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Off With a Bang. The Energy Report
By: Phil Flynn | May 28, 2024
The summer travel season started off with a bang. Energy markets, at least for the moment, decided to quit worrying about what the Fed may or may not do with interest rates and decided to focus on supply and demand. Oil and products are rising with increased oil and product demand expectation, rising geopolitical risk, as well as another drop the US rig count. Gasoline demand surged back of 9 million barrels a day according to EIA last week and evidence suggests that for at least the start of summer, demand might live up to lofty expectations even as bad weather put a damper on many beach plans along the Northeast over Memorial Day. AAA did predict demand for petroleum might have hit a 20 year high for this past weekend as Americans took planes, trains and automobiles.
The U.S. Transportation Security Administration (TSA) got the holiday oil buying party started after they said they screened 2.95 million airline passengers on Friday, the highest number ever on a single day. The record travel coincides with the Memorial Day weekend that marks the beginning of the U.S. summer travel season. Last week, a group representing major U.S. airlines forecast record summer travel with airlines expected to transport 271 million passengers, up 6.3% from last year. That means, more than likely, strong jet fuel demand will continue. Last week the EIA put jet fuel demand up 3.6% compared with the same four-week period last year according to Reuters.
We also have a report about oil demand in China rising by 1.3 million barrels a day in March according to JODI. While that was down year over year that is still very strong, but this may be one reason why Saudi Arabia is lowering the cost of oil to Asia for the first time in five months. The July official selling price (OSP) for flagship Arab Light crude is expected to fall by 30 to 50 cents a barrel, a Reuters survey of five refiners showed, after hitting a five-month high in June. Normally the market would take this as a negative but so far, not. It’s very possible that Saudi Arabia’s move is to regain market share, but they have given up after raising prices in the last couple of months to places like Russia.
Which leads us to the upcoming all-important June 2nd OPEC Plus meeting. As you might remember, after it was announced that the meeting went from an in-person meeting in the beautiful hotels of Vienna to an online meeting, oil traders went short on the assumption that the status quo was going to stay in place until the end of the year and there would be no surprises. So, the market expectations are that OPEC plus would do something dramatic were dampened. Now there’s growing optimism that we may get commitments from OPEC cheaters to extend their production cuts past 2025 to make up for previous cheating. Amena Bakr says that the expectation is that the 8 states that offered voluntary cuts will extend them, with a possibility of further action to support the market.
Some people were concerned about the boasts by Iraq that they planned to increase their oil production capacity to over 4 million barrels a day. That’s a negative but that is a problem for another day and not at this OPEC meeting.
The Biden administration has been a big boost for Iran’s oil production. Energy Tidbits pointed out that, “Today Iran, interim president, Mohammad Mokhber, that took over after the death of Ebrahim Raisi said that one of the greatest achievements of his predecessor was increasing Iranian oil production to 3.6 million barrels a day. He is also now bragging that Iran will hit a production level of four million barrels a day shortly.
Geopolitical risk factors for oil remain high yet the market isn’t adjusting for it because so far there’s been no major disruptions to supply. Even more attacks by the Houthi Rebels on shipping over the weekend failed to move the needle.
Over the weekend, exchange of fire between Israel and Egypt made the headlines. The Wall Street Journal reported that, “Biden is facing fresh political tension at home following an Israeli airstrike on Rafah that Palestinian authorities said killed dozens of civilians. Israel said the strike killed two top Hamas officials, but Palestinian authorities said it also led to the deaths of at least 45 Palestinian civilians and wounded others, including women and children. Israeli Prime Minister Benjamin Netanyahu called the civilian deaths a “tragic mistake” and promised to investigate.
China is calling out the United States and our support for Taiwan independence. After completing war games near Taiwan with live ammunition, China is signaling that they’re getting closer to a possible confrontation. Fox Business reported that Taiwan’s opposition-controlled legislature passed changes that favor China and reduce the power of the island’s president. The changes, pushed by the opposition Nationalist Party, give the legislature greater power to control budgets, including defense spending. The Nationalist Party, which supports unification with China, took control of the legislature with a single-seat majority after the January elections.
Bloomberg reported that, “Iran increased its stockpile of near bomb-grade uranium, a move that could flame tensions across the wider Middle East as Tehran prepares to hold presidential elections next month.
It’s the first nuclear-safeguards assessment since Iran’s president and foreign minister died in a helicopter crash just days after top officials from the United Nations’ atomic watchdog traveled to the country to secure greater cooperation in their monitoring efforts. International Atomic Energy Agency inspectors verified on Monday that Iran’s stockpile of highly enriched uranium rose 17% over the last three months, according to a nine-page, restricted report circulated among diplomats and seen by Bloomberg. That’s enough uranium to fuel several warheads should Iran make a political decision to pursue weapons.”
Bloomberg also touted over the weekend that wind and solar is going to boost US power plant capacity by 80% by the year 2035. Yet Art Berman, noted oil analyst, reacted and pointed out that we have to put that in perspective and pointed out renewables will then account for 2.2% of US energy consumption delivered. So, the death of fossil fuels consumption has been greatly exaggerated. Investment dollars that were turning away from oil and gas are starting to creep back in because reality sometimes is better than the alternative.
Natural gas is back on the rise as crazy weather over the Memorial Day weekend and the beginning of what could be a very interesting summer. Not only is the market looking ahead to near term forecasts that are calling for above normal temperatures in many parts of the country, we are also getting warnings from many private forecasters of a very active hurricane season. Suddenly, the natural gas market is starting to look a little bit better even though we still have some oversupply. Rig Zone reported that North America added two rigs week on week, according to Baker Hughes’ latest rotary rig count, which was published on May 24. Although the U.S. lost four rigs week on week, Canada added six during the same period, leading to a total North America rig count of 720, comprising 600 rigs from the U.S. and 120 rigs from Canada, the count outlined.
Of the total U.S. rig count of 600, 579 are classified as land rigs and 21 are classified as offshore rigs. The total U.S. rig count comprises 497 oil rigs, 99 gas rigs, and four miscellaneous rigs, the count showed. Horizontal rigs made up 537 of the total U.S. rig count, directional rigs made up 43, and vertical rigs made up 20, Baker Hughes revealed. Week on week, the U.S. added one offshore rig and dropped five land rigs, Baker Hughes’ count outlined. The country cut four gas rigs and eight horizontal rigs, and added two directional and two vertical rigs, week on week, the count showed.
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Natural Gas Tests 200-Day MA Support After Strong Rally
By: Bruce Powers | May 27, 2024
• After a 92.1% rally, natural gas approaches the 200-Day MA at 2.46, indicating a potential correction phase and testing critical support levels.
Natural gas further flirts with potential support around the 200-Day MA, currently at 2.46, as the low for the day was 2.475. The 200-Day MA is an obvious area to test for support as this is the first time that it has been approached since the bullish breakout of the line on May 16. It is common for the first test of a moving average as support frequently sees signs of support. However, natural gas is correcting from a strong advance that completed a 1.40 point or 92.1% rally in 13 weeks.
That is an aggressive advance that exceeds all prior rallies since the 10.03 peak in 2022. It has been overdue for a correction and has more than likely only just begun a retracement or consolidation phase. So, the behavior of natural gas around the 200-Day line is important for the short-term as the reaction should provide clues as to what might come next.
Weekly Chart Looks Bearish
Moreover, the weekly chart needs to be considered. Last week ended with a bearish wide ranged red shooting star candlestick pattern with the closing price essentially the low of the week. That low stopped at support seen at the 50-Week MA. Currently, the 50-Week MA is at 2.50. It was broken to the downside briefly today to reach a low of 2.475 before there was a minor intraday bounce.
Since both the 200-Day MA and 50-Day MA identify a similar potential support zone from 2.50 to 2.46, it may have added significance. Nevertheless, a decisive drop through 2.46 has natural gas heading first towards the 20-Day MA at 2.37 followed by a prior interim swing low at 2.31. A more likely lower price target though looks to be around 2.25 to 2.23. That zone is derived from the 50% retracement and a previous swing low from December 13.
Correction May Just Be Getting Started
Natural gas has been tracing out a declining trend channel that is shown on the chart with dashed declining blue trendlines. Since it hit the top of the channel last week and rejecting price to the downside, the lower area of the channel becomes a potential target. Also, if the 20-Day MA fails to retain support and natural gas drops below it and stays below it, the 50-Day MA at 2.01 becomes a target. It is a match with the prior top of the symmetrical triangle bottom pattern.
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Crude Oil Continues to Find Support
By: Christopher Lewis | May 27, 2024
• The crude oil market continues to see a bit of support underneath, as there have been plenty of trade executed in this general area. The market will be noisy, but in the end, I think the buyers are forming a floor.
WTI Crude Oil Technical Analysis
Taking a look at the four hour crude oil chart, you can see that the West Texas Intermediate crude oil market has rallied a bit during the Monday session. But keep in mind that it’s also Memorial Day in the United States, so there’s a lot of liquidity issues. So, I don’t read too much into the candlestick of the early hours in North America, but what I look into is the fact that we have found support at an area where we needed to find it in the form of roughly $77.
At this point, I think it’s likely that the market could go looking to the $80 level above. But with that being said, I do think that we’ve got a scenario where you have to be cautious and recognize that a lot of choppiness will be the norm. This time of year, is typically very bullish for crude oil, so I’m perfectly fine buying it, but I do recognize that it’s not necessarily going to be the easiest market to deal with.
Brent Crude Oil Technical Analysis
Brent markets look very much the same. If we can break above the $83 level, then I think it brings in a rush where we try to get to $84.50. Short-term pullbacks continue to be buying opportunities as there will be a lot of demand for crude oil.
And of course, there are a lot of geopolitical concerns in the Middle East as per usual. With that being the case, I think it makes a lot of sense to be a buyer of dips and to not worry about shorting the market at all.
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | May 25, 2024
• Following futures positions of non-commercials are as of May 21, 2024.
WTI Crude Oil: Currently net long 255.3k, up 21.8k.
For the second consecutive week, a rising trendline from last December when West Texas Intermediate crude bottomed at $67.71 was breached intra-week but defended by the end of the week. The difference this time was that the crude ended the week right on it, with oil bulls buying Friday’s low of $76.15 to push the session up 1.1 percent to $77.72/barrel. With this, they also defended short-term horizontal support just south of $77.
The crude has faced difficulty at $80 for three weeks now. Back then, WTI fell back into a well-established range between $71-$72 and $81-$82 that persisted for 19 months before the upper end gave way a couple of months ago. Oil bulls need to at least charge toward the upper range sooner than later. Else, they risk a breach of the December trendline.
In the meantime, US crude production in the week to May 17th was unchanged for 11 consecutive weeks at 13.1 million barrels per day; 13 weeks ago, output was at a record 13.3 mb/d. Crude imports decreased 81,000 b/d to 6.7 mb/d. As did gasoline inventory, which dropped 945,000 barrels to 226.8 million barrels. Stocks of crude and distillates went the other way, up 1.8 million barrels and 379,000 barrels respectively to 458.8 million barrels and 116.7 million barrels. Refinery utilization increased 1.3 percentage points to 91.7 percent.
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Small Speculators in Crude Oil Are Still Eager
By: Tom McClellan | May 24, 2024
Every Friday in my Daily Edition, I cover some of the interesting insights in the weekly Commitment of Traders (COT) Report, published on Fridays by the Commodity Futures Trading Commission (CFTC). That report lists the totals of trader positions in different categories for 314 different futures contracts (at last count). This week's chart looks at the net position of the "non-reportable" traders of crude oil futures.
The non-reportable category has that name because the traders in that category have positions which are so small that the CFTC figures they are not worth tracking individually. The CFTC really wants to know how many contracts Exxon and Chevron own, as well as the big hedge funds. But the small traders with a handful of contracts are not worth tracking.
