peaked at $95.03.
In the meantime, after 13 consecutive weeks of 13.1 million barrels per day US crude production went sideways at 13.2 mb/d the last three weeks; 17 weeks ago, output was at a record 13.3 mb/d. Crude imports fell 443,000 b/d week-over-week to 6.6 mb/d. Stocks of crude, gasoline, and distillates all rose – respectively up 3.6 million barrels, 2.7 million barrels and 377,000 barrels to 460.7 million barrels, 233.9 million barrels and 121.3 million barrels. Refinery utilization decreased 1.3 percentage points to 92.2 percent.
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Natural Gas Bearish Trend Intensifies
By: Bruce Powers | June 28, 2024
• Natural gas dropped to a new retracement low at 2.59, breaking below key Fibonacci levels and potentially targeting further support near the 200-Day MA.
Natural gas dropped on Friday to a new retracement low of 2.59. Selling accelerated as the sellers took back control generating a decisive red candle. Trading continues near the lows for the day at the time of this writing, and natural gas could still dip lower before the weekend. Today’s decline broke below the 78.6% Fibonacci retracement at 2.63.
Decline Follows Failed Breakout Above the 20-Day MA
The decline today follows a successful test of resistance around the 20-Day MA and top trendline over several days earlier this week. Given that the June 24 swing low at 2.635 failed to hold as support today, it looks like the 200-Day MA around 2.47 will be tested as support before the retracement is complete.
Notice that the 50-Day MA has almost converged with the 200-Day line thereby confirming potential support around the 200-Day line. If the 200-Day line fails to act as support, lower potential targets are identified at the 50% retracement and 61.8% Fibonacci retracement at 2.37 and 2.18, respectively.
Drop to 200-Day MA More Likely
When measuring the full upswing beginning from the April 25 swing low, the 38.2% retracement shows at 2.55. But given the rejection of the price of natural gas as the 20-Day line and subsequent bearish reaction, it is at risk of being broken. Further, this week’s swing high of 2.86 established the BC leg of a descending ABCD pattern.
The pattern completes below the 200-Day MA and near the 50% retracement at 2.34. This would seem to increase the risk of a potential decline below the 200-Day line. The 200-Day line was successfully tested as support on May 28, shortly after natural gas rallied back above the line on May 16. If it falls back below the line and then stays below it, the correction is likely to continue with a deeper retracement or consolidation.
Lower Support Zone Starts Around 2.235
A lower potential support zone, below the 50% retracement, is identified from around 2.235 to 2.18. This week is on track to end, completing the second week down from the June 10 high. Moreover, selling continues to dominate into Friday afternoon. Therefore, next week natural gas is at risk of continuing the bearish decline.
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Taking The Wind Out Of The Sails. The Energy Report
By: Phil Flynn | June 27, 2024
British Petroleum or BP as it is also known, is having the wind taken out of its sails as investors say enough is enough when it comes to investing and losing money in aspirational virtue signaling projects.
Reuters reported that BP’s CEO Murray Auchincloss has imposed a hiring freeze and paused new offshore wind projects as he places a renewed emphasis on oil and gas amid investor discontent over its energy transition strategy, sources at the company said.
The moves, which have not previously been reported, are part of a decision by Auchincloss to slow down investments in big budget, low-carbon projects, particularly in offshore wind, that are not expected to generate cash for years, said several sources at BP who declined to be named according to Reuters. This means that investors are demanding that BP get back to investing, get back to oil and gas and start making profits. This is the latest evidence of the backlash from the energy transition debacle that has damaged the global economy, led to rampant inflation, hurt the poor, and has destabilized the globe. Finally we are starting to see a swing back towards common sense as people of reason start to stand up.
Despite global leaders falsely claiming that the biggest threat to the globe is climate change, people of reason see that the cure being touted by the green energy elite is much worse than the disease. For years politicians and global leaders have hyped doom and gloom climate predictions to push the big government green agenda. Doom and gloom predictions to get you to conform, give up your freedoms all in the good name of saving a planet. Whether it’s taking away your mode of transportation or putting farmers out of business trying to take away their water supply or get rid of gassy cows and take away your meat or taxing the heck out of you, it is more about government control. These policies will make it almost impossible to heat or cool your home; people are starting to get wise to this game. They are getting tired of these political windbags.
Decades of this scaremongering and billions of dollars spent on this transition yet the reality is that fossil fuel usage is at a record high. I am for all forms of energy yet it’s very clear the government desire is to force feed the global economy inefficient energy sources that are more expensive and take away our rights. Not only has it failed from a carbon emission standpoint but from a moral and ethical standpoint as well.
Back in the real oil world, prices seem to be shaking off some bearish data from the Energy Information Administration (EIA) and even reports China’s crude oil imports hitting a five year low because of increasing geo-political risk and signs that the trend of increasing global demand that will hit an all-time high, will see the oil market significantly tighten later over the coming months.
The EIA put supply at U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.6 million barrels from the previous week. At 460.7 million barrels, U.S. crude oil inventories are about 2% below the five year average for this time of year. Total motor gasoline inventories increased by 2.7 million barrels from last week and the same as the five-year average for this time of year. Distillate fuel inventories decreased by 0.4 million barrels last week and are about 9% below the five-year average for this time of year.
The EIA petroleum demand over the four-week moving average came in at about 20.4 million barrels a day and that’s actually up 0.8% from the same period last year gasoline demand continues to lag falling last week and on a four-week moving average is at 9.1 million barrels a day down 2% from the same. A year ago, distillate demand came in at 3.6 million barrels a day over the past four weeks, that is down 1% from the same period a year ago.
Other fuels are driving the market higher, jet fuel, asphalt chemicals and demand is higher than a year ago overall.
Natural gas can’t seem to get a handle on which way the wind is blowing. While production is down and demand is up, some producers might start to ramp up production and temperatures could cool down, causing some uncertainty about advancing prices much higher. On top of that the hot weather that has driven demand in many parts of the country may ease and the other issue with natural gas is just what may happen as far as tropical activity develops in the Gulf of Mexico.
Fox Weather is reporting that, “Hurricane HQ: Invest 95L likely to become Tropical Storm Beryl in Atlantic Fox Weather warns that a pair of tropical disturbances are being tracked in the Atlantic Ocean.
‘Invest 94L is the one closest to land as it moves across the Caribbean Sea. Invest 95L is in the middle of the ocean and has a high chance of developing into a tropical depression or tropical storm this weekend. The next named storm in the Atlantic will receive the name Beryl.
For natural gas these storms, depending on how they develop, could have a major impact on prices, whether it be from the lack of production because of shutdowns in the Gulf of Mexico to the flip side of that power outages caused by this storm reducing demand. Download the Fox Weather app to keep up with the latest developments.
The other thing that natural gas traders are watching today is the weekly storage report. Scott Di Salvino at Reuters wrote that, “U.S. utilities likely added a smaller-than-usual 51 billion cubic feet (bcf) of natural gas into storage last week, after drillers cut output earlier this year due to low gas prices, a Reuters poll showed on Wednesday. That would be sharply down from an injection of 81 bcf during the same week a year ago and a five-year (2019-2023) average increase of 85 bcf for this time of year. In the prior week ended June 14, utilities added 71 bcf of gas into storage. The forecast for the week ended June 21 would increase stockpiles to 3.096 trillion cubic feet (tcf), about 11.2% above the same week a year ago and about 20.5% above the five-year average for the week. The U.S. Energy Information Administration (EIA) will release its weekly storage report at 10:30 a.m. EDT (1430 GMT) on Thursday. Financial firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 98.5 billion cubic feet per day (bcfd) so far in June, up from a 25-month low of 98.1 bcfd in May. That was still well below the monthly record high of 105.5 bcfd from December 2023.
There were 94 total degree days (TDDs) last week compared with a 30-year normal of 75 for the period, according to data from financial firm LSEG. TDDs measure the number of degrees a day’s average temperature is above or below 65 degrees Fahrenheit (18 degrees Celsius) to estimate demand to cool or heat homes and businesses.
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$Oil $WTIC #Energy - We got a bullish confirmation off the Wkly 'Hammer' Candle a few weeks ago, and I said to watch for the Bi/Wkly to do the same...
By: Sahara | June 27, 2024
• $Oil $WTIC #Energy - Update
We got a bullish confirmation off the Wkly 'Hammer' Candle a few weeks ago, and I said to watch for the Bi/Wkly to do the same...