Generally speaking, the non-reportable category of futures traders in all contracts are the hot money, and they are usually wrong when they get to an extreme. In crude oil, this group also tends to be affected a lot by whatever prices are doing. They pile in during rallies, and get scared away during selloffs.
One important note about the non-reportable traders of crude oil futures is that they are nearly always net long to varying degrees. Every futures contract is simultaneously 1 long position and 1 short position, held by different parties. The trader who is short is committed to make delivery at the contract expiration date, and the trader who is long is committed to take delivery. Or they can trade out of those positions before expiration (they hope). Each group in the COT Report (commercial traders, non-commercial, and non-reportable) holds some number of long positions, and some number of shorts. The difference between those is their net position.
The last time that the non-reportable traders of crude oil futures were actually net short as a group was all the way back in November 2019, which is off the left end of this chart. This bias toward the long side means that when we go to interpret their current net position, we have to account for how they are normally positioned. One should never make judgements based just on the raw number of contracts, but rather look at a chart to get context.
What is really interesting right now is that crude oil prices have been falling, but the non-reportable traders have been moving toward a bigger net long position. That is irregular, but not unprecedented. What this means is that their change in sentiment is not coming about due to the normal pressures of price movements, but rather out of pure speculation. And that is the most important type of sentiment.
When we have seen a spike up in their net position like this during price drops, it usually means that there is more to come for falling prices. Some examples are highlighted in the chart above. The message is that the amount of price decline we have seen thus far has not been long enough or hard enough to get the small speculators to abandon all hope. So it has more work to do.
At the point when these small speculators decide that they cannot stand it any more, and start aggressively bailing out of their collective net long positions, then we can say that a price bottom is probably at hand. But oil is not there yet.
Tom McClellan
Editor, The McClellan Market Report
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | May 25, 2024
Next Monday is Memorial Day, which is a holiday in the United States. NY Crude Oil Futures closed today at 7772 and is trading up about 8.47% for the year from last year's settlement of 7165. Caution is required for this market is starting to suggest it could now decline on the MONTHLY level. Up to now, this market has been rising for 4 months going into May suggesting that this has been a bull market trend on the monthly time level. As we stand right now, this market has made a new low breaking beneath the previous month's low reaching thus far 7615 while it's even trading beneath last month's low of 8070.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Crude Oil Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2020 and 2009 and 2001 and 1998 and 1994. The Last turning point on the ECM cycle high to line up with this market was 2022 and 2018 and 2011 and 2000.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The historical broader tone of the NY Crude Oil Futures has been a bearish consolidation following the high established back in 2008. Since then, this market has created 2 reaction highs which have been unable to break this overall protracted bearish consolidating trend. Still, the major low was made in 2023 and the market has bounced back for the last year. The last Yearly Reversal to be elected was a Bullish at the close of 2023.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Nevertheless, it closed last year on the weak side down from 2022. Pay attention to the Monthly level for any serious change in long-term trend ahead.
Focusing on our perspective using the indicating ranges on the Daily level in the NY Crude Oil Futures, this market remains moderately bearish position at this time with the overhead resistance beginning at 7775 and support forming below at 7765. The market is trading closer to the resistance level at this time. An opening above this level in the next session will imply that a bounce is unfolding.
On the weekly level, the last important high was established the week of April 8th at 8767, which was up 17 weeks from the low made back during the week of December 11th. We have seen the market drop sharply for the past week penetrating the previous week's low and it closed lower. We are trading below the Weekly Momentum Indicators warning that the decline is very significant and we need to pay attention to the timing and reversals. When we look deeply into the underlying tone of this immediate market, we see it is currently still in a weak posture. Immediately, this decline from the last high established the week of April 8th has been important closing sharply lower as well. Before, this recent rally exceeded the previous high of 7960 made back during the week of November 27th. Nonetheless, that high was actually lower than the previous high made the week of October 16th suggesting this market has really been running out of sustainable buying for right now. This immediate decline has thus far held the previous low formed at 6771 made the week of December 11th. Only a break of that low would signal a technical reversal of fortune and of course we must watch the Bearish Reversals. Right now, the market is below momentum on our weekly models casting a bearish cloud over the price action. Looking at this from a wider perspective, this market has been trading up for the past 23 weeks overall.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2021 while the last low formed on 2023. However, this market has declined in price with the last cyclical low formed on 2023 warning that this market remains weak at this time on a correlation perspective declining in both price and Momentum.
Looking at the longer-term monthly level, we did see that the market made a high in September 2023 at 9503. After a four month rally from the previous low of 8346, it made last high in September. Since this last high, the market has corrected for four months. However, this market has held important support last month. So far here in May, this market has held above last month's low of 8070 reaching 8070.
Some caution is necessary since the last high 9503 was important given we did obtain one sell signal from that event established during September 2023. That high was still lower than the previous high established at 12368 back during June 2022. Critical support still underlies this market at 6700 and a break of that level on a monthly closing basis would warn of a further decline ahead becomes possible. Nevertheless, at this time, the market is still weak trading beneath last month's low.
Oil Market Update - back in buying territory after post-breakout correction...
By: Clive Maund | May 20, 2024
With the main fundamental drivers for a higher oil price remaining in play, namely continuing strife in the Mid-East with the ongoing risk of flare ups and the growing risk of a dollar collapse, this looks like a good point to buy oil and oil related investments after the corrective phase of the past 5 weeks or so.
On the 8-month chart for Light Crude we can see how oil ran up in late March and early April following a breakout from a Head-and-Shoulders bottom. Then we saw what looks like a normal post-breakout reaction back to test the support at the top of the pattern with an intermediate base pattern forming in this support this month within which are a couple of “bull hammers” which are long-tailed bullish candles, which are more easily seen on shorter-term charts. This correction has more than fully unwound the earlier overbought condition and has put oil in position to advance anew soon.
Turning now to oil stocks we see on the 8-month chart for the XOI oil index that they had quite a strong runup on the back of the rise in the oil price in March and April but from early April we see that this index has reacted back in what looks like a classic bull Flag / Pennant that will lead to renewed advance. We can see that the duration of this corrective pattern has allowed time for the earlier heavily overbought condition shown by the MACD indicator to fully unwind, thus restoring upside potential, and for its bullishly aligned moving averages to partially catch up, thus creating the conditions for renewed advance. This therefore is believed to be a good time to buy selected oil stocks.
A good vehicle for playing renewed advance by the energy sector is the Energy Select Sector SPDR Fund, code XLE, and on its 8-month chart we see that it has corrected back over the past 5 weeks or so in sympathy with the sector to arrive at the lower rail of a powerful uptrend cannel, which has allowed time for its earlier heavily overbought condition to fully unwound. This correction is believed to be a bull Flag that will lead soon to another strong upleg, an interpretation that is given added weight by the fact that the Accumulation line has held up very well on the correction and is even on the point of making new highs even though the price has not yet broken out of the Flag. This is very bullish and so XLE is rated a strong buy here. Whilst XLE is not viewed as especially speculative in this environment, buyers here may want to place a stop some way beneath the lower rail of the channel or to reduce the risk of being shaken out before a big rally, it’s perhaps better to place a stop beneath the support level at approximately $90 - $91.50.
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Natural Gas Faces 200-Day MA Test at 2.46
By: Bruce Powers | May 24, 2024
• Following a significant rally, natural gas starts a retracement, with key support levels at the 200-Day and 20-Day MAs in focus.
Natural gas fell to a five-day low of 2.51 today and it continues to trade near the lows of the day at the time of this writing. It looks to be heading next towards the first test of support around the 200-Day MA since a bullish breakout of the line last Thursday. Today’s bearish continuation follows yesterday’s new trend high of 2.92 and subsequent weak close. That high completed a 92.1 % advance from the February swing low at 1.52. The RSI momentum oscillator is also showing weakness as it turned down from the most overbought reading since the peak of a long-term uptrend in 2022.
Declining Trend Channel Identifies a Price Range
Since April 26 natural gas has been trading within a declining parallel trend channel defined on the chart with two blue dashed line. Clearly price was rejected to the downside near the top line yesterday. That was the third touch for the top trendline. Given the recent sharp rally it would be normal for natural gas to spend some time in retracement or consolidation. When considering the declining channel, once the top is hit there is the potential for the bottom channel line to be tested as support. This doesn’t mean it will happen, but it does increase the possibility that a correction could take some time.
Correction to Strong Advance Could See Lower Support Levels
If the 200-Day MA is broken to the downside, the 20-Day MA becomes the next target. It is currently at 2.35 and should be considered along with the 2.31 interim swing low from January 22. A little lower is the 50% retracement at 2.25, along with the 2.23 swing low from December. That swing low is potentially more significant than the January low as it was a sustained bottom.
The 61.8% Fibonacci retracement is at 2.095, followed by the orange 50-Day MA at 1.99 currently. It is approximately 32% below yesterday’s high. Since the rally was fast, the price of natural gas reached an extreme level relative to the 50-Day line. Strong swings in one direction can frequently lead to a strong reaction in the opposite direction.
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Crude Oil Continues to Find Buyers on Dips
By: Christopher Lewis | May 24, 2024
• The oil markets found a little bit of support on Friday, gapping higher to kick off the session. This is a market that has been weathering a bit of a storm lately, and therefore it has proven its resolve.
WTI Crude Oil Technical Analysis
This is the West Texas Intermediate crude oil market and you can see that the market has gapped higher to kick off the trading session. And it now looks like we are trying to recapture the 50% Fibonacci retracement level that had been important previously.
With that being said, I like the idea of paying close attention to whether or not we can clear the $78 level, because I think that allows the market to go looking to the $80 level. I am starting to wonder whether or not and you can look on futures charts as to whether or not the sell off here was a little bit capitulatory.
Brent Crude Oil Technical Analysis
And I’m starting to suspect that Brent looks very much the same. If we can take the $82.50 level back again, then we could go to the $84.50 level. We are in summer driving season, so it does make a lot of sense that crude oil will continue to rally. Furthermore, we have a lot of geopolitical issues out there that could continue to push this market higher.
So, I don’t have any interest in shorting anyways. I haven’t this entire time, at least not over the last couple of months. I think ultimately you have a market that does go higher and perhaps reaching as high as $90 and Brent and of course dragging the WTI grade right along with it. I have no interest in shorting oil now, not this time of year. And I believe inflation is just going to show itself in petroleum like it is everything else.
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Ceasefired Up. The Energy Report
By: Phil Flynn | May 24, 2024
Oil prices retreated yesterday along with a big sell off in the stock market as concerns about inflation and rising interest rates put it damper on most of the markets. Today, believe it or not, the market is getting some pressure from a Reuters report that Vladimir Putin is looking for a ceasefire in Ukraine. According to a Reuters report Russian President Vladimir Putin is ready to halt the war in Ukraine with a negotiated ceasefire that recognizes the current battlefield lines.
At the same time, he is saying he is prepared to fight if Kiev in the West does not respond.
The interesting thing here is that when you look at the war in Ukraine the Biden administration has a lot invested in this War. Early in the war the Biden Administration advised Ukraine not to agree to a ceasefire deal with Russia.
President Biden seemed to welcome the “minor incursion” into Ukraine by Russia and then later backed off that statement, yet it seemed almost to welcome the conflict between Russia and Ukraine.
Now he has the military industrial complex humming with massive amounts of American Taxpayer money flowing to Ukraine. Because of that ignominious start to the war, it would be interesting to see if the Biden administration would be open to the olive branch that the Russian President is offering.
Many members of the Biden administration of course have demonized Russian President Vladimir Putin even before the Russian Ukraine war, rightly or wrongly. Many members of Biden administration helped perpetuate the myth that the Trump administration had in some way colluded with Putin and Russia to discredit the sitting president of the United States.