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | June 27, 2024
• Top Movers
Platinum / Gold Ratio 4.65 %
NY Platinum Futures 3.71 %
Iron Ore 62% Fe CFR China (TSI) 3.38 %
Lean Hogs (CME) Futures 2.56 %
Zinc 2.56 %
• Bottom Movers
NY Natural Gas Futures 4.12 %
Oats (Minneapolis) 2.75 %
LBMA Silver in USD 2.44 %
Coffee (NYCSCE) Futures 2.16 %
AU - Queensland Base-Load Electricity Futures 1.75 %
*Close from the last completed Daily
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Natural Gas Will the Uptrend Continue?
By: Bruce Powers | June 26, 2024
• Testing resistance at 2.86, natural gas remains uncertain; a close above 2.95 would improve the likelihood of an uptrend continuation.
Natural gas rallied to test resistance around the downtrend line with the day’s high of 2.86. That high is the extent of the bounce so far from the 2.635 swing low reached on Monday. Today’s high defines resistance up to the swing high and weekly high of 2.95.
A decisive advance through 2.95 confirms an upside breakout and the potential continuation of the uptrend that has developed since the April 25 swing low. Nevertheless, natural gas remains in a precarious position and uncertainty remains as to the next direction.
20-Day Line Tells a Story
The relationship to the price of natural gas and the 20-Day MA tells a story over the past few days. Notice that Monday ended above the 20-Day line and yesterday’s close was below the 20-Day line. At the time of this writing natural gas is on track to close weak, in the lower third of the day’s range and again below the 20-Day line. Since the line had shown support during the trend’s rise, successful tests of the 20-Day line as resistance continue to keep the possibility of a deeper retracement as a possibility.
Further Weakness Below 2.635
A break below Monday’s low of 2.635 is a sign of weakness, and it opens the door to a deeper retracement. However, a dip below Tuesday’s low of 2.70 will provide an earlier signal of pending weakness. On the downside, the initial target is the 200-Day MA, currently at 2.47. Also, the 50-Day MA is a little lower than the 200-Day line at 2.43.
Recovery from Shallow Retracement is Bullish
Notice that Monday’s low found support near the 78.6% Fibonacci retracement level of the internal upswing. However, the larger upswing has a minimum 38.2% Fibonacci retracement of the full trend 2.55. It provides a potential support area that is above the 200-Day line. The fact that the recent retracement found buyers before testing support of the 38.2% Fibonacci level is a sign of strength. That is, if it follows through with additional bullish signals. Once there is a daily close above 2.95, natural gas would have cleared an important price level to indicate that the trend is indeed improving.
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$XLE Supercharged setup
By: TrendSpider | June 26, 2024
• Supercharged setup. $XLE
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Over the last two decades, $XLE has a 65% win rate in July, the second highest win rate for the ETF
By: TrendSpider | June 26, 2024
• Energy stocks sizzle in July
Over the last two decades, $XLE has a 65% win rate in July, the second highest win rate for the ETF.
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Oil Pie Piety. The Energy Report
By: Phil Flynn | June 26, 2024
You want to ban fossil fuels but make them cheap at the same time. This is not only impossible, but it is dangerous. This is something the Biden Administration does not understand or maybe they do not want to do.
After speding years bashing the US energy industry and going easy on our adversaries like Iran, Venezuela, and Russia because they need to keep gas prices low to try to win elections. Sanctimonious lectures about climate change being the biggest existential threat to the world while allowing some of the dirtiest oil producers to thrive.
The global oil pie is shifting away from the US and to producers that do not have our best interest at heart. Nor do they care about what President Biden says is “environmental justice” that he says is at the center of what his administration does do when it comes to making decision about our nation’s energy policy and energy security.
So. I guess that is why the he Biden Administration continue to work to undermine the US oil and gas industry which happens to be one of our nation’s most important industries and the cleanest oil producers on the entire planet. This policy has to rampant inflation as well as global instability. US oil producers are flashing peak oil production while Iran. And Russia benefits from the Biden Administration policies.
As loyal readers of the Energy Report know I have been talking about this for years and it was great to see the Wall Street Journal call the administration out for their politization of their energy policy and the failure to effectively enforce sanctions against our advisories and allow the US oil and gas industry work to stabilize the market.
The Wall Street Journal wrote “The Biden administration wants to keep gas prices stable ahead of the election by encouraging oil to flow into global markets.
The effort has run square into another priority: being tough on adversaries Russia, Iran and Venezuela.
The policy has led to softer-than-expected sanctions on major oil producers, according to diplomats, former government officials and energy-industry players briefed by current officials.
The Journal says that “A case in point arrived on Tuesday when the U.S. levied fresh sanctions against Iran. The measures affect a fraction of the country’s oil exports and are unlikely to gum up global markets, analysts say.
WSJ went on to say that “There is frustration among some staffers in the U.S. Treasury Department over the lack of action against oil-trading networks that ferry Russian and Iranian oil, including one that officials are currently investigating, according to U.S. diplomats and some of the energy-industry players briefed by current officials.”
Yet the Biden must turn a blind eye to bad actors so he can come to try to sell Americans on his green energy fantasies that weaken our country and strengthen our advisories.
Today oil is stymied awaiting the Energy Information Administration data (EIA) and real inflation data on Friday. The American Petrolem Institute report API wasn’t exactly bullish, but the market took it in stride as the API seems to be out of step with the EIA data.
The American Petroleum Institute reported a increase of 914,000 barrels in crude supplies but the market expectation really was for a draw of 3,000,000 barrels.
Their Cushing supplies fell slightly by just 35,000 barrels.
Gasoline inventories surprisingly increased by 3.843 million barrels and that could be a concern because the demand numbers for gasoline have been suspect. That was offset by a drop of 1.178 million barrels and distilled supplies.
This comes as traders wonder if Fed Governor Michelle Bowman really believes what she is saying or is she just trying to massage market expectations.
The Fed governor caused some selling in oil and other commodities like metals after she said that “The Federal Reserve should not be considering cutting interest rates given the continued risk that inflation remains sticky or even move higher. We are still not yet at the point where it is appropriate to lower the policy rate.” Reducing rates too soon or too quickly could cause inflation to flare, she warned.
Those hawkish comments are right in theory but are they correct based on current market conditions? It seems that she is more hawkish than most of the other members of the Fed and out of line with the preponderance of economic data and she is probably an outlier.
This type of rhetoric coming from a Fed official will l put more focus on Friday’s inflation data and that will be a key driver for the next oil move as well as of a lot of other commodities.
Obviously, the dollar is starting to have an impact on the price of oil more directly let’s say fundamentals for oil are well priced in current levels.
While there is still significant risk of an upside move in oil and products in the short term the perceptions that supplies are only a little tight is giving the markets some pause from moving from dramatically higher.
The talk about the demise of the dollar might be greatly exaggerated concerns about central banks buying gold to offset their relationship to the dollar because of politics and because of the surging U.S. debt might be overstated this is something . I will look at this a little bit more closely in the Phil Flynn Manic Metals report this morning. If you are not signed up for the Manic Metals report, email me so we can fix that.
Is It prices or is it Biden’s anti Fossil fuel agenda that is causing the market to flash signs of peak US oil production?
Probably a bit of both.
Yet industry insiders say that Biden’s crazy energy policies are causing a lack of capital spending and changing plans on investment in US projects because of the power hungry and erratic EPA and the so-called social justice aspect of drilling a hole.
Potential peak in U.S. oil and gas production is a major growing threat to the US and global economy and at this point the market seems to be somewhat oblivious to the fact that we could be heading into a major structural shortage in global oil and gas supplies.
OIL Price points out that “While last week’s rig count from Baker Hughes showed U.S. oil drilling activity still in a downward trajectory, hitting a 29-month low, Standard Chartered suggests that neither the output slowdown nor the seemingly hesitant drilling has been priced into the market yet.”
They point out that “since November 2022, U.S. drilling activity has plunged 23%, with Standard Chartered noting that “several large companies seem to have moved far away from growth maximization and are now close to a policy of simple output maintenance,” despite rising crude oil prices.’
In the course of the past nine months, StanChart says that there has been no indication whatsoever of sustained growth in U.S. crude oil production. Right now, production is sitting at around 13.2 million barrels per day. And while there was a nice growth spurt last December of over 1 million bpd, for June this year, it has been downhill, with growth at only 0.3M bpd for June.”
Right now Wwe think the long-term options for oil and products are very good value at these levels start to look at long term strategies for oil we should also see a surge in investing in oil and gas which continues to be undervalued and should really start turning the corner.