We know that the Russian investigation into the Trump campaign was started by the Hillary Clinton campaign with a fake dossier.
We know now that the FBI that broke the law in securing FISA warrants against American citizens.
This was a very dark time in American history where the rule of law became a joke as corrupt players in the FBI and the CIA decided to take it upon themselves to try to unseat sitting U.S. President. They spat on the constitution and bright shame on themselves and the institutions that they were supposed to serve.
I’s clear that the Biden administration has a lot invested in the war in Ukraine. Not only did his son Hunter have business dealings in Ukraine, working for the natural gas company Burisma Holdings. Then Vice President leveraged $1 billion in aid to persuade Ukraine to fire its top prosecutor, Viktor Shokin, in March 2016.” In 2012, the Ukrainian prosecutor general Viktor Pshonka began investigating Ukrainian oligarch Mykola Zlochevsky, owner of the natural gas company Burisma Holdings, over allegations of money laundering, tax evasion, and corruption during 2010–2012. In 2015, Shokin became the prosecutor general, inheriting the investigation. Then will Hunter Biden was getting paid the Vice President got Ukraine to fire Ponoka.
Biden administration is also used the war in Ukraine as an excuse for increasing inflation and rising oil and gas prices. This has been a convenient excuse, almost as convenient as being able to use US taxpayers’ dollars to influence a country to fire a prosecutor investigating the company that you’re Son is getting paid by.
From a technical point the market just doesn’t seem to have a lot downside but the negativity about demand expectations and the course of interest rates is keeping the market in a range.
AAA says that “The national average for a gallon of gasoline wobbled slightly since last Thursday before settling one cent higher at $3.61
“The lack of pump price movement is typical in the days leading up to Memorial Day. However, with AAA forecasting a record 38.4 million drivers hitting the road for the long weekend, the price needle could point a bit higher, at least temporarily. “
Yet Trilby Lundburg on the Lundberg Survey the granddaddy of all gasoline price reporting and the inventor of that industry questioning that prediction. Berg better preceded AAA’s price reporting on gasoline and even did it before the US government started to cover it.
Lundgurg writes that “AAA’s holiday car travel projections have been high versus actual gasoline demand by a factor of ten on average according to our study. The AAA forecasts are widely reported by media as gospel without anyone asking about the historic track record. This report examines 14 years of AAA forecasts versus gasoline demand and finds some shocking results. Lundberg writes that “the AAA press release states quote we haven’t seen Memorial Day weekend travel numbers like these in almost 20 years” said Paula Twidale, senior vice president of a travel. “We are projecting an additional 1,000,000 travelers this holiday weekend compared to 2019 which not only means were exceeding pre pandemic levels but also signals a very busy summer travel season ahead.”
What’s more AAA says Rd. travel will hit a new record high: “road trips are expected to set a record AAAA projects 38.4 million people will travel by car over the Memorial Day weekend the highest number for that holiday since AAA began tracking this in the year 2000.
Lundberg did an extensive study of a AAA holiday predictions over the years concluded that they have really been overestimating these travel numbers for a while.
She did a comparison to the Energy Information Administration (EIA) data and saw some differences.
She says because of that a forecast of four-point a 4.1% increase in driving this Memorial Day season is somewhat questionable. She questions why AAA would expect a big surge in gasoline demand when we have seen evidence that so far drivers have been cutting back on consumption in 2024.
Why suddenly when they jump into their cars and start spending money when they’re being impacted by high inflation.
And while the Energy Information Administration did report a big surge in gasoline demand from the week before we have seen some very erratic data as far as gasoline from week to week as far as demand numbers are concerned.
Yet regardless of who’s right and who’s wrong the main thing to do is stop and take some time this holiday weekend to remember those that gave all for America and our freedoms. so many good men and women sacrificed so much so that we could have a country and they deserve our gratitude and prayers. God Bless them and God Bless their Families and God please bless America.
Scott DiSavino at Reuters wrote that Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 97.5 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April. That compares with a monthly record of 105.5 bcfd in December 2023.
On a daily basis, however, output was up about 1.5 bcfd since hitting a 15-week low of 96.2 bcfd on May 1. Energy traders said that increase was a sign that the 63% gain in futures prices over the past three weeks prompted some drillers to start producing more gas.
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Crude Oil Faces Increased Selling Pressure
By: Bruce Powers | May 23, 2024
• WTI crude oil's lowest close since February 26 indicates weakening, with potential bearish continuation on a drop below 76.83.
WTI crude oil tested the bottom range of a two plus week tight consolidation zone with today’s low of 76.90. That is a six-day low and crude oil is on track to close at its lowest daily closing price since February 26, not to mention the lowest daily close of the current consolidation phase. This is a sign of weakening, although within consolidation.
Nonetheless, it indicates increasing selling pressure and follows multiple tests of resistance at the convergence of a downtrend line, 200-Day MA, and 20-Day MA. Further, the area around the uptrend line has been attempting to hold as support. Today’s bearish price action decreases the chance that the uptrend line will remain a price support area and increases the possibility of it representing resistance.
Chance for Bearish Continuation is Increasing
The chance for a continuation of the bear trend is increasing. Recent failed attempts to breakout above the 200-Day MA, the more significant trend indicator, have failed and we’re now seeing increasing signs of weakness. The week ends tomorrow and unless the bulls take back control crude oil is set to end the week with a bearish candlestick pattern.
A bear trend continuation signal will be given on a drop below last week’s low of 76.83. Last month’s low of 76.86 was already busted once earlier this month. A drop below that low will provide a second monthly bearish signal. The next lower target zone includes the 61.8% Fibonacci retracement at 75.49, along with the bottom trend channel line. Further down is the 78.6% retracement at 72.11.
Rallies Will Again Deal with Solid Resistance Zone
On the upside, a rally above today’s high of 79.14 sets up another test of trendlines and moving average as resistance. One thing to consider is that when multiple lines identify a similar price zone, it becomes more significant. For crude oil, that significance may be experienced as strong resistance leading to a bearish continuation, or a key pivot where an upside breakout may trigger strong momentum.
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Natural Gas Rally Stalls at 2.92, Reversal Signals Loom
By: Bruce Powers | May 23, 2024
• After hitting 2.92, natural gas faced resistance and reversed, suggesting a potential top and increasing chances of a market correction.
Natural gas advances to a high of 2.92 on Thursday before encountering resistance and turning over. At the time of this writing natural gas has reversed intraday to below the halfway point of the day’s trading range. This indicates a possible weak close following a new trend high and a possible top for now. Today’s high was a little shy of testing the top declining trendline (blue dashed).
Large Measured Move Completed
However, an 87.2% measured move that matches the percentage advance from the rally starting from the April 23 swing low completed at 2.85. That advance covered the full rising trend channel that ended at 3.64 in October 2023. The current advance started from the 1.52 February swing low. It reflects a degree of price symmetry between the two swings. Once there is a match the chance of encountering resistance that could lead to a reversal increases.
Either way, a key pivot level is identified. Judging by today’s initial continuation into new trend highs, followed by a clear intraday reversal and a likely weak closing price, it seems like the market may have taken notice. Further, the relative strength index (RSI) has turned down from being overbought, the most overbought since the 2022 peak.
Watching for Further Weakness
Nonetheless, there is no daily reversal signal yet and natural gas could still advance. But the next higher target is not much higher at 2.98/2.99. Certainly, the uptrend is extended and due for a retracement. Even if slightly higher prices are seen before a further dip, the chance for a correction has increased.
A drop below Wednesday’s low of 2.61 on the daily chart will be bearish. Key price areas to watch for possible support start with the 200-Day MA at 2.64. That level is followed by the 20-Day MA and prior interim swing low at 2.21. A little lower is the 50% retracement of the current advance at 2.25 and prior swing low at 2.23. Further down is the 50-Day MA at 1.98.
Weekly Chart May End Bearish
Also, be aware of the weekly chart and how natural gas ends the week. As of today, the weekly chart is shaping up as a bearish shooting star. If the week completes in a similar fashion, it will set up a potential sell signal below this week’s low of 2.61.
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$WTIC $OIL - Failed to exit the Dn/Trend Channel (Gold)
By: Sahara | May 23, 2024
• $WTIC $OIL - Failed to exit the Dn/Trend Channel (Gold).
And exiting the 'Bowl'. Unless it recovers to leave a tail outside the Bowl for the Week. Otherwise it will seek out that final Target from that 'H&S' Plot (Red).
A failure to hold there will target the full Wave-(E)...
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Bull Signal Flashing for Oil & Gas Stock Chevron (CVX)
By: Schaeffer's Investment Research | May 23, 2024
• Chevron stock pulled back to a historically bullish trendline
• The stock could bounce back towards seven-month highs
The shares of oil and gas stock Chevron Corp (NYSE:CVX) still sport a fractional year-over-year lead, despite pulling back over the last two weeks. In fact, going back to May 13, CVX's only win was a 1% gain on May 17. While the security is pacing for its second consecutive weekly loss, investors may have a potential "buy on the dip" situation on their hands.
That's because this recent pullback has Chevron stock trading within one standard deviation of its 260-day moving average, a trendline with historically bullish implications. Per Schaeffer's Senior Quantitative Analyst Rocky White, the security saw four similar signals over the past three years, after which it was higher one month later 75% of the time, averaging a 7.6% gain. A move of similar magnitude would put CVX nearly $170, or its highest level since October 2023.
An unwinding of pessimism amongst options traders could provide the shares with tailwinds. This is per CVX's Schaeffer's put/call open interest ratio (SOIR) of 0.97 that stands higher than 90% of readings from the past 12 months.
Options are reasonably priced at the moment too, for those that wish to speculate on Chevron stock's next move. This is per the security's Schaeffer's Volatility Index (SVI) of 17%, which sits in the low 15th percentile of its annual range. This means options traders are pricing in low volatility expectations at the moment.
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Willing But Able? The Energy Report
By: Phil Flynn | May 23, 2024
The Fed Minutes were a buzz kill for smoking hot commodities after it said that some Fed officials might be willing to raise interest, if need be, but the question is whether or not they are able. Raising rates in an election year is fraught with political fallout so even if inflation stays red hot, I can’t imagine that a rate increase would be possible this year, unless of course Donald Trump becomes President.
Regardless, the Fed minutes broke oil, but as bad as it looked, the support was not broken. The Energy Information Administration (EIA) Petroleum Status report showed a decent snap back in gasoline to 9.315 million barrels a day(mbpd) and diesel demand up to 3.883 mbd. That improved the lagging four-week average on demand to 8.9 mbd, now just 1.8% below year ago levels. Distillate improved to 3.7 mbd, down 6.1%.
Global oil demand expectations rose after the India flash PMI climbed to 61.7 in May from 61.5 in April. That was the third fastest pace upturn in oil hungry India output since Jul-2010 and was partially fueled by Russian oil imports. How is that price cap thing working? The report said that services drove the growth amid acceleration in business activity. Now Jodi is reporting that India’s total product demand was nearly at the same level month over month at 5.6 mb/d but was 3.4% above the previous year’s level.
The oil market is preparing for the June OPEC online meeting. The oil market should comment that OPEC decided to hold the meeting online, but they may have a surprise already baked into the online meeting.
The key issue that currently moves oil prices is whether or not OPEC will extend production cuts into 2025. While that is unlikely, in an online meeting there’s no doubt about the commitment by OPEC plus to continue along the path that they are on.
Amena Bakr points out that, “commitment among the OPEC+ alliance to the cuts is strong, and countries that have been overproducing their quotas are compensating for the increased volumes.” So, OPEC plus may do whatever it takes to keep the oil market tight and if demand surges, the supply deficit will occur.
US oil inventories are still higher than most thought they would be at this point as supply at the Cushing, Oklahoma delivery point hit 36.3 million barrels, the highest level since July. Yet stagnant US oil output, at least according to EIA data, suggests that as the refining season kicks in that could change very quickly. The EIA says that US production has been stuck at 13.1-million-barrel day. Is that a sign that we are seeing a peak in production? Or is it a sign that the EIA just gave up on updating weekly production numbers?
Regardless, the EIA’s snapshot of supply puts U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) with an increase by 1.8 million barrels from the previous week. At 458.8 million barrels, U.S. crude oil inventories are about 3% below the five-year average for this time of year. Total motor gasoline inventories decreased by 0.9 million barrels from last week and are about 2% below the five-year average for this time of year. So, both demand and supply are below year ago levels. Distillate fuel inventories increased by 0.4 million barrels last week and are about 7% below the five-year average for this time of year.
The EIA is also putting out an alert about the upcoming hurricane season. The EIA said, “Meteorologists are forecasting a particularly intense Atlantic hurricane season this year; they expect 20–25 named storms with a possibility of 30 or more, according to reports from AccuWeather in April. Colorado State University similarly forecasts an estimated 23 named storms this year. The potential for a stronger hurricane season suggests heightened risk for weather-related production outages in the U.S. oil and natural gas industry. With this type of a forecast coming from the Energy Information Administration, it’s probably critical that you get your Fox Weather app downloaded on your phone.
Oil prices look like they are still in the process of bottoming here even with the weakness thrown at it. It’s probably a perfect time to start getting back in and building a position slowly.
Gold prices did take a hit after the Federal Reserve minutes but also there are concerns that high prices might cure high prices in India’s red hot economy. Reuters reported that, “India’s gold imports in 2024 could fall by nearly a fifth from the previous year, as record high prices spur retail consumers to exchange old jewelry for new items, the head of an industry body told Reuters. Lower imports by India, the world’s second biggest consumer of the precious metal, could cap a rally that carried global prices to a record this week.
Natural gas prices sizzled after early weakness yesterday. Increase in the demand for LNG potential for weather related demand is causing the resurgence in natural gas prices with the best run in 2 years. EBW Analytics warns that, “While the immediate term outlook may feature a retreat into Memorial Day weekend as CDDs peak and June final settlement awaits, the medium-to-long term outlook may find support amid robust power burns across Texas and the Southeast and glimmers of upside potential for LNG feedgas demand.” If you believe the global natural gas crisis is over, you better think again. Energy Intelligence reported that European natural gas prices jumped to their highest levels in over four months on Wednesday after Austria’s OMV warned that its supply may be cut off by Russia’s Gazprom.
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EIA Natural Gas Storage Build Of +78 Bcf Misses Estimates
By: Vladimir Zernov | May 23, 2024
Key Points:
• Natural gas in storage increased by 78 Bcf from the previous week.
• Stocks are 402 Bcf higher than last year.
• Traders continue to prepare for summer, which could bring extreme heat.
On May 23, 2024, EIA released its Weekly Natural Gas Storage Report. The report indicated that natural gas in storage increased by 78 Bcf from the previous week, compared to analyst consensus of +84 Bcf.
At current levels, stocks are 402 Bcf higher than last year at this time and 606 Bcf above the five-year average of 2,105 Bcf. High storage levels serve as a bearish catalyst for natural gas prices, although traders have focused on other drivers in recent weeks.
Current demand for natural gas is moderate, but traders continue to prepare for the upcoming cooling season, which would boost demand for energy.
It should be noted that natural gas prices in Europe have also gained solid upside momentum in recent weeks as traders prepared for warm summer.
According to recent reports, the North Atlantic sea surface temperature is at 40-year highs, which indicates that summer would be hot. Extreme heat is bullish for natural gas.
Interestingly, natural gas prices moved lower after the release of the EIA report. The storage build missed analyst estimates, which could have provided support to the market. However, it looks that traders have decided to “sell the news” and took some profits off the table after the strong rally from May lows.
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Natural Gas Rallies to New Highs After Early Session Dip
By: Bruce Powers | May 22, 2024
• Following an early dip, natural gas rallied to 2.85, suggesting continued strength with key resistance ahead.
Natural gas stays strong to reach a new trend high of 2.85 on Wednesday. Earlier in the session the price of natural gas broke below the lows of the past couple days before buyers took control to rally into new trend highs. An outside day is the result.
Trading remains active near the highs of the day and will likely end today’s session with a new daily closing high for the current rally. A daily close above the prior trend high of 2.80 will be a slightly stronger indication of strength than a close below it.
False Breakdown Followed by Sharp Intraday Advance
Given the failure of the breakdown earlier in today’s session and the following strong recovery, it looks like natural gas wants to go higher. The next higher identified target zone is close by from around 2.86 to 2.88. Also, keep an eye on the top declining blue dashed trend channel line as resistance can be seen around that line. Further, if a daily close occurs above the line, it will be a sign of strength. Highter up is the 78.6% Fibonacci retracement at 2.99.
Price is Extended Yet Continues to Rise
Certainly, natural gas is getting extended as well. The relative strength index (RSI) is the most overbought since the 2022 peak. Considering the size of the current advance, this rally has exceeded all prior sharp advances since the first trend bottom in 2023 on a percentage basis. That is when starting the measurement from the most recent swing low (C). In this case, from (C) the current rally was up by as much as 80.1% at today’s high.
However, the full advance from the second trend bottom in April 2023 to the October 2023 peak was 87.2%. That performance will be matched in the current rally at 2.96 thereby providing another measured move target (purple arrows). It is interesting that this target is very close to the 2.99 Fibonacci retracement level. It is also close to several measured moves that occurred in natural gas during the uptrend that began from the 2020 bottoms.
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Crude Inventories Rise By 1.8 Million Barrels, Exceeding Analyst Expectations
By: Vladimir Zernov | May 22, 2024
Key Points:
• Strategic Petroleum Reserve increased from 367.8 million barrels to 368.8 million barrels.
• Domestic oil production remained unchanged at 13.1 million barrels.
• Oil markets rebound from session lows as traders react to the EIA report.
On May 22, 2024, EIA released its Weekly Petroleum Status report. The report indicated that crude inventories increased by 1.8 million barrels from the previous week, compared to analyst consensus of -2.5 million barrels. At current levels, crude inventories are about 3% below the five-year average for this time of the year.
Total motor gasoline inventories declined by 0.9 million barrels, compared to analyst forecast of -1.2 million barrels. Distillate fuel inventories increased by 0.4 million barrels.
U.S. crude oil imports declined by 81,000 bpd, averaging 6.7 million bpd. Over the past four weeks, crude oil imports averaged 6.8 million bpd.
Strategic Petroleum Reserve increased from 367.8 million barrels to 368.8 million barrels as U.S. continued to buy oil for strategic reserves.
Domestic oil production remained unchanged at 13.1 million bpd. Current oil price levels are not attractive enough to boost production.
WTI oil settled near the $78.00 level as traders reacted to the EIA report. The report was rather bearish, but it looks that rising crude inventories have been already priced in by the market. From a big picture point of view, WTI oil remains range-bound since early May.
Brent oil is trading near the $82.00 level after an unsuccessful attempt to settle below $81.50. It looks that traders have already started to prepare for the driving season, which should provide additional support to oil markets.
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Empty The Tank. The Energy Report
By: Phil Flynn | May 22, 2024
Empty Ideas just empty the tank. The Biden Administration wants to try to convince Americans that despite being the most anti-fossil fuel administration in history they still want to see low gas prices even as their policies say otherwise. The latest move by the Biden Administrations to sell that point to voters is a move to empty the gas tank by releasing 1 million barrels of gasoline from the Northeast gasoline reserve.
The press release on the previously authorized sale of this unused reserve that was created after Hurricane Sandy joyfully exclaimed that “The Biden-Harris Administration is laser focused on lowering prices at the pump for American families, especially as drivers hit the road for summer driving season,” said U.S. Secretary of Energy Jennifer M. Granholm. “By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state and northeast at a time hardworking Americans need it the most.”
Yes! Let them eat cake and burn hydrocarbons. Of course, the amount of gasoline that is to be sold is only about 11 percent of daily demand and the sales will be allocated in quantities of 100,000 barrels more than likely it will be consumed before most of us have breakfast.
And while very gallon might help lower prices, I think it’s rather desperate of the Biden Administration feeling the need to take a victory lap on this gasoline release. Gas prices average about $3.60 per gallon nationwide as of Tuesday, up 6 cents from a year ago, according to AAA.
The administration that has accused be U.S. oil and gas industry of price gouging and war profiteering has shown unusual vitriol against this industry. This is an administration that abused the mission of the strategic petroleum reserve by releasing supplies to try to lower gasoline prices ahead of an election. The continuing intervention by the Biden administration into the global oil markets has not been helpful to the type of investment that this country is going to need to meet our needs and global demand in the future. The timing of the announcement ahead of the Memorial Day holiday weekend with an effort to try to lower prices ahead of the summer driving season or at least trying to give the appearance of doing so.
We know that US consumers are angry about inflation and the Biden administration is concerned because they know that many Americans hold them responsible.
If you look at gasoline demand, there are signs that consumers must cut back because of inflation pressures. And you know that when Americans cut back on driving that is a cut back on their feeling of freedom and their prosperity.
The Biden Administration consistent metaling in the market along with regulations that create uncertainty has hampered the ingenuity and creativity of the US oil and gas industry. Biden significantly drained the Strategic Petroleum Reserve in 2022 following Russia’s invasion of Ukraine, dropping the stockpile to its lowest level since the 1980s.
Instead of working with one of the most dynamic industries in this country they chose to have an adversarial relationship with this industry. The Biden administration’s policies have been very inflationary. Their foreign policies failures like not avoiding war between Russia and Ukraine as well as the weakening of sanctions on Iran that helped fund Hamas Hezbollah and the Houthi rebels which have conspired to increase the cost of energy and just about every other commodity the planet.
Yet they continue to disparage the US oil and gas industry.
White House Press Secretary Jean-Pierre said, “While congressional Republicans fight to preserve tax breaks for Big Oil at the expense of hardworking families, President Biden is advancing a more secure, affordable, and clean energy future to lower utility bills while record American energy production helps meet our immediate needs.”
The White House press secretary obviously has no experience understanding about the US oil and gas industry.
The so-called tax breaks that the press secretary is talking about is away for U.S. oil and gas industry to produce more product and keep prices cheaper for the American people. When the Biden administration puts more burden on the US oil and gas industry that’s going to show up directly at the pump.
So while they keep telling us that they are trying to do wonderful things for hard working Americans the reality is the opposite and if you don’t believe it just go fill up at the pump.
And at the same time policies of this administration has allowed revenue in places like Iran to hit a five-year high. The Administration nd has failed to enforce sanctions on Russian oil. We should also point out that the oil on our SPR went to other countries that included our adversary, China. And while there’s no doubt that commodities have been at the beginning of a major super cycle and may have a long way to go, it’s clear that if the government continues to try to intervene in the free markets and try to pick winners and losers in this energy transition it’s only going to lead to even more inflation and higher prices in the future.
Today the petroleum markets are under pressure after the American Petroleum Institute (API) reported increases in crude and gasoline supply and hawkish Fed talk. Raising the inventories is raising concerns about a slowdown in demand and the possibility of stagflation as other commodities like grains and metals rise.
The API reported that crude stocks increased 2.48 million barrels while gasoline inventories increased by 2.1 million barrels. Distillates fell by 320,000 barrels as Farmers made a lot of progress in the fields. Farm Progress reported that USDA’s latest crop progress report, on Monday showed corn plantings still a bit behind the prior five-year average but has mostly caught up as more farmers have been able to jump back into spring fieldwork over the past several days. Soybean plantings passed the halfway mark, meantime, and are still modestly ahead of the prior five-year average. Winter wheat quality ratings unexpectedly shifted a point lower. Increasing inventories are raising concerns about slowing global demand. And that could be a sign of stagflation. Fed Speakers had to be hawkish as inflation continues to be a problem.