Natural gas prices are still being dictated by the weather. There has been some talk about increasing production as some of the players say that we’re withholding supplies or starting to bring back some supplies.
That could get us back into a glut mentality if the temperatures across the US start to moderate.
Ty the spike in the price of gas seems to suggest that the producers can bring on a little bit if they don’t go crazy and as long as the demand doesn’t fall off the map.
The other key thing of course for the natural gas market is going to be the weather so you need to download the Fox Weather app to keep up with the latest developments. And for business you need to stay tuned to the Fox Business Network because they’re the only network in the whole world that is really invested in you. You also need to sign up for the Phil Flynn daily trade levels that covers all the major commodities.
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Crude Oil At Key Decision Point
By: Bruce Powers | June 25, 2024
• Crude oil, testing resistance at 82.24, forms an expanding triangle, suggesting a potential breakout or retracement as a decision looms.
Crude oil has been pushing up against a resistance zone for four days as defined by a relatively narrow price range. Again, on Tuesday, crude rallied to a new trend high of 82.24 before encountering resistance that took the price of crude down near the lows for the day. It continues to trade near the lows of the day at the time of this writing.
Small Expanding Triangle Consolidation Forms
During the four-day consolidation phase crude has formed a small expanding triangle pattern. It may designate a high and lead to a retracement or crude may break out of the pattern to the upside. Either way, it has reached the point that a decision needs to be made. Crude either breaks out to higher prices or it succumbs to selling pressure and retraces some degree of the recent advance. Of course, the third alternative is further consolidation and expansion of the triangle.
Reaches Key Resistance
The fact that crude has been testing resistance for the past four days while it remains huddled near recent highs is a testament to its strength. Notice that resistance has been seen at the 61.8% Fibonacci retracement level and the convergence of the two trendlines. Also, a third line converges that rises from the top of an earlier expanding triangle consolidation pattern. Earlier, the top of the resistance zone was estimated at 82.26. That price level looks like it remains a valid level to key off. Therefore, a decisive breakout above 82.26 may signal a continuation of the rising trend. But it wouldn’t be surprising to first see a continuation of consolidation.
Tuesday’s High Completes 13.1% Rally
Crude was up as much as 13.1% at today’s high when measured from the June 4 swing low. It got there quickly, in only 15 days. Further consolidation near recent highs would sustain a bullish outlook as crude deserves a little rest before proceeding, if it is to do so. If a decisive breakdown from the expanding triangle triggers the 79.25 price area is the first target, followed by the 38.2% Fibonacci retracement at 78.61.
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Natural Gas Poised for Breakout After Key Reversal
By: Bruce Powers | June 25, 2024
• Natural gas peaked briefly above Monday’s high before finding resistance at 2.84, suggesting a rest day before potential higher moves following a bullish reversal.
An insignificant day today for the price of natural gas as it peaked above Monday’s high briefly before finding resistance at 2.84. Consider it a rest day before attempting to proceed higher as it follows Monday’s bullish key reversal day. That high was a successful test of resistance around the downtrend line. Natural gas is on track to complete a narrow range day today and it has formed near the highs of yesterday’s price range. This positioning reflects underlying strength.
Strength Confirmed Above 2.95
Today’s price behavior reiterates the importance of natural gas getting above the most recent swing high of 2.95, also a weekly high, before buyers start to get more aggressive. Until then, resistance could be seen that takes natural gas down to again test support at this week’s low of 2.635, and possibly lower. There remains a series of lower swing highs and lower lows until the 2.95 high is breached.
Retracement Likely Complete
Nonetheless, there are reasons to believe that the 2.635 low from Monday may be the end of the retracement. It completed a 78.6% Fibonacci retracement (2.62), and yesterday’s strong bullish reversal ended with a key reversal day (open below prior day, close above prior day). The key reversal day reflects a shift in sentiment in only one day, from the sellers being in charge to the buyers taking back control of price action. Yesterday’s swing low also set up a measured move. The measured move is reflected in a rising ABCD pattern shown on the chart.
Initial Upside Target of 3.32
The second move or CD leg of the pattern has the potential to at least match the price appreciation seen in the first move or AB leg up. Price symmetry is reflected when the two swings match. It completes an initial target at 3.32. Once symmetry is present between the swings, a potentially significant pivot level has been identified. Either price breaks out above the pivot zone, or it behaves as resistance and a pullback ensues. Also, a choppy relatively sideways pattern could develop as well around the pivot point.
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Emission Mission. The Energy Report
By: Phil Flynn | June 25, 2024
Petroleum markets, which saw a surge of buying on geopolitical risk factors, are coming down a bit ahead of tonight’s American Petroleum Institute (API) report. Shipping container costs are going through the roof and tightness of supplies.Houthi rebels continue their attacks in the Red Sea and in Israeli. Yesterday the Russians blamed the United States for a Ukrainian missile strike raise concerns that the war between Russia and Ukraine will drag the United States ever so closer to direct conflict. While those concerns are real and there’s even rumors about the Biden administration talking about bringing back the draft, you must remember that they think that the biggest existential threat to the world is climate change.
Obviously with all the trillions of dollars that have been spent on trying to reduce greenhouse gas emissions, it’s been an abject failure with greenhouse gas emissions hitting a record high. Yet here in the United States they continue to use the incredible wide-ranging powers of the Environmental Protection Agency to ram through regulations without the due process of law. Yet is the EPA overstepping their bounds? Well, there’s a case that is going to be heard before the Supreme Court that can tell us.
OIL Price’s Charles Kennedy writes that, “The U.S. Supreme Court has decided to hear a case that could have far-reaching implications for future energy infrastructure projects in the country by establishing the limits to federal agency power over emission assessments. On the face of it, the case is small. It concerns an 88-mile railway that would carry oil and other commodities from northeast Utah to markets. The project was approved by the Surface Transportation Board but an appeals court in Washington D.C. nixed that approval citing “numerous” violations of the National Environmental Policy Act in the project’s review.
The case was brought to the appeals court by environmentalist organizations but now supporters of the $1.5-billion project are fighting back, challenging what they suggest is overarching powers. In their request for the hearing, the groups behind the Uinta Basin Railway project asked the judges to have their say on whether the National Environmental Policy Act gives federal agencies power “beyond the proximate effects of the action over which the agency has regulatory authority.”
The Biden Administration has been touting price caps on Russian oil and price caps on natural gas, but Russia continues to export oil in a big way. Reuters reported that India and China were the top destinations for Russian seaborne fuel oil and vacuum gasoil (VGO) exports in May, traders said and LSEG data showed. Russian fuel oil and VGO seaborne exports last month rose 12% from April to about 4 million metric tons, helped by completion of seasonal maintenance.
The European Union’s full embargo on Russian oil products went into effect in February 2023 and the bulk of Russia’s fuel oil and VGO was redirected to other regions, mostly Asia. Good luck with that.
Despite the high prices and the strapped consumer, we’re seeing demand expectations start to rise once again air travel demand based on TSA members hit another record high so the demand for jet fuel continues to be strong. We’re seeing consumers get back behind the wheel as demand for gasoline seems to be picking up.
We’re expecting to see inventories fall across the board this week and should give us a little bit of a bounce. I would assume that the market is getting close to a bit of a bottom here and expect to see the supplies tighten as we get closer to the 4th of July holiday and that should keep the market on an upward trek.
Natural gas prices rebounded as the heat domes stay in place. This once again raises demand expectations for air conditioning electricity demand. Fox Weather reports, “Triple-digit heat frying central, southern US on Tuesday. Heat alerts stretch from Omaha, Nebraska, to Houston, Texas, to Jacksonville, Florida, to Charleston, South Carolina, as the central and southern U.S. is backed by a large dome of high pressure. People in these areas are urged to stay hydrated and take frequent breaks in the air conditioning.
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Hedge Funds have built the largest gasoline short position in more than 5 years
By: Barchart | June 25, 2024
• Hedge Funds have built the largest gasoline short position in more than 5 years.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | June 25, 2024
• Top Movers
NY Palladium Futures 5.52 %
Coffee (NYCSCE) Futures 5 %
Tokyo Palladium Futures 4.35 %
NY Natural Gas Futures 3.95 %
AU - Queensland Base-Load Electricity Futures 3.32 %
• Bottom Movers
Cocoa (NYCSCE) Futures 11.06 %
Lean Hogs (CME) Futures 2.91 %
LBMA Silver in USD 2.89 %
Iron Ore 62% Fe CFR China (TSI) 2.51 %
Wheat #2 2.46 %
*Close from the last completed Daily
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Natural Gas Price Forecast: Bullish Signs Point to Potential Upside
By: Bruce Powers | June 24, 2024
• Natural gas hit 2.83, signaling a bullish reversal and potential for higher prices if it closes above 2.77 today, Monday.
Natural gas found support at a new retracement low of 2.64 on Monday before it strengthened intraday. The subsequent advance took the price of natural gas above Friday’s high of 2.77 thereby triggering a daily bullish reversal. At the time of this writing the high for the day was 2.83 and trading continues near the highs of the day.
Natural gas is on track to complete a key bullish reversal day today. Monday’s session began with an open below Friday’s 2.67 low and it was followed by an eventual breakout above Friday’s high. A daily close today above Friday’s high increases the chance for further strengthening in the price of natural gas.
20-Day MA Near-term Support
Further, the price area around the 20-Day MA, now at 2.79, has been defining resistance today. If natural gas can end today above the 20-Day line, it will be sending a signal that the retracement is likely over, and higher price levels again come into play. Note that natural gas closed below the 20-Day line for only the past two days. It had marked potential support since April 26 when natural gas previously rose above the 20-Day MA after being below it. A quick two-day recovery of the 20-Day MA is a bullish sign.
Bullish Signal on Breakout Above 2.95
Last week’s high of 2.95 marks an important price level for natural gas as it is a weekly high and a daily interim swing high. A decisive breakout above that price level will signal a bullish weekly reversal. Also, a rise above last week’s high will have recovered the downtrend line. From there natural gas should look to recover the recent trend high of 3.16 and then test higher target areas.
Rising ABCD Pattern Points to 3.32, if Bulls Take Back Control
An initial higher target is identified around 3.32. That price would complete a simple rising ABCD pattern or measured move. Once price symmetry is exhibited the chance to encounter resistance to some degree increases. That target is a little below the next higher price target around the January swing high at 3.39. It is confirmed by a 200% extended retracement target of 3.37.
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Houthis And Oil On The Rise. The Energy Report
By: Phil Flynn | June 24, 2024
The rag tag group of Iranian backed Houthi rebels are a force to be reckoned with and are growing in power as the Biden administration seem unable to stop them from attacking ships. The Houthi’s, that the Biden administration removed from the foreign terrorist organization list in attempt to appease the Iranians, are now thriving with the help of Iranian oil revenue that has surged to 6-year highs after the Biden administration failed to enforce sanctions on Iran.
That gave the Iranian’s economy a 35 billion dollar boost that Iran could then give to the Houthi rebels to cause mayhem and murder in the Red Sea and it seems that Iran is getting their money’s worth. While the Biden administration had to reverse course and put the Houthis back on the terror list, they seen to not have a plan to stop this terror group from growing in power.
Over the weekend the Houthis boldly continued attacks and now say they are joining forces with an Iraqi militia resistance group called the Islamic Resistance say they are going to attack Israeli ships. Yemen’s Houthis claim attacks on four ships at Israel’s Haifa port. The AP reported that: An aerial drone launched by Yemen’s Houthi rebels struck and damaged a vessel in the Red Sea on Sunday, officials said, the latest attack by the group targeting shipping in the vital maritime corridor. The AP Also reported that, “An attack by Yemen’s Houthi rebels targeted a commercial ship traveling through the Gulf of Aden but apparently caused no damage, authorities said Saturday, in the latest strike on the shipping lane by the group.
The Houthi attack comes after the sinking this week of the ship Tutor, which marked what appears to be a new escalation by the Iranian-backed Houthis in their campaign of strikes on ships in the vital maritime corridor over the Israel-Hamas war in the Gaza Strip.
That comes as oil traders will wonder how much blood refiners can squeeze out of a turnip. Falling US rig counts are being balanced with hopes that US drillers can continue to innovate to keep production rising as decline rates and falling rigs start to suggest that oil producers are being forced into peak production. The Baker Hughes rig count raise those concerns as drillers cut rigs to the lowest level since January of 2022
Reuters reported that “the US oil rig counts have been decreasing for 4 weeks in a row since the week ending on 31 May.
The total number was reduced to 485 last week, after peaking at 511. The oil and gas rig count, an early indicator of future output, fell by two to 588 in the week to June 21. Baker Hughes said that puts the total rig count down 94, or 14% below this time last year. Baker Hughes said oil rigs fell three to 485 this week, their lowest since January 2022, while gas rigs were unchanged for a third week in a row at 98, their lowest since October 2021.
The oil and gas rig count dropped about 20% in 2023 after rising by 33% in 2022 and 67% in 2021, due to a decline in oil and gas prices, higher labor and equipment costs from soaring inflation and as companies focused on paying down debt and boosting shareholder returns instead of raising output.
The rig count in the Permian basin, the largest U.S. oilfield, is expected to move roughly sideways this year, but edge down below 300 by end-2026 as U.S. producers remain capital disciplined, Goldman Sachs said this week. In the Permian formation in West Texas and eastern New Mexico, the total oil and gas count fell by one to 308 this week, the lowest since January, according to Baker Hughes.
Production growth in maturing Permian is likely to gradually slowdown from exceptionally strong 520,000 barrels per day in 2023 to a still robust 270,000 bpd in 2026, , according to Baker Hughes.
The possibility of tightening supply and lower US output expectations is pointing us towards a tightening market.
Geopolitical risks are running high. Reports that Russian gas output is falling on refining issues are also supportive of oil products.
This comes as I expect that crude oil supply will fall by 3 million barrels this week. I am also looking for a 1-million-barrel drop in gasoline supply as well as a 2-million-barrel drop in distillate supply. Refinery runs should uptick by 1.0.
Today Reuters reported that EU countries on Monday agreed a new package of sanctions against Russia over its war in Ukraine, including a ban on reloading Russian liquefied natural gas (LNG) in the EU for further shipment to third countries. Now let’s see if they enforce them.
Jodi Reported that India and China’s natural gas demand in both countries grew +7% y/y to total 13.6 bcm, driving growth in the Asia Pacific region.
The Biden administration paused LNG exports and Russia gladly filled the void. Biden is making the US look like an unreliable provider.
India’s LNG demand will continue to rise.
Natural gas futures after selling off in anticipation of the cool down are back on the rise.
EBW Analytics reports that the weather-dependent natural gas rally is faltering alongside weaker weather-driven demand forecasts. Instead, the supply side is rising with production at three-month highs and rising Canadian imports. Over the weekend, LNG feedgas also crumbled to six-week lows.
Further, the inability to hold key technical support at $2.76/MMBtu offers incremental downside risks into this week’s July expiration. While August may regain strength after assuming the front-month role, momentum overshooting fundamentals appears less likely.
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Chevron $CVX Best in breed, not really special here. 200D support, otherwise not much going on so far
By: Options Mike | June 23, 2024
• $CVX Best in breed, not really special here.
200D support, otherwise not much going on so far.
50D level to clear
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Commodity price changes over last year...
By: Charlie Bilello | June 21, 2024
• Commodity price changes over last year...
Cocoa: +180%
Silver: +35%
Coffee: +34%
Gold: +22%
Zinc: +20%
Copper: +17%
Aluminum: +13%
WTI Crude: +12%
Brent Crude: +10%
Natural Gas: +6%
US CPI: +3.3%
Heating Oil: +2%
Gasoline: -2%
Cotton: -10%
Lumber: -13%
Soybeans: -19%
Wheat: -22%
Sugar: -26%
Corn: -30%
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Natural Gas Holds Important Support at 2.70
By: Bruce Powers | June 21, 2024
• Natural gas reached a new low of 2.67, testing critical support levels, with potential for sharp drop if the 2.70 level breaks.
Natural gas triggered a deeper pullback on Friday to reach a new low of 2.67 before signs of support showed up. At the time of this writing, it is set to end the day with a relatively narrow trading range, and either at or above a support level marked at the center horizontal of a pennant consolidation pattern at 2.70.
A decisive daily close below the 2.70 level reflects a failure of the bull pennant breakout. Failed patterns are often followed by sharp moves in the opposite direction of the initial breakout.
Bearish Weekly Signal Dominates
Last week natural gas reached a new trend high of 3.16 before sellers took back control and drove the price back down. Subsequently, a bearish weekly signal triggered earlier this week that is certainly following through to the downside as trading continues near the lows of the week. If 2.70 support breaks, the 200-Day MA at 2.47 may be tested quickly.