Barrons reported that Fed Governor Waller said he needs to see “several more” months of good inflation figures to begin interest rate cuts. Atlanta Fed President Bostic reiterated his view that inflation will continue to decline slowly and that the Fed can likely begin cutting interest rates in the fourth quarter.
Today could be a turning point for oil after all the negativities. If the market can get a more bullish report from the Energy Information Administration (EIA) today, we could be close to the bottom technically.
Keep an eye on demand to band for gasoline and products. It’s been subpar we do expect a bounce and we do expect to see a low coming into the prices very shortly. We don’t think the upside risk has gone away and we think there’s more upside than downside at these price levels.
Natural gas is incredible moves seems to be taking a pause after the market has had one of the best upward moves in 2 years. The recovery has been led by increased demand for one of the cheapest hydrocarbons on the planet. LNG exports resumed and the science of production was leveling out storage levels are still at historically high level. We are going to pull back here at a little bit to see if the air conditioning demand starts to increase demand. Power outages and demand destructions and part of the country due to storms has also hurt demand.
Naureen S. Malik at Bloomberg wrote that “Windows are still falling from skyscrapers in downtown Houston after a historic windstorm whipped through the city last week. And days after the disaster, more than 140,000 customers in the area remained without power. Most of those homes and businesses are served by CenterPoint Energy Inc. The utility operates the most stressed local power grid in the country. Malik says that “What happened in Houston is emblematic of widespread issues across the country. As the US grid is tested by extreme weather and increasing demand, aging infrastructure is giving way to higher counts of grid faults.
The problem is one of poor power- quality, or when the flow of electricity powering lights and appliances is being delivered at an uneven or unpredictable pace, which can lead to dangerous surges, sags, brownouts and outages.” Maybe they could put that is an electric car ad.
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Natural Gas Rallies to 2.80, Will It Hold?
By: Bruce Powers | May 21, 2024
• Natural gas hit a high of 2.80, completing a significant 76.8% rally from the April low of 1.58.
Natural gas hit a new trend high of 2.80 on Tuesday, thereby completing a 1.21 point or 76.8% rally from the April 25 low at 1.58. The new high has some significance as it is the completion of a 250% extension of a rising ABCD pattern. It shows the CD leg of the pattern up by 2.5x the price appreciation seen in the AB leg of the advance. Judging by the bearish intraday reaction once 2.80 was reached, it seems the market is aware of the relationship between the swings.
Next Moves Provide Clues
Follow through will be key. There remain higher target areas starting from 2.86 to 2.88. That zone includes an extended rising ABCD pattern at 2.86, which is calculated using 2.618x the advance seen in the AB leg instead of 2.5x. It sits with the June 2023 swing high at 2.88. Then, higher up from there is the 78.6% Fibonacci retracement at 2.99. Those higher targets may yet be reached but given an initial bearish reaction to reaching the 2.80 target, maybe not until there is some degree of a pullback and/or consolidation.
Caution Warranted by the Bulls
There are several additional reasons for caution following today’s high. The relative strength index (RSI) is the most overbought since the peak in in the price of natural gas in April 2022. Also, there is a concern about time symmetry. The current advance has been developing for 18 trading days. Two of the previous four rallies that followed the February 2023 trend high have lasted 18 days. Moreover, the current advance of 76.8% significantly improved on the 53.9% rally from the February 2023 trend low. That 53.9% rally had the strongest performance of subsequent rallies until the current.
Resistance and Support
A decisive advance above today’s high of 2.80 would provide the next bullish signal and give natural gas a chance to reach the 2.86 target zone. Also, a drop through today’s low of 2.64 provides a short-term bearish signal that may lead to a deeper pullback. Key support is around the 200-Day MA at 2.46. Below there is a 2.40 to 2.38 price zone. The 20-Day MA is down at 2.21.
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Crude Oil Tests Resistance, Awaits Bullish Breakout
By: Bruce Powers | May 21, 2024
• A decisive advance above Monday's high of $80.64 would trigger a bullish breakout for crude oil above key moving averages and a downtrend line.
Crude oil has been sitting in an interesting position recently as it has been consolidating up against resistance around the 200-Day MA for two weeks. The significance of the 200-Day line was increased today as the purple 20-Day MA has fallen to converge with the 200-Day line. Together, the two lines represent a formidable near-term resistance zone with a new high of the consolidation range marked yesterday at 80.64. Both the 200-Day MA and 20-Day MAs are at 80.24 and 80.28, respectively. In addition, a downtrend line was also successfully tested as resistance at Monday’s high.
Rise Above 80.64 Triggers Bullish Breakout
A decisive advance above Monday’s high would be needed for a bullish signal. Such an advance would trigger a breakout above both moving averages plus the downtrend line. If it triggers after this week is complete, a weekly breakout is also indicated. Subsequently, a breakout should be followed by a test of support around the moving averages showing that prior resistance has become support. Once an upside breakout confirms with a daily close above 80.64, crude oil should be ready to advance. The first upside target would be the orange 50-Day MA and 50% Fibonacci retracement at 82.23 to 82.36, respectively.
Bottom of Range is 76.83
On the support side of the equation, the low of the range is at 76.83. It was successfully tested as support last Wednesday. Price was quickly rejected leading to a sharp intraday bullish reversal with crude oil ending in the green. Notice that it was followed by three higher daily highs into a new high for the small trading range.
Support has been seen recently around the uptrend line and 50% retracement. Most of the daily closing prices have either been above or near the trendline. Also, notice how buyers stepped up during attempts to drop crude oil below the consolidation range. Each of the three attempts, including today, were met with buyers who were able to push price higher to end the day in the top half or quarter of the day’s trading range thereby leaving clear bottoming tails.
On a weekly basis, a bullish reversal was triggered yesterday as crude oil moved above last week’s high of 80.24. A daily close above that price level will confirm the breakout, and further still if this week ends above it.
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Fast Enough. The Energy Report
By: Phil Flynn | May 21, 2024
Ladies and Gentlemen, Start your engines! Let’s get the summer driving season underway. Summer can’t come fast enough as demand concerns linger. Even signs of OPEC Plus compliance to production cuts as well as signs of demand green shoots in both India and China are not helping the early morning oil market mood.
The market is also showing concerns about the direction or no direction on interest rate is fed officials yesterday came off hawkish and caused the oil market to sell off. MarketWatch reported that Cleveland Fed President Loretta Mester on Monday suggested she was thinking about backing away from her prior expectation that the U.S. central bank will cut interest rates three times this year. In an interview with Bloomberg , Atlanta Federal Reserve Bank President Raphael Bostic said that it is going to take a while before they are certain that inflation is going back down to 2%.
Petroleum markets also is worried about this week’s oil inventories as the “whisper number” on petroleum inventories is suggesting that we might get a surprise increase in crude oil supplies even as there are signs that refiners are starting to kick it into high gear. US gasoline demand has been a concern as there are fears that inflation is forcing changes in America’s driving behavior. Consumers are experiencing inflation unlike many have seen in their lifetimes and it seems to be taking its toll. Groceries or gasoline that’s the question that many the Americans sadly must ask. And because we’ve only had one crew draw in the last few months it’s raising questions as to whether crude supplies in the US are ever going to fall.
Gasoline and diesel crack spreads that were improving fell back as well as Brent time spreads that dropped significantly. That is raising conerns about global demand or at the very least an unwinding of global oil risk premium. Concern about the war in Gaza and its impact on oil supplies seems to have gone away. Iranian President Ebrahim Raisi’s death in a helicopter crash most likely will not change Iran’s oil production or export plans. Reuters reported that – Iranian President Ebrahim Raisi’s death in a helicopter crash upsets the plans of hardliners who wanted him to succeed Supreme Leader Ayatollah Ali Khamenei and will stir rivalries in their camp over who will take over the Islamic Republic when he dies.
Reports of another Ukrainian drone attack on a small independent refinery in Krasnodar Russia seems to not be a big concern because Russia seems committed to reducing productions and exports anyway.
Vladimir Putin touted that January through April oil production Russian oil production came in at 195.7 million tons which was down 1.8% from the same a year ago. Russia continues to play hard to get about a commitment to extend of oil production cuts into 2025. Russia is widely expected to go along with the rubber stamping of the voluntary and involuntary production cuts going into the end of 2024 at the virtual June OPEC meeting.
Saudi Arabia also is also showing signs of compliance and tightening oil inventories. Saudi Arabia crude oil inventories were 139.285 million barrels of merge that was down from 145.092 million barrels in February. Saudi crude oil production fell to just 8.97 million barrels a day. India’s oil demand continues to rise another 179.000 barrels a day from last month. OPEC projects that India’s oil demand will grow by 4% to 5.8 mbd in 2025. And a lot of that demand is y going to be fed by Russian oil. India is a country that has not fallen into line with sanctions on Russian oil and have seen their imports Russian increase by 40% since last year.
Metals are rocking t copper wire and now aluminum is moving as the world rushes to secure metals to meet the growing demand for artificial intelligence and electronic vehicles as well as the expansion of the power grid.
Rio Tinto Group has declared force majeure on alumina cargoes from its refineries in Queensland, Australia, due to shortages of gas to power its operations. This story seemed to give aluminum a bounce.
The California public employee’s retirement system is saying they’re going to vote against all 12 board members nominated by Exxon at the company’s annual meeting as a protest. Barons’ reports that EXXON is playing hardball with two small environmentally conscious shareholders saying in a lawsuit filed in January that the funds are abusing the process of submitting resolutions at its annual meeting now that stance is being challenged by the country’s which is pension fund. Exxon mobile basically is saying that these people have no economic interest but they’re just trying to make Exxon Mobil reduce their oil and gas production. New laws are going into place in California to raise gasoline prices not only in California but the neighboring states.
The early weakness seems to be a rocky road for petroleum, but we believe that this is an opportunity if you can get through the next couple of days depending on inventories today and tomorrow we think we will bottom out and start to have higher as we end the week but in the meantime get ready to ride the volatility. Natural gas continues to see its recovery from the depths of despair. Those long-term options that we recommended are starting to look nice.
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Crude Oil Continues to See Support
By: Christopher Lewis | May 21, 2024
• The crude oil market continues to see a lot of support, despite the fact that there is a ton of momentum at this point. This market continues to question whether or not there is a surge coming due to summer.
WTI Crude Oil Technical Analysis
Take a look at the crude oil market on the four hour chart. You can see that the West Texas Intermediate Market did fall down toward the 50% Fibonacci retracement level from the bigger move. But it does appear that it’s trying to bounce from here. We have been in a consolidation range for a while, with the $77 area being support, while the $80 level above acts as resistance.
It is worth noting that the $80 level, of course, is a large, round, psychologically significant finger that a lot of people will pay attention to and therefore, I think it might be a little bit difficult to get above. That being said, I suspect it is probably only a matter of time before we do break above that $80 level and go looking to the $82.50 level after that.
Brent Crude Oil Technical Analysis
The Brent market looks very much the same, bouncing from the $82 area, an area that has been important more than once. The $84.50 level, of course, is an area that a lot of people will pay close attention to, as it has been previous support and resistance. And I think that might be your target for any type of recovery.
Whether or not that happens easily remains to be seen, but I do suspect that’s probably the more likely of outcomes. If we do break down in the crude oil market, we could see a $2 drop in both grades rather quickly. But at this point in time, we have a lot of concerns about geopolitics and perhaps even supply in what is the busiest time of year that could cause this market to really shoot straight up in the air.
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Natural Gas Surges to New High, Eyes $3.00
By: Bruce Powers | May 20, 2024
• Natural gas surged to a new high of 2.75, breaking resistance and setting sights on the 2.99-3.00 target zone.
Natural gas further advances to a new trend high of 2.75 on Monday, as it busts through a potential resistance zone ending at 2.69. Today’s high put the price of natural gas up by 73.5% from the most recent swing low at 1.58 (C). It looks like it will close strong today, in the top quarter of the day’s range and above 2.69. That puts it in a good position to continue its ascent towards the 78.6% Fibonacci retracement target at 2.99.
Also, the area around the top declining blue dash channel line can be watched for signs of resistance. For those familiar with Gann’s square of nine calculator, a 270 degree rise from the 1.58 low completes at 3.00. That is a match with the 78.6% price target and tells us to keep a close eye on the approach towards the 2.99/3.00 price zone.
Interim Higher Price Targets from ABCD Pattern
Nevertheless, there is no assurance the higher targets will be reached. Interim price targets include 2.80 and 2.86. They are derived from the 2.5% and 261.8% extensions of the rising ABCD pattern, respectively. Another price level of 2.88 is marked from the June 2023 swing high. Although all previous potential targets from the rising ABCD pattern have been exceeded during the current rally, a top in natural gas will be found at some point, and it may match with an ABCD target.
The ABCD pattern looks to identify price symmetry between the second CD leg of the advance and the initial AB leg. Symmetry first occurs when the price appreciation in each advance matches. Subsequently, Fibonacci ratios are used to identify extended targets for the CD leg. For example, for the 261.8% target, the price distance of the AB leg is multiplied by the Fibonacci ratio to derive a target of 2.86.
Relative Strength of Current Rally
The current rally of 73.5% is well above the prior two greatest advances since the first bottom of the downtrend in February 2023. There were four prior larger rallies from 34.7% to 53.9%. The current advance of 73.5% clearly exceeds the previous rallies. This points to a likely change in character as natural gas further shows strength and provides signs of a transition from a downtrend to an uptrend, in which case the 3.00 price zone becomes more likely to be reached.
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Death of a Hardliner. The Energy Report
By: Phil Flynn | May 20, 2024
Iran confirms the death of President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian. They died in a helicopter crash. President Raisi legacy was one that did little to foster peace in the world nor did he seem to do anything to improve the economic conditions of the Iranian people. And the oil market at this point seems unmoved.
The oil market also seems to be unmoved and reports that Saudi Prince bin Salman had to cancel his trip to Japan because of the concerns about the health of his father the king. Reports say that Saudi Arabia’s King Salman, 88, was diagnosed with a lung infection and will undergo treatment with antibiotics, according to state media.
The oil market seems to be the commodity that has drawn the short straw as metals continue to shine. Copper prices surged above 11,000 a ton, a record high as supply shortages is finally being recognized by the futures market.
The hedge funds have pulled a lot of money out of oil and put it into other commodities. It seems that many do not look at oil as an inflation hedge. Strength in the precious and industrial metal suggests that oil will not have too far to fall. Oil is bottoming and while the bounce out of this range has been less than impressive, it also suggests that there is limited downside as well. We like oil because we believe that the increase in demand by refiners will start to result in substantial crude oil supply draws here in the United states. We like oil because we believe that the demand from India and China is going to rise significantly over the coming months especially with China trying to boost its economy and its real estate sector that is also a reason why copper is doing well.
The reason why, according to Reuters, that gasoline export fell to the lowest level since 2015 is because of recovering domestic Chinese gasoline demand. Gasoline demand in the United States on the other hand is still relatively weak, coming in below 9 million barrels a day for three consecutive weeks. The big question we have going forward is will Americans get back behind the wheel and top off the tank. AAA’s gasoline prices are at 359 a gallon which is roughly a nickel higher than they were a year ago on this day.
The other question people have is why the Energy Information Administration has adjusted the US oil production number in almost a month. Sone voice concerns that US shale production may be topping out in part because of the fear of stricter regulations by the Biden administration causing a pullback in oil and the investment in the industry.
The other concern is that the government is now going after Scott Sheffield, founder and longtime CEO of Pioneer Natural Resources, of attempted collision with OPEC over alleged price fixing. Yet the governments attack on Scott Sheffield, who obviously was trying to coordinate oil production with OPEC to keep fuel producers from going out of business, might be another reason why all the hostile environment in the United States oil and gas may make it less attractive to investors.
Regardless we believe that we will start to see crude oil supplies draw here in the United States. This week we are looking for crude oil inventories to fall by 4 million barrels we expect gasoline inventories will also fall by 3,000,000 barrels. Distillate inventories will fall by 2.2 million barrels. We expect gasoline inventories to show a 1.0 increase in refinery runs.
Natural gas is continuing its recovery. EBW Analytics reports that the natural gas rally extended to the highest level since mid-January as a hot forecast shift added 20 CDDs and back-to-back bullish EIA storage surprises provided support for the ongoing rally higher. Technical presage another 5-10% of incremental upside ahead. Still EBW says that NYMEX futures are nearing fundamental fair value as higher prices incentivize producers to return supply and higher prices catalyze power sector gas-to-coal switching. Nonetheless, momentum can carry futures above long-term fair value in the short-to-medium term.
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$XLE This setup is looking electric
By: TrendSpider | May 18, 2024
• This setup is looking electric. $XLE
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | May 19, 2024
• Following futures positions of non-commercials are as of May 14, 2024.
WTI Crude Oil: Currently net long 233.5k, up 19.5k.
Yet again, a rising trendline from last December when West Texas Intermediate crude bottomed at $67.71 was breached intra-week but defended by the end of the week. This week’s low of $76.70 undercut last week’s $76.89 but only to attract bids and close the week up 1.7 percent to $79.58, for a weekly hammer. Last week produced a weekly doji. Earlier, the crude came under pressure after ticking $87.67 on April 12th.
Odds favor a move higher, on condition that this week’s low is not decisively breached. A couple of weeks ago, WTI fell back into a well-established range between $71-$72 and $81-$82 that persisted for 19 months before the upper end gave way seven weeks ago.
Immediately ahead, the upper end likely acts as a magnet. The 50- and 200-day lie at $81.76 and $80.01.
In the meantime, US crude production in the week to May 10th was unchanged for 10 consecutive weeks at 13.1 million barrels per day; 12 weeks ago, output was at a record 13.3 mb/d. Crude imports decreased 225,000 b/d to 6.7 mb/d. As did stocks of crude, gasoline, and distillates, which respectively dropped 2.5 million barrels, 235,000 barrels and 45,000 barrels to 457 million barrels, 227.8 million barrels and 116.4 million barrels. Refinery utilization increased 1.9 percentage points to 90.4 percent.
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | May 18, 2024
The NY Crude Oil Futures has been in an uptrend for the past 2 days closing above the previous session's high. Currently, the market is trading in a neutral position on our indicators but it is trading strongly higher up some 2.45% from the previous session low. Our projected target for closing resistance for the next session stands at 8114, we need to close above that target to imply a further advance. Failure to even exceed this intraday warns that the upward momentum is starting to decline. Nevertheless, this session closed below our ideal projection for closing resistance warning that the market which stood at 8190 is forming a high. A break of this session's low of 7858 will warn that we have a potential temporary high in place. Our Stochastics are all pointing upward while our internal momentum models have also remained in a bullish posture.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Crude Oil Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2020 and 2009 and 2001 and 1998 and 1994. The Last turning point on the ECM cycle high to line up with this market was 2022 and 2018 and 2011 and 2000.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The historical broader tone of the NY Crude Oil Futures has been a bearish consolidation following the high established back in 2008. Since then, this market has created 2 reaction highs which have been unable to break this overall protracted bearish consolidating trend. Still, the major low was made in 2023 and the market has bounced back for the last year. The last Yearly Reversal to be elected was a Bullish at the close of 2023.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Nevertheless, it closed last year on the weak side down from 2022. Pay attention to the Monthly level for any serious change in long-term trend ahead.
Focusing on our perspective using the indicating ranges on the Daily level in the NY Crude Oil Futures, this market remains neutral with resistance standing at 7980 and support forming below at 7938. The market is trading closer to the support level at this time.
On the weekly level, the last important high was established the week of April 8th at 8767, which was up 17 weeks from the low made back during the week of December 11th. We have seen the market drop sharply for the past week penetrating the previous week's low and yet it recovered to close above the previous week's close of 7826. We are trading below the Weekly Momentum Indicators warning that the decline is very significant and we need to pay attention to the timing and reversals. When we look deeply into the underlying tone of this immediate market, we see it is currently still in a weak posture. Immediately, this decline from the last high established the week of April 8th has been important closing sharply lower as well. Before, this recent rally exceeded the previous high of 7960 made back during the week of November 27th. Nonetheless, that high was actually lower than the previous high made the week of October 16th suggesting this market has really been running out of sustainable buying for right now. This immediate decline has thus far held the previous low formed at 6771 made the week of December 11th. Only a break of that low would signal a technical reversal of fortune and of course we must watch the Bearish Reversals. Right now, the market is below momentum on our weekly models casting a bearish cloud over the price action. Looking at this from a wider perspective, this market has been trading up for the past 22 weeks overall.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2021 while the last low formed on 2023. However, this market has declined in price with the last cyclical low formed on 2023 warning that this market remains weak at this time on a correlation perspective declining in both price and Momentum.
Looking at the longer-term monthly level, we did see that the market made a high in September 2023 at 9503. After a four month rally from the previous low of 8346, it made last high in September. Since this last high, the market has corrected for four months. However, this market has held important support last month. So far here in May, this market has held above last month's low of 8070 reaching 8070.
Some caution is necessary since the last high 9503 was important given we did obtain one sell signal from that event established during September 2023. That high was still lower than the previous high established at 12368 back during June 2022. Critical support still underlies this market at 6700 and a break of that level on a monthly closing basis would warn of a further decline ahead becomes possible. Nevertheless, at this time, the market is still weak trading beneath last month's low.
Natural Gas Price Forecast: Bull Trend Continues Towards 2.68
By: Bruce Powers | May 17, 2024
• With a 65.4% rise from the April low, natural gas targets 2.68-2.70, backed by strong bullish momentum and key breakout signals.
Natural gas surged to a new trend high of 2.64 on Friday and it continues to trade near the highs of the day, at the time of this writing. That put it up by 65.4% from the April 25 swing low (C). A bullish trend continuation signal was triggered on a rally above Thursday’s high of 2.575.
The advance also signaled a breakout from the 2.56 price target for a rising ABCD pattern extended by 200%. Resistance was seen yesterday near that price level. It reflects price symmetry between the two swings in the pattern. The CD leg of the advance is two times the initial AB leg. Therefore, it looks like natural gas is going to the next target zone as shown on the chart.
Fibonacci Confluence on the Radar
Next, watch the approaching Fibonacci confluence zone from 2.68 to 2.70. The price of natural gas may get there quickly as it is on track to end the week near the highs of the week, and bullish momentum has accelerated as seen in Friday’s wide price range and strong green candle. Further up is the top line of a declining blue dashed trend channel, as well as the 78.6% Fibonacci retracement at 3.00.
Caution Warranted as Natural Gas Further Extends
This looks like a swing back rally in response to the sharp decline from the January 12 swing high of 3.38. Natural gas fell by 1.86 or 54.9% in 25 days, finding a bottom at 1.52. Since the subsequent swing low at 1.58 (C) the price of natural gas has risen by as much as 65.3% as of today’s high. The relative strength index momentum oscillator (RSI) continued to rise today and reached a height not seen since the peak in April 2022.
That peak was followed by a quick 21% decline to the 38.2% Fibonacci retracement. If a similar scenario were to unfold with the current rally, natural gas would complete a 38.2% retracement at 2.23. That is assuming that 2.64 turns out to be a swing high. On the other hand, if the retracement began from the top of the upcoming resistance zone at 2.70, a 38.2% retracement would put natural gas around 2.28.