It can be considered along with the most recent swing low of 2.475. A 38.2% Fibonacci retracement completes at 2.55. Given the bearish weekly pattern a lower price zone around 2.37 could also be approached. That would follow a bearish drop through the 200-Day MA, however. It comes from the convergence of the 50-Day MA and the 50% retracement level of the full rally off the April swing low.
Upside Breakout Above 2.77 Could Lead Higher
Nonetheless, it remains possible that a bullish reversal signal is given on Monday on a move above today’s high of 2.77. That price level coincides with the 20-Day MA at 2.78. The 20-Day line would also need to be taken out for a more reliable indication of strength. The 20-Day line was tested as resistance earlier in today’s session and the price of natural gas was rejected to the downside.
This behavior indicates that the market recognizes the price area of the 20-Day MA. Notice that on Monday and Tuesday it was clearly showing an area of support. Today’s successful test of the line as resistance sets of a continuation of the retracement to lower price zones. But, at stated above, that may start to change on a breakout above 2.77.
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Summer Draws Makes Me Feel Fine. The Energy Report
By: Phil Flynn | June 21, 2024
Summer draws, makes me feel fine, Blowing through the jasmine in my mind. Ok I thought it was “jazz man” in my mind, but no matter, because on the first day of summer and the oil market is simmering. It is also a sign that consumers might be feeling a bit better about their circumstances and are trying to enjoy the summer breezes. Not only did we get a report from the Energy Information Administration (EIA) that demand for gasoline hit the highest level of the year, but the price of oil has risen 5% this month, hitting its highest price since April on better demand.
Predictions that gas prices would continue to fall seems to be at risk, and a drop in diesel supply is suggesting that the US industrial sector is heating up. Crazy strong demand numbers for ‘other oils’ is lifting overall oil demand expectations and signaling future tightening of oil and product supply in the coming weeks. This comes as the US Oil and Gas Association has a classic calling out of Biden on his fossil fuel hypocrisy.
But before we get to that let’s talk about the sudden resurgence of US oil and gasoline demand. Drivers that have been reluctant to get on the road party being held back from the plague of inflation, started to venture out as demand rose by 346,000 barrels a day last week to a new year high of 9.386 million barrels a day. Still the four-week moving average shows that overall gas demand is still 1% below a year ago.
US gasoline exports to Europe are soaring. Quantum Energy points out that European exporters will have drawn further support from a sharp fall on the Atlantic coast, where stocks fell 2.7 million barrels or 4.5%.
Diesel demand also increased 328,000 barrels a day to 3,977. That seems to reflect data of stronger us manufacturing and Farmers field work.
Also, the demand for those often-forgotten other oils surged from a million barrels a day by a 1.138 million barrels a day to 5009 million barrels a day. Other oils like aviation gasoline, kerosene, natural gas plant liquids and LRGs (except propane/propylene), unfinished oils, other hydrocarbons and oxygenates (except fuel ethanol), aviation gasoline blending components, naphtha and other oils for petrochemical feedstock use, special naphthas, lube oils, waxes, coke, asphalt, road oil, and miscellaneous oils and other fun stuff like that.
That led to draws across the board as EIA reported that “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.5 million barrels from the previous week. At 457.1 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year.
Total motor gasoline inventories decreased by 2.3 million barrels from last week and are about 1% below the five-year average for this time of year. Distillate fuel inventories decreased by 1.7 million barrels last week and are about 8% below the five-year average for this time of year.
Still John Kemp says that, “US Crude oil inventories remain very close to the long-term seasonal average, despite talk of a massive deficit in the global market. Stocks were just -2 million barrels below the prior ten-year seasonal average on June 14 compared with a surplus of +15 million barrels at the same point in 2023.
Of course then you must remember the depleted Strategic Petroleum Reserve that gives that a different look. And while the SPR rarely was tapped, having that in reserve gave oil price a sense of security and a lower risk premium.
Biden is no doubt the most anti-fossil fuel President in history and has slandered and showed disrespect to the US oil and gas industry and its workers despite the fact that the US oil and gas industry is one of the main reasons that the US economy is as strong as it is and serves the American people in many ways that cannot be replaced.
So, when Biden posted a picture of himself walking down the stairs of Air Force One with the caption “The best part of my job is showing up for the American people” The US Oil and Gas Association wanted to point something out to him. They wrote under the Biden’s post that, “Air Force One – two specially configured 747-200Bs are powered by four GE CF6-80C2B1 engines with a thrust rating of 56,700 pounds each.
The fuel capacity of Air Force One is 53,611 gallons of jet fuel which is primarily derived from crude oil – which is produced domestically – thanks to the US oil & gas industry. So – every time POTUS “shows up” – showing up is made possible – by the members of the US Oil & Gas Association. And he has never once said thank you….”
Well, I know Biden might not thank you, but I thank you! In fact, many Americans who benefit from your investment and innovation, hard work and risk taking to make our world safe, drive our economy and the lives that you are saving today by keeping our homes cool during this heat wave, thank you as well. Keep the Faith.
Natural gas is pulling back as the market thinks that Tropical Storm Alberton will cool off demand. Today we got the EIA Nat gas report at 10,30 Eastern time. Anthony Harrup at the Wall Street Journal wrote that U.S. natural gas inventories likely saw a below-average build last week, further reducing surplus supplies as hot weather across much of the U.S. lifted demand for air conditioning.
Natural gas in underground storage is forecast to have increased by 70 billion cubic feet to 3,044 Bcf in the week ended June 14, according to the average estimate in a Wall Street Journal survey of nine analysts, brokers and traders. Estimates range from an injection of 64 Bcf to an injection of 82 Bcf.
It would be smaller than the five-year average injection for the week of 83 Bcf, and mark a sixth consecutive below-average injection, lowering the surplus over the five-year average from 573 Bcf the week before.
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$XLE Energy sector finally starting to get some love again while Tech cools off
By: TrendSpider | June 20, 2024
• Energy sector finally starting to get some love again while Tech cools off. $XLE
Top Holdings: $XOM, $CVX $COP, $EOG, $SLB, $MRO
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Natural Gas Natural Gas at Risk of Lower Pullback
By: Bruce Powers | June 20, 2024
• Natural gas declines below key support levels, threatening the bull pennant breakout and indicating potential for a deeper bearish trend.
Natural gas stalled its rise on Thursday and reversed to trigger a bearish continuation of the retracement. It is now back below the 20-Day MA, and it is on track to close below it today. Further, the 61.8% retracement level at 2.74 failed to stop the decline. Natural gas looks to be on its way to trigger a breakout failure for the bull pennant. It looks to be rapidly approaching the center of the pennant triangle formation at 2.70.
That center line defines the symmetry of the pennant and is being used to identify a potential support level. If it is broken that provides a bearish indication. While, if it leads to a bullish reversal, the potential for the bull trend to continue in the near-term improves. If the 2.70 price area fails to hold as support, then the pennant breakout is failing. If so, the trendline breakout has also failed. Lower down is the more significant 200-Day MA at 2.47.
Breakout Above 2.95 Needed for Bullish Sign
On the upside, a new bullish signal is indicated on a decisive rally above today’s high of 2.95. A daily close above that high will then be needed to confirm the breakout. Notice that Wednesday’s high closed technically above the line, but not by much. The result is seen in today’s weakness. Also, keep an eye on the interim swing high of 2.92. It was also exceeded today but subsequently failed to follow through. It should be watched in conjunction with the downtrend line.
Deeper Retracement More Likely
Natural gas recently completed a greater than 99% rally when starting from the April 25 swing low. Further consolidation and or retracement would not be surprising following such a move. Nevertheless, how the price of natural gas responds in the pullback is going to be more revealing. Both the prospect of a deeper retracement, or a bullish continuation remains a possibility.
Yesterday’s bullish reversal off the 20-Day line showed promise but given the bearish response today, uncertainty dominates. The weekly chart provides support for a possible deeper correction as a bearish shooting start candle triggered to the downside earlier this week. If this week’s low price is broken the weekly chart will take on greater meaning.
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Bad Day For The Energy Transition. The Energy Report
By: Phil Flynn | June 20, 2024
Billions and billions of dollars spent! Higher prices for energy and global instability all in the name of saving the planet from climate change. Yet I hate to tell them, their plans are not working. Today, Reuters reports that, “Global fossil fuel consumption and energy emissions hit all-time highs in 2023, even as fossil fuels’ share of the global energy mix decreased slightly on the year, the industry’s Statistical Review of World Energy report said on Thursday.” The report seems to spread panic and doom by writing, “Growing demand for fossil fuel despite the scaling up of renewables could be a sticking point for the transition to lower carbon energy as global temperature increases reach 1.5C (2.7F), the threshold beyond which scientists say impacts such as temperature rise, drought and flooding will become more extreme.”
The climate change folks will also seize on the recent heat wave as more evidence that the planet is in peril. They will tell you that the only way to save the earth from doom and destruction is to sacrifice your economic futures and freedoms to save the planet. While there is debate about the dangers of climate change, the one thing that is easy to document is all the inaccurate warnings of total doom due to climate change that have failed to come true. They need you to live in a ‘State of Fear’ coined by the late Michael Crichton, the title of his anti-climate change novel that correctly predicted that big money interests and politicians had to keep you in a state of fear about the planet so they can take away your freedoms and you standard of living and ultimately control you.
Oil today is also awakening to the fact that maybe the demand for oil is not that bad after all. After selling off because of the fear that OPEC might taper production cuts or that the Fed might cause a recession is being replaced with signs that the global market is tightening based on market structures as well.
Oil is supported by a Reuters report that the Nigerian energy firm Aiteo has shut down all oil production at its Nembe Creek facility, nearly 50,000 barrels per day of output, after detecting a leak, the company said on Wednesday.
Geopolitical risk factors are also supporting oil as there is growing frustration with the inability to stop attacks by the Houthi Rebels in the Red Sea. The AP reported that, “A bulk carrier sank days after an attack by Yemen’s Houthi rebels, who are believed to have killed one mariner on board, authorities said early Wednesday. It was the second ship sunk in the rebels’ campaign targeting Red Sea shipping. The sinking of the Tutor marks what appears to be a new escalation by the Iranian-backed Houthis in their campaign of attacks on ships in the vital maritime corridor over the Israel-Hamas war in the Gaza Strip. The attack comes despite a months long U.S.-led campaign in the region that has seen the Navy face its most-intense maritime fighting since World War II, with near-daily attacks targeting commercial vessels and warship.
The AP also reported that, “Russia resumed its aerial pounding of Ukraine’s power grid and Kyiv’s forces again targeted Russian oil facilities with cross-border drone strikes, officials said Thursday. With no major changes reported along the 1,000-kilometer (600-mile) front line, where a recent push by the Kremlin’s forces in eastern and northeastern Ukraine has made only incremental gains, both sides in the war have taken aim at distant infrastructure targets.
So much for your gasoline price break. RBOB gasoline futures hit the highest level since May rising over 15 a gallon from its may low price and is hitting key resistance and if it breaks higher, it will mean that prices at your local station will again start to rise.
Unconfirmed reports of early maintenance the Whiting Indiana BP refinery and tightening supplies and certain local markets is starting to drive the area futures higher it’s also possible that its gasoline prices fell demand went up so we’re getting mixed signals on the demand side of the equation.
Quantum Commodity Intelligence – reported that ExxonMobil has been forced to shut different units at its Baytown and Beaumont refineries in Texas amid reports of flaring and related issues. They also reported that Shell has been forced to close a diesel-making hydrocracker at its troubled 400,000 bpd Pernis refinery in Rotterdam.
Because of the Juneteenth holiday today we get the Energy Information Administration (EIA) weekly petroleum status report at 10:00 yet those in the natural gas world have to wait until tomorrow to get their report to find out how the hot weather impacted global inventory as well as production.
Before the June 10th holiday we did get the American Petroleum Institute (API) report that didn’t seem to really have a big impact on the oil and petroleum market. The API reported that crude oil inventories rose by 2.264 million barrels but at the same time gasoline inventories fell by 1.077 million barrels. Distilling inventories did increase by 538,000 barrels.
Most people admit that last week’s Energy Information Administration weekly status report was wild. Huge adjustments and uptick in U.S. oil production and a huge surge in U.S. oil imports had many people questioning the data. Most people expect some huge adjustments in this week’s number or at the very least at the end of the month. Yet the weekly data is becoming more erratic once again and that’s making it more difficult to get an overall handle on the true supply and demand situation. Currently our expectations continue to be that the Energy Information Administration will have to upwardly revise oil demand numbers and dramatically increase the amount of U.S. oil and product exports.
Will this heat wave stay around and what is going to be the impact on US storage numbers. We do know that the tropics continue to have to be watched and that’s the reason you need to download the Fox Weather app.
Tropical storm Alberto became the first named storm of the 2024 Atlantic hurricane season Wednesday, and as the system churned over the open waters of the Gulf of Mexico, it blasted parts of Texas, Louisiana and Mexico with heavy rainfall, storm surge flooding and gusty winds.
At last report from the National Hurricane Center (NHC), Alberto was a minimal tropical storm with winds mainly around 50 mph. However, its influence stretched hundreds of miles. Despite the center of circulation being more than 200 miles south of the Rio Grande, widespread coastal flooding was reported along barrier islands and coastal communities from Brownsville, Texas, to Grand Isle, Louisiana. The FOX Forecast Center said due to the system’s lack of organization and a steep pressure gradient, coastal flooding was more significant than what is normally experienced during a low-end tropical storm.
Seas as high as 16 feet were reported in the Gulf of Mexico on Wednesday afternoon, which helped cause water level rises of 3-5 feet along the Texas coastline. Major flooding was reported in Surfside Beach and the San Louis Pass region, which are south of Galveston. Photos and video from coastal communities showed streets that were inundated by seawater, especially during high tide.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | June 20, 2024
• Top Movers
LME Aluminum Alloy 3.86 %
Coconut Oil 2.96 %
London IPE Gas Oil Futures 1.47 %
White Sugar ICE Futures 1.26 %
LBMA Silver in USD 1.2 %
• Bottom Movers
AU - Victoria Base-Load Electricity Futures 4.13 %
AU - Queensland Base-Load Electricity Futures 2.36 %
Palm Kernel Oil 0.88 %
London IPE Brent Crude Futures 0.3 %
London IPE Brent Crude Spot 0.3 %
*Close from the last completed Daily
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Natural Gas Price Forecast: Shows Continued Strength Following Retracement
By: Bruce Powers | June 19, 2024
• Natural gas traded within a narrow range today, reinforcing its uptrend and signaling potential for further gains if key resistance levels are breached.
Natural gas retained signs of strength on Wednesday as it traded in a relatively narrow range near the highs of Tuesday’s trading range. Tuesday’s close was above the downtrend line, and it looks like today may also close above the line. The high for the day was 2.93 and the low was 2.86, at the time of this writing. Another close above the line would provide an additional sign of strength. Also, of interest is the 2.92 interim swing high, which was Tuesday’s high. It was busted briefly today and a close above it would further confirm strength.
20-Day MA Retains Trend Support
This week’s bounce from the 2.76 swing low confirms the 20-Day MA as an applicable moving average to use for the current aggressive uptrend that began from the April 26 bullish reversal and breakout of a symmetrical triangle bottom. A daily bullish reversal yesterday set the stage for a continuation of the uptrend following an upside breakout of a bull pennant and break above the trendline last week.
The retracement exceeded 50% of the near-term swing and was a little shy of the 61.8% Fibonacci retracement at 2.74. It was a normal and healthy retracement following a 1.57 point or 99.2% advance in 31 days when measured from the April 25 swing low.
Bullish Weekly Candle Will Counter Last Week’s Bearish Sentiment
Last week ended with a bearish weekly shooting star candlestick pattern that triggered on Monday with a drop below 2.86. If this week’s low of 2.76 is retained as support and natural gas can end this week in the top third of the week’s range, it will have formed a weekly bullish pattern. Therefore, if it does so, heading into next week it will be positioned to trigger a weekly bullish reversal with an advance above this week’s high. This week’s bearish weekly reversal would then be negated.
Watching for Breakout Above 3.16
A rally above last week’s trend high of 3.16 will trigger a continuation of the rising trend. While natural gas may still encounter resistance up to approximately 3.20 (top of resistance zone from 3.18 to 3.20), the bullish momentum from a second and confirming breakout of the trendline should help propel it through that price range. The area around the swing high of 3.39 from early-January would then be the next higher target. That swing high is part of the downtrend price structure as it is a lower swing high.
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Natural Gas Bullish Reversal Signals Uptrend
By: Bruce Powers | June 18, 2024
• A bullish reversal in natural gas triggers a rally, with significant price levels suggesting further upward momentum.