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Crude Oil Continues to Consolidate
By: Christopher Lewis | May 17, 2024
• Crude oil markets have consolidated a bit during the course of the trading week, but it does look like we have plenty of support underneath. Because of this, I think we are trying to build some type of base to get moving, but right now we just don’t have any follow-through.
WTI Crude Oil Weekly Technical Analysis
The West Texas Intermediate crude oil market has initially fallen during the week, only to turn around and show signs of life. At this point, it is worth noting that we have bounced from the 50% Fibonacci retracement level.
And of course, we are looking at the 50 week EMA just above, which on the daily chart is also the 200 day EMA. And then, of course, we’re paying attention to the $80 level. In general, if we can break above the $80 level, then I think the market can go higher, perhaps reaching the $85 level over the longer term.
Psychologically speaking, this is travel season, so therefore most of the time oil does fairly well. That being said, it doesn’t necessarily mean that it’s going to be an easy grind higher. But I do think that it’s easier for the market to rise than fall for a significant move.
Brent Crude Oil Weekly Technical Analysis
Looking at the Brent market, it’s very much the same situation bouncing from the 50% Fibonacci retracement level facing the 50 week EMA and the $84.50 level is a major barrier. If we can break above there, then it’s likely that we could go looking to the $90 level. On the other hand, if we were to break down below the bottom of the hammer on either grade, that probably drags oil on the whole down within the 61.8% Fibonacci retracement level would be an area that a lot of people would be paying attention to.
So do keep that in the back of your mind. That could be the next support level. Either way, this is a market that I think is going to continue to be very choppy on short term charts, but there are a lot of geopolitical concerns out there that could flare up and send oil straight up in there. So, keep that in mind.
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Fire And Rain. The Energy Report
By: Phil Flynn | May 17, 2024
I’ve seen fire and rain and both of those could impact oil prices today. Massive rains in Houston have caused flooding and could impact oil production and potentially refining activity. While at the same time Canadian wildfires could threaten 2.1 million barrels of Canadian oil production a day in the worst-case scenario according to a report by Rystad Energy.
Fox Weather reported that the Houston metro area was rocked by severe storms that left 4 dead and over 1 million without power. They say that a storm system spawned severe thunderstorms in Houston Thursday, causing at least four fatalities and leaving more than 1.0 million customers without power across southeastern Texas. The oil market is going to watch very carefully as to what potential disruptions these storms might cause. Power outages reduce demand for electricity but at the same time it could impact refining operations and while we have no direct reports, we’re going to be watching the wire to see if there’s any that are reported.
We did see a big jump back up in the beleaguered gasoline crack spread yesterday in a signal to refiners they need to ramp up production of gasoline ahead of the Memorial Day holiday. In recent weeks gasoline demand has been disappointing to say the least but the bounce in the crack spread suggests that we could see a rebound soon.
This comes as we head into a weekend where the market is expecting the Fed to have some leeway to cut interest rates after we saw initial jobless claims yesterday come in stronger than expected and saw weakness in the Philly fed manufacturing number. Also a weakness and housing starts and building permits and while import prices came in a little bit hotter than expected, the market doesn’t believe that there is an increased chance of perhaps more than one interest rate cut before the end of the year.
Reports that China is making moves to stimulate its housing market is supportive to oil and gas. The People’s Bank of China effectively scrapped the nationwide minimum mortgage interest rate while cutting the minimum down-payment ratio to 15% for first-time buyers and 25% for second homes, according to a statement on Friday. The previous ratios stood at 20% and 30%, respectively according to Bloomberg News.
Reuters is also reporting that China’s industrial output grew by 6.7% year on year in April as recovery in its manufacturing sector gathered pace, accelerating from the 4.5% in March and pointing to possibly stronger demand for oil to come.
All this signals that the recent correction in oil as well as the crack spreads should be nearing the end. We know that gasoline demand is being impacted by the consumers being hit with inflation pressures. There are signs that we could be turning the corner with weakness in manufacturing data that has helped ease some of the tightness in the diesel product market. And if the damage in Houston to refineries is small, we would expect to see big draws in crude oil inventories in the next few weeks. While the correction may try to retest if we get bad economic news from these levels, we feel that the risk on the downside is a lot less than the potential risk on the upside.
We are also seeing stronger demand for natural gas because, gosh darn it, low prices sometimes start to cure low prices. Gas prices are up over 43% with renewed hopes that liquefied natural gas exports will pick up and production will level off. While we did see some signs of production leveling off, it did bounce back. Yesterday the Energy Information Administration reported demand for natural gas for electricity generation hit an all-time high in January. The United States power generation from natural gas has risen over the last 2 years and most likely will again this year. And we’re starting to see some hope in the storage numbers, we may be whittling down the massive inventory as the EIA reported a smaller than expected increase in storage. They said that, “Working gas in storage was 2,633 Bcf as of Friday, May 10, 2024, according to EIA estimates. This represents a net increase of 70 Bcf from the previous week. Stocks were 421 Bcf higher than last year at this time and 620 Bcf above the five-year average of 2,013 Bcf. At 2,633 Bcf, total working gas is above the five-year historical range.
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Natural Gas Bullish Momentum Continues but Overdue for a Correction
By: Bruce Powers | May 16, 2024
• The recent surge in natural gas prices has been remarkable, with the commodity hitting a new high and breaking through key resistance levels.
Natural gas blasted through potential resistance at the 200-Day MA on Thursday to hit a new trend high of 2.575. Resistance then kicked in leading to an intraday pullback. That high completed a rising ABCD pattern where the CD leg was 200% of the advance in the AB leg of the pattern. The 200-Day MA is at 2.46 and natural gas continues to trade above that price level at the time of this writing. A daily close above the 200-Day line indicates that the uptrend may have more to go.
Can Strength Continue?
Certainly, today’s bullish price action is a sign of strength as natural gas recently busted through three price zones that could have seen resistance, especially the 200-Day line. However, can demand remain strong enough to take out today’s high and keep rising? That remains to be seen.
Rally Extended
The current rally is extended and closer to a top than it has been. As of today’s high, natural gas is up by 62.7% from the April 25 swing low at 1.58. That makes the current rally the largest on a percentage basis since the initial trend low from February 2023. Nevertheless, if the 200-Day MA can continue to act as support, the price of natural gas has a chance of continuing its rise. The next higher target zone is at 2.68 to 2.70. Those price levels are the 61.8% Fibonacci retracement and a 127.2% extension of a 51.8% measured move (purple arrows) that matches the rally beginning in August 2023, respectively. The high target is the top blue dashed falling channel line.
Drop Below 2.39 Should Lead to Deeper Pullback
A decisive drop below the 200-Day MA may provide an initial indication that a retracement may be coming. But a drop below today’s low of 2.39 will provide a clearer short-term bearish signal. Potential support from the 20-Day MA is down at 2.07. Higher price levels to watch on the way down are marked on the chart in black right extended lines from prior swing highs and lows. They include 2.31, 2.23, and 2.17. Fibonacci levels will be added on the chart if a retracement begins.
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The energy sector $XLE is starting to look enticing again
By: TrendSpider | May 16, 2024
• The energy sector is starting to look enticing again. $XLE
Top holdings: $XOM. $CVX, $COP, $EOG, $SLB, $MPC
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Crude Oil Continues to Find Value Hunters
By: Christopher Lewis | May 16, 2024
• The crude oil markets have bounced back after selling off again, as the oil markets enter what is typically a very bullish time of year for the markets.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil Market initially pulled back a little bit during the trading session on Thursday, but then turned around to show signs of life again. This is an area that I think will continue to be consolidated and it’s probably worth noting that the market is paying close attention to the 200-day EMA and the $80 level above. If we can break through all of that, then I think the WTI crude oil market continues to rally for a bigger move. It might be worth noting that the 50% Fibonacci retracement level is just below as well, and that of course brings in technical traders also. In other words, I’m somewhat bullish, but cautious, I’m not willing to throw a ton of money into the market.
Brent Crude Oil Technical Analysis
Brent looks exactly the same to me. 200 day EMA and the $84.50 level above offering resistance, but it certainly looks as if the 50% Fibonacci retracement level is coming into the picture to keep oil somewhat afloat.
There is a cyclical argument to be made for crude oil this time of year, and then of course there’s a lot out there that could have influence due to geopolitics. So really at this point, I have no interest whatsoever in shorting the market. I think this is an area of value that people will eventually take advantage of in trying to send oil much higher as they typically do during the summer anyway.
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Can’t Get It Together. The Energy Report
By: Phil Flynn | May 16, 2024
Let’s face it, the OPEC plus cartel the International Energy Agency (IEA) and the Energy Information Administration EIA are basically a hot mess. The growing divergence on predictions for both supply and demand and whether oil demand will eventually go away or continue to grow has market participants just scratching their heads. Predictions of peak oil production and peak oil demand and record adjustments have added confusion to the market and for both users and producers of oil.
As we have said before, the International Energy Agency, in my humble opinion, is one of the worst forecasters when it comes to global supply and demand. I pointed out in the past that they have basically said that they’ve skewered their data to raise more awareness about the threats of climate change. The IEA job was never to combat climate change but to ensure energy security for oil consuming nations. It’s sad to see that this once noble organization has lost its way and admittedly skewer their supply and demand forecast to push green energy agenda.
OPEC on the other hand has a better track record and have predicted that the death of global oil demand is highly exaggerated. OPEC has even poked fun at the International Energy Agency for the way they’ve had to backtrack on their peak oil demand predictions. OPEC and the IEA divergence in the market outlook was highlighted once again after the International Energy Agency reduced its forecast for demand growth for this year to 1.1 million barrels a day while OPEC kept their demand growth forecast for this year at 2.2 million barrels. The International Energy Agency pointed to weak demand in Europe and a mild winter as the reason for the downgrading of its demand forecast for this year. OPEC on the other hand sees demand growth continue with record oil imports into places like India and China.
While The International Energy Agency boldly reduced its demand forecast for this year, they more quietly seem to shift back its prediction for peak oil demand once again. Dan Tsubouchi at Energy Tidbits reports that the IEA demand doesn’t even add up to what the headlines are saying. He wrote, “Rinse & repeat? IEA in April cuts its 2024 year over year oil demand growth by 120.000 barrels a day and now IEA for May cuts 2024 year over year oil demand growth by 140.000 barrels a day.
As many of you remember the International Energy Agency years ago predicted that oil demand globally peaked a few years ago. They continue to overestimate the ability of alternative fuels to replace traditional fossil fuels in the global economy. Yesterday, in the interview with Bloomberg, the International Energy Agency Toril Bosoni was asked whether the International Energy Agency sees peak fossil fuel demand being pushed back towards the end of the decade seemed to suggest that peak oil demand might not be so much a peak but a plateau. Ms. Bosoni was quoted as saying, ”we see a oil demand plateau rather than a steep peak towards the end of the decade based on our current assumptions” So in other words we will be using fossil fuels a lot longer than the International Energy Agency has said in the past.
It seems like the oil market is still pessimistic on demand even after we got a supportive Energy Information Administration’s (EIA) inventory report and a weaker than expected consumer price index report.
Also concerns by EIA that average monthly prices for regular-grade retail gasoline in the United States could increase by more than 10 cents per gallon (gal) if refinery output is lower than expected. Oil did manage to close on a strong note, but it was disappointing considering the run that we had on copper, silver, gold and the stock market.
Oil seemed disappointed that the OPEC plus cartel decided to hold their June meeting virtually. That perhaps means that OPEC will agree to extend their production cuts through the end of the year. The move to a virtual meeting means more than likely they will wait to decide on an extension of the cuts into 2025 for another meeting and raised fears that they might not extend the cuts at all.