Natural gas rallies following a bullish reversal from the 20-Day MA. The 20-Day MA is one trend indicator that has defined support for the most recent advance. It was tested as support on Monday and then on Tuesday. Subsequently, buyers took back control today, Tuesday, and triggered a daily bullish reversal as Monday’s 2.84 high was exceeded to the upside. Moreover, natural gas is on track to close strong, in the top third of the day’s trading range.
Daily Close Above 2.92 Confirms
A rise and subsequent daily close above 2.92 will confirm the bullish breakout and the likely continuation of the rising trend. The 2.92 price level was the prior trend high from May 23. An advance above that price level will also put natural gas clearly back above the downtrend line. It if happens, the correction should be over and since it was relatively shallow with a quick recovery, it points to remaining underlying strength in demand for natural gas.
Trend Continuation Setting Up
Higher up is last Friday’s high of 3.00. A rise above that high would be needed to next to show improving upward momentum. Of course, the recent trend high of 3.16 is the more significant price level as a rise above it will signal a continuation of the rising trend.
Once natural gas closes above the downtrend line, it will be the second time (advance) that it has done so and therefore further confirms the bullish breakout above the line. It indicates that the trend is strengthening and improves the chance for a continuation to higher price levels. Initial upside targets that are above the prior trend high include the 3.39 price area and 3.64. Each was a prior swing high, and the second price was also the 2023 peak.
Support at 2.76 Needs to Hold
Alternatively, a downside break below 2.76 points to a test of lower support levels. The more significant lower target is the 200-Day MA, which is currently at 2.47. A test of support around the 200-Day line should see price rejected to the upside. Lower down from there is the 50-Day MA at 2.33.
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Crude Oil Surpasses Key Resistance, Eyes Further Gains
By: Bruce Powers | June 18, 2024
• Crude oil's bullish breakout above the 200-Day and 50-Day MAs indicates strong demand and potential for further upside, with resistance at 82.1.
Crude oil confirmed a bull breakout above both the 200-Day and 50-Day MAs today as it exceeded Monday’s high of 80.43. It also broke above the most recent swing high of 81.00 thereby surpassing a significant price level. A daily close above that price level will further cement the bullish implications of today’s advance. At the time of this writing crude oil has reached a high of 81.26 but continues to trade near the highs of the day.
Price Extended?
Arguably, the price of crude is getting extended and due for a pullback. It was up by 11.7% at today’s high, from the most recent swing low of 72.73. However, demand looks to be staying strong even after busting through potential resistance at the two moving average lines and busting above a trendline. It has been rising with enthusiasm and today’s bullish price action says there may be more upside to go before a retracement of note.
Pullback Support Areas
Prior resistance now becomes possible supports areas during a retracement. The obvious levels are now the 50-Day MA at 80.11, the 200-Day MA at 79.77, followed by 79.25, which was a peak in January and is marked on the chart. Reaching the 61.8% Fibonacci retracement at 82.1 looks to be next on the agenda for crude. It combines with the area around the intersection of two trendlines, one rising and one falling.
Given the confluence of indicators marking the 82.1 price area, it would not be surprising to see crude rise next into the possible resistance zone. Between the two lines the long-term downtrend line has greater importance as it covers a longer period.
Daily Close Above Downtrend Line Projects Higher
A daily close above the downtrend line will provide the next more significant sign of strength for crude. The first breakout attempts in April failed. This second attempt may have a greater chance of success. It would greatly increase the chance to challenge the 87.90 April swing high. A rise above there would trigger a bull trend continuation signal for the trend begun from the December swing low. The weekly chart confirms the strength seen in the daily chart as there is a series of higher weekly highs and higher lows starting.
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Peak Oil by Design. The Energy Report
By: Phil Flynn | June 18, 2024
While there are expectations that global oil demand will break the record this year and for years to come, there are signs that global oil production may be peaking and by design. The green energy madness that has swept the globe is taking its toll on oil investment and oil producers are getting regulated out of preforming to the best of their ability.
Rystad Energy said in a report on Monday that global oil supply growth will likely slow this year with a high possibility of a further decrease in 2025. The group is not only pointing towards the voluntary production cuts by the OPEC plus cartel but also because OPEC failed to raise their demand forecasts, which is still one of the highest of any major reporting agencies. The group drastically reduced their oil supply growth for 2024 from 900,000 barrels a day to a mere 80,000 barrels a day for this year. JODI Data reported that Saudi Arabia’s crude oil exports fell by 445 kb/d. India oil demand is humming. JODI Data reported that India’s oil imports hit 5.5.3 mb/d: increasing by 509.9 kb/d m/m.
This comes as another report is suggesting that further investment and more political support with oil production in the once prolific United Kingdom could have peaked and could fall dramatically. Oil Price. com reported that the UK is currently producing some 1.2 million barrels of oil equivalent, but this will fall steeply to just 700,000 barrels daily by 2030, according to forecasts by the North Sea Transition Authority—the industry regulator, as cited by Bloomberg. It doesn’t have to be happening but because of the fossil fuel backlash and the lack of direction when it comes to the in the UK and other parts of the world, it is causing a potential shortfall that is going to damage the poor and the middle class.
Oil Price reported that, “The UK could be producing 30% more oil from the North Sea in 2030 than previously expected if investments worth some $25 billion (20 billion pounds) are deployed for that purpose.
This is according to Offshore Energies UK, formerly Oil and Gas UK, the industry group that earlier today published its Economy & People Report 2024. In the report, the authority also said that with the right political support, investment in what it calls offshore energy could rise to over $25 billion from $16.5 billion in 2023.”
If anybody had any doubts about Saudi Arabia’s commitment to production cuts, we did have another report yesterday that showed that Saudi Arabia’s crude oil exports in April fell to 6.000 million barrels per day from 6.413 million bpd in March, official data showed on Monday.
Geopolitical risk factors continue to rise under the Biden administration. There was a New York Times report that Vladimir Putin was open to peace deal in 2022 but it was slammed down by the Biden administration. That is something we have heard before and it makes you wonder whether the war in Ukraine really had to get to the point where it is today. It also makes you wonder about all the lives and the billions of dollars that could have been saved. The New York Times wrote that, “the draft included limits on the size of the Ukrainian armed forces and the number of tanks, artillery batteries, warships and combat aircraft the country could have in its arsenal. The Ukrainians were prepared to accept such caps but sought much higher limits.
A former senior U.S. official who was briefed on the negotiations, noting how Russian forces were being repelled across northern Ukraine, said Mr. Putin seemed to be “salivating” at the deal. American officials were alarmed at the terms. In meetings with their Ukrainian counterparts, the senior official recalled, “We quietly said, ‘You understand this is unilateral disarmament, right?’”
Now Reuters is reporting that Russian President Vladimir Putin vowed on Tuesday to deepen trade and security ties with North Korea and to support it against the United States, as he headed to the reclusive nuclear-armed country for the first time in 24 years.The U.S. and its Asian allies are trying to work out just how far Russia will go in support of North Korean leader Kim Jong Un, whose country is the only one to have conducted nuclear weapon tests in the 21st century.
This comes as South Korea’s military fired warning shots after North Korean soldiers crossed the Military Demarcation Line in the border area between the two Koreas on Tuesday, according to the country’s Joint Chiefs of Staff (JCS). Some 20 to 30 soldiers breached the line by 20 meters (65 feet) which runs through the middle of the demilitarized zone (DMZ) on Tuesday morning and briefly moved back north after warning shots were fired by the South, according to a JCS official as repoted by Reuters.
This week because of the Juneteenth holiday, we’re going to see a delay on the Energy Information Administration report. We will get the American Petroleum Institute report and while it’s been differing from the EIA we expect to see a pretty good drawdown in crude oil inventories today. We think the supply tightening is going to start to show up in the numbers and that should support prices.
I think it’s another reason why oil prices are up over 7% on the year and the front month got back above $80.00 a barrel on the West TX intermediate. We continue to get mixed signals on gasoline demand which signals consumers are struggling with high inflation, but we did see the market bounce back up yesterday signaling that maybe we’re seeing at bottom. Working to tighten and we are continuing to see concerns about gasoline demand even though it has rebounded.
John Kemp at Reuters writes, “U.S. TRAFFIC VOLUMES have rebounded but remain well below the pre-pandemic trend, which helps explain the relatively anemic consumption of gasoline. U.S. motorists drove 273 billion vehicle-miles in April 2024 at a seasonally adjusted rate, up from 270 billion in April 2023 but essentially unchanged since April 2018. Traffic volumes are increasing well under 2% per year – not enough to increase petroleum consumption, given the rise in ethanol blending, the growing number of hybrid and battery electric vehicles, and improvements in engine fuel efficiency.
Traders will also be watching weather developments in the Gulf of Mexico and the Atlantic. Fox Weather is reporting that, “There is a potential Tropical Cyclone One formed Monday in the Gulf of Mexico and could be on its way to becoming the first named tropical system of the 2024 Atlantic hurricane season. A potential tropical cyclone is a designation used by the National Hurricane Center to indicate a disturbance that is not yet a tropical storm but has the potential to bring that kind of weather to the U.S. within 48 hours. Potential Tropical Cyclone One is forecast to bring heavy rain and coastal flooding to much of the Texas Gulf Coast even though the center of the storm likely won’t make landfall in the U.S. The system is expected to strengthen and would likely get the first name on the list for the 2024 season – Alberto. Here’s everything you need to know about Potential Tropical Cyclone One.
Fox Weather that Potential Tropical Cyclone One is in the Bay of Campeche in the southern Gulf of Mexico. A Tropical Storm Warning has been issued for the Texas coast from Port O’Connor to the mouth of the Rio Grande. A Tropical Storm Watch has been issued for parts of Mexico’s coast. A Flood Watch has been issued in parts of Texas, where heavy rain is forecast. The watch stretches
from Beaumont to Corpus Christi and inland to Laredo and includes the Houston metro area. Potential Tropical Cyclone One is expected to become a tropical storm by Wednesday and make landfall in Mexico late Wednesday. Download the Fox Weather Ap to keep up on the latest.
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Natural Gas Retraces Gains, Tests Key Support Levels
By: Bruce Powers | June 17, 2024
• While a further drop could risk failure of recent bullish activity, holding support around $2.74-$2.76 could set up natural gas for a bullish continuation.
Natural gas further retraced its prior advance on Monday as it fell below the long-term downtrend line to reach support at 2.76. That completed a successful test of support at the purple 20-Day MA. It is the first touch of the 20-Day line since natural gas rose above it on April 26.
Since the 20-Day line is showing support so far, there is a possibility that today’s low completes the retracement. The low price today also completes a successful test of support around the top of the bull pennant pattern.
Test of 20-Day Line Might Complete Retracement
Lower prices begin to put recent bullish activity at risk of failure. Although there could still be a brief drop lower in the short term, if a quick recovery follows it will put natural gas back in a position to progress its uptrend. The 61.8% Fibonacci retracement level is at 2.74. If the 20-Day line is busted, currently at 2.76, then natural gas will likely reach the 2.74 area.
If support is seen from there, followed by a recovery above the 20-Day line, the bullish price structure will be maintained. However, a drop below the 20-Day line where natural gas then stays below the line, will be short-term bearish. A failure of the bull pennant breakout is indicated on a drop below the center line at 2.70.
Rally Above Today’s High of 2.85 Shows Strength
If a bullish setup completes today, then a decisive breakout above today’s high of 2.85 will be a sign of strength. Today’s candlestick pattern may take the form of a bull hammer candlestick pattern. A daily close in the top third of the day’s range will be a stronger indication than a close lower than the top third of the range. A decisive advance above today’s high would then be a sign of strength that should continue to higher prices.
Bearish Weekly, but Quick Bullis Recovery Will Negate Implications
Today’s decline in natural gas also triggered a bearish reversal on a weekly time frame. The weekly pattern last week was of a bearish shooting start candle. It triggered today on a drop below 2.86 and it will confirm on a daily close below that price level.
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At It Again. The Energy Report
By: Phil Flynn | June 17, 2024
Apparently the Biden Administration believes that the Strategic Petroleum Reserve (SPR) is their own little political slush fund. The Biden team is saying that they will potentially tap the reserve using taxpayer money to help influence the outcome of the election. I think I read somewhere that someone else was accused of something like that. Regardless, according to the FT, “The Biden administration is ready to release more oil from its strategic stockpile to halt any jump in petrol prices this summer, as the White House battles to contain inflation ahead of the November election.”’ So, I guess you can spend money, which increases inflation, and put on regulations that raise prices and kill pipelines that raise prices and put on drilling moratoriums that raise prices and then slander the oil and gas industry and mom and pop gas stations then use the SPR to make it all ok. All the while using the SPR for political cover while leaving the country vulnerable if there is a major oil disruption.
We are not just talking about hurricanes. In a year where they are predicting a record amount of hurricanes there is also the growing risk of global conflict that could impact supply and those risks have increased dramatically under this administration.
Russian Warships in the Caribbean, bringing back memories of the Cuban Missile crisis, as wars wage in the Ukraine, Gaza, and ongoing attacks on ships from the Iranian backed Houthi rebels which all are a risk to oil supply. Reports that Russian subs and the Russians carrying supersonic missiles are meant as a gentle threat about Biden’s escalation of the war in Ukraine.
Fox News reported that, “Russia is a longtime ally of Venezuela and Cuba, and its warships and aircraft have periodically made forays into the Caribbean. But this mission comes less than two weeks after President Joe Biden authorized Ukraine to use U.S.-provided weapons to strike inside Russia to protect Kharkiv, Ukraine’s second-largest city, prompting President Vladimir Putin to suggest his military could respond with “asymmetrical steps” elsewhere in the world.
The Washington Post reported that, “One Russian reporter described the visit as retaliation for Biden’s decision to allow Ukraine to strike inside Russia with American weapons. “Last week, President Vladimir Putin made it clear that it reserves the right for a mirror response – that is, supplying long-range weapons to countries that feel the pressure of the United States,” the Russia 24 reporter said.
This comes as the sanctions on Russian oil and gas are failing. The Financial Times reported that, “Europe’s gas imports from Russia overtook supplies for the United States for the first time in two years even though the region must mean itself off of Russia and fossil fuels. The strategic blunders that Europe has made was to go head first into green energy alternatives and becoming more dependent on Russia for supplies and now it seems they just can’t quit. Diesel supplies in Europe are very tight and now they are looking to the US to replenish those supplies but at the end of the day, Russia continues to supply more and more energy to Europe every day.
The FT Reported that, “Following Russia’s full-scale invasion of Ukraine in February 2022, Moscow slashed its pipeline gas supplies to Europe and the region stepped up imports of LNG, which is shipped on specialized vessels with the US as a major provider. The US overtook Russia as a supplier of gas to Europe in September 2022 and has since 2023 accounted for about a fifth of the region’s supply.
But last month, Russian-piped gas and LNG shipments accounted for 15 per cent of total supply to the EU, UK, Switzerland, Serbia, Bosnia and Herzegovina and North Macedonia, according to data from ICIS. LNG from the US made up 14 per cent of supply to the region, its lowest level since August 2022, the ICIS data showed.
The reversal comes amid a general uptick in European imports of Russian LNG despite several EU countries pushing to impose sanctions on them. Russia in mid-2022 stopped sending gas through pipelines connecting it to north-west Europe, but continues to provide supplies via pipelines through Ukraine and Turkey according to the FT.
Gasoline prices are continuing to fade as demand is still struggling as consumers bear the brunt of inflation. John Kemp at Reuters points out that, “U.S. GASOLINE prices at the pump (including taxes) are almost exactly in line with the long-term average, once adjusted for inflation. Nationwide prices have averaged $3.59 per gallon so far in June which was in the 52nd percentile for all months since the start of the century.
This week we are looking for crude supply to fall by 2 million barrels. We are also looking for distillate supply to fall by 2 million barrels. Gas supply should pop 2 million barrels and refinery runs should be flat.
Natural Gas is pulling back after the heat driven rally. Hopes for some moderations are giving us a break. Yet Fox Weather is watching the Gulf Of Mexico. They say that, “The National Hurricane Center (NHC) is monitoring a tropical disturbance in the Gulf of Mexico that could develop into a tropical depression or tropical storm this week, and while the system is expected to stay south of the U.S., fears are growing that tropical moisture being pulled north could lead to flash flooding along the Texas, Louisiana and Mississippi coasts.
EBW Analytics is saying that bearish weekend fundamental catalysts for natural gas were plentiful: off-the-charts record heat for late June retreated, production turned upwards to three-week highs, and LNG feedgas ebbed on maintenance at Corpus Christi LNG. Near-term downside appears likely. EBW says that it technically similarly points to a deeper retrenchment following a bearish double-top pattern at $3.16/MMBtu. While long-term fundamentals also appear weak, however, substantial, scorching heat over the next 30-45 days may still yield higher highs first.
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