The 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 457.0 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 0.2 million barrels from last week and are about 1% below the five-year average for this time of year. Distillate fuel inventories slightly decreased last week and are about 7% below the five-year average for this time of year. Total demand based on products supplied over the last four-week period averaged 20.1 million barrels a day, up by 0.7% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.7 million barrels a day, down by 4.5% from the same period last year. Distillate fuel product supplied averaged 3.6 million barrels a day over the past four weeks, down by 5.3% from the same period last year. Jet fuel product supplied was up 3.7% compared with the same four-week period last year.
Jodi reported that, “Crude inventories built by 17.7 mb in February but were still 262 mb below the 5-year average. Product inventories drew by 2.9 mb but were 4.8 mb above the 5-year average.
Natural gas traders will look at today’s Energy Information inventory report for natural gas to see if the impressive recovery rally can continue. The back end of the gas curve once again moved above $5 which is a sign that demand expectations for natural gas are going to explode in the coming years. In the short term, traders will look at today’s report which should come in with an injection somewhere in the area of 76 BCF.
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Natural Gas Eyes on 2.46 Target
By: Bruce Powers | May 15, 2024
• Bullish trend persists as natural gas approaches 2.46 target, supported by 50% retracement and 200-Day MA.
Natural gas reached a new trend high of 2.42 on Wednesday as the bull trend persists. It is rapidly approaching the next higher target of 2.46. That is where the 200-Day MA and 50% retracement resides. The 200-Day line is a significant trend indicator, and this is the first approach since the price of natural gas dropped below the 200-Day MA in late-January. Therefore, it expected that resistance will be seen around that line, enough to turn prices back down. A little higher is the 50-Week MA at 2.49
Drop Below 2.31 Points to Retracement
A retracement is first indicated on a drop below today’s low of 2.31. Prior swing highs and lows then mark possible support levels starting with 2.23, which was a swing low in December. Then the level is a little lower at 2.21, followed by 2.18. This is the fourth consecutive week of positive performance for natural gas. Although the week is not over, it is currently trading near the highs of the day, and it is well on track to hit the 2.46 target zone. The 20-Day MA is a way lower at 2.04. It wouldn’t be surprising to see the 20-Day line tested as support if a retracement does come.
Key 2.46 Pivot Approached
Although the 2.46 price area is a key pivot, price action will leave clues as to what might be coming. Given the strength of the advance so far, might natural gas be able to breakout above the 200-Day line? Given the confluence of indicators highlighting a resistance zone from 2.37 to 2. 49, an upside breakout seems less likely, but it is possible. Or a brief consolidation and/or retracement could follow a test of the 200-Day line.
In this case, natural gas would be heading up towards the 61.8% Fibonacci retracement level. The 78.6% Fibonacci retracement follows. Also, a rise to test the top channel line could be in the works. If reached today the top channel line would match the 78.6% retracement level. Let’s watch the reaction of price upon approaching the 200-Day line for further insights.
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Crude Inventories Declined By 2.5 Million Barrels, More Than Expected
By: Vladimir Zernov | May 15, 2024
Key Points:
• Strategic Petroleum Reserve increased from 367.2 million barrels to 367.9 million barrels.
• Domestic oil production remained unchanged at 13.1 million bpd.
• Oil prices rebounded from session lows as traders reacted to EIA data.
On May 15, 2024, EIA released its Weekly Petroleum Status Report. The report indicated that crude inventories declined by 2.5 million barrels from the previous week, compared to analyst consensus of -1.4 million barrels. At current levels, crude inventories are about 4% below the five-year average for this time of the year.
Total motor gasoline inventores decreased by 0.2 million barrels from the previous week, while analysts expected that they would grow by 0.9 million barrels. Distillate fuel inventories have slightly declined.
U.S. crude oil imports decreased by 226,000 bpd from the previous week, averaging 6.7 million bpd.
Strategic Petroleum Reserve increased from 367.2 million barrels to 367.8 million barrels as U.S. continued to buy oil for strategic reserves.
Domestic oil production remained unchanged at 13.1 million bpd, which is not surprising as oil prices have been moving lower in recent weeks.
WTI oil rebounded from session lows as traders reacted to the EIA report. Currently, WTI oil is trying to settle above the $77.50 level. Oil prices settled near multi-month lows as traders were worried about the strength of the demand for oil.
Brent oil settled near the $82.00 level after the release of the EIA report. The geopolitical premium for oil prices have significantly declined in recent weeks as traders do not believe in supply disruptions in the Middle East. At this point, oil markets need significant positive catalysts to break the current trend.
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Biden Tariff Squeeze. The Energy Report
By: Phil Flynn | May 15, 2024
The timing of Biden’s directing his trade representative to increase tariffs under Section 301 of the Trade Act of 1974 on $18 billion of imports from China helped light a fire under an already tight industrial metal market that helped play a part in an epic copper market squeeze as well as inspiring panic buying in in other metals like platinum and now more buying in gold and silver. This comes against a backdrop of an oil market that is trying to assess a prediction by the International Energy Agency (IEA) that is predicting that world oil production will increase by 580,000 bpd this year to record 102.7?million bpd and a prediction that global oil demand will hit an all-time high next year of 102,7 million barrels a day. The market also received a supportive report from the American Petroleum Institute (API) .
The tightening global copper market has been an issue for some time and the market went over the edge after the report of the Biden sanctions spread trading between the front end of the curve and the back month made a record-breaking one day move. Bloomberg reported that, “The sharp price move has been tightly focused on the most-active July contract on Comex. The expanded premium of that price over copper on other global exchanges — and the need for shorts to deliver metal against their positions — is already prompting a rush by traders in China to arrange shipments to Comex warehouses in the US. “The short squeeze is set to continue as traders might not be able to ship enough metal from either Chinese bonded warehouses or from Europe ahead of the delivery date,” Jia Zheng, head of trading at Shanghai Dongwu Jiuying Investment Management Co., said.
Supplies of copper are going to be even tighter as buyers move to secure supply before Biden’s Chinese sanctions go in place. That added uncertainty is raising questions as to how the sanctions on electric vehicle components could tighten the market forward copper and other metals. Aluminum and steel did not move as much because the demand for those two commodities isn’t as strong but for markets that are not as tight as compared to platinum, Palladium and copper. The impact of the sanctions cannot be underestimated surrounding the historic moves. The Biden sanctions we’re like throwing a lit match on gasoline in a market where supply issues are already apparent.
It also raises the specter of inflation which was a major focus for oil traders yesterday. The PPI, especially month over month, came out higher than expected but both Federal Reserve Chairman Jerome Powell and other fed speakers seemed to suggest that the Fed was not considering an interest rate hike and at the very worst case, the heating of inflation most likely would lead to the Fed standing pat on rates. We’ll see how hot today CPI is.
The market did get some supportive data from the American Petroleum Institute. API reported a larger than expected 3.104 million barrel drop in crude supplies. That probably suggests that refiners are starting to kick into high gear, and it could be the first of many draws as we get into the heart of the summer driving season. The API also reported a 1.269 million barrel drop in gasoline inventories and a 349,000-barrel increase in distillate inventories. We also saw a drop of 601,000 in the Cushing, OK delivery point which is the first draw in a while.
The International Energy Agency surprisingly lowered their demand forecast this year by 140,000 barrels a day mainly because of what they say was weak demand out of Europe. Yet for next year, their demand forecast is an increase of 1.2 million barrels a day which is slightly higher than their last forecast. The IEA says that they believe that the oil market looks more balanced overall in 2025 and they say that if OPEC voluntary production cuts were to stay in their place, they still think global oil supplies could rise by 1.8 million barrels a day compared to a 580,000 barrel increase in 2024.
The IEA points to the increase in supply coming with a big jump on offshore oil storage, yet their data seems to contradict other data that shows that we’ve seen a dramatic drop in offshore oil storage in recent weeks. I guess it comes down to who do you believe, Bloomberg or the International Energy Agency? Or is the IEA running behind. Bloomberg reported that oil in floating storage is at the lowest level since February of 2020, falling to only 55.92 million barrels as of May 10. This data came from Bloomberg News that reported a stunning drop in floating storage of 11% since just last week.
The IEA said that, “Global oil inventories surged by 34.6 mb in March, as oil on water swelled to a fresh post-pandemic high. On land stocks fell by 5.1 mb to their lowest level since at least 2016, as total OECD stocks declined by 8.8 mb to a 20-year low while non-OECD inventories built for the first time since November. According to preliminary data, global oil stocks rose further in April.
For some strange reason it appeared that oil prices dropped after OPEC announced that it’s likely to hold its June 1st policy meeting online. To me the online meeting would suggest that there doesn’t seem to be any anticipation of any real friction at the meeting. But the market is a little bit nervous.
The market is also keeping an eye on wildfires in the Alberta that could impact production. We have seen wildfires in the past shut down production and do a lot of damage so we’re praying for the people in Canada.
Natural gas is still recovering on hopes for more LNG exports. Technically the markets had a very good month as it has come back from the lows. Hopefully a few weeks ago when we’re recommending buying calls, people took advantage of that.
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Natural Gas Eyes on 200-Day Moving Average at 2.46
By: Bruce Powers | May 14, 2024
• Upward momentum in natural gas remains strong, targeting 200-Day MA at 2.46, but a pullback is possible after completing another target at 2.40 today.
Natural gas advances to a new trend high of 2.40 on Tuesday and hits the initial target from a measured move. Upward momentum still looks constructive as the day’s trading range is relatively narrow and positioned in the upper zone of Monday’s range. If natural gas manages to end today’s session above yesterday’s high of 2.38, it will be in a slightly stronger position than if the close occurs below that high.
200-Day Line at 2.46 is Next Target
The next target zone is the 200-Day MA at 2.46. It is strengthened by the 50% retracement, which marks the same price. Natural gas is well on its way to that target, and it continues to have a good chance of being reached before resistance stops the ascent, possibly leading to a pullback. Further, the 50-Week MA (not shown) is slightly above the 200-Day line at 2.49. If the completion of the measured move at today’s high doesn’t end the ascent, a 2.46 to 2.48 target zone should be next on the agenda.
First Approach to 200-Day Line Could See Strong Resistance
It is common for price to be rejected from a long-term moving average the first time it is approached after being away from it for a while. Following the January 25 internal swing high natural gas dropped below the 200-Day line and accelerated to the downside.
The current rally is the first attempt since then to test the 200-Day line as resistance. However, if natural gas manages to break through the 200-Day line and the 50-Week line, and then stays above them, it would next be heading towards the 61.8% Fibonacci retracement at 2.68. Depending on when reached, the upper declining blue dashed channel line may have an impact as the channel line and 61.8% level may be near each other.
Near-term Support at 2.31
If instead of continuing to ascend, today’s high leads to a retracement, the first sign of it would be on a drop below today’s low of 2.31. The prior swing low and 38.2% retracement at 2.24 would the be the next lower possible support zone. Other price levels will be looked at in the future if the pullback scenario unfolds.
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Float The Boat. The Energy Report
By: Phil Flynn | May 14, 2024
Get ready to float your oil boat as data from OPEC and floating storage suggests the global oil market tightening. While US crude oil inventory supply in recent weeks saw some surprising increases, the same is not true if you look at oil in floating storage around the globe which now is at the lowest level since February of 2020, falling to only 55.92 million barrels as of May 10. This data came from Bloomberg News that reported a stunning drop in floating storage of 11% since just last week. So, in other words, the concerns about global demand falling off the map were probably overstated and that’s one of the reasons why oil had a pretty decent performance, which has been unusual to start the week for a while. OPEC stands by its prediction that the global oil demand will rise by 2.25 million barrels a day ( Mn b/d) to 104.46mn b/d this year and by a further 1.85mn b/d to 106.31mn b/d next year, the group said in its latest Monthly Oil Market Report (MOMR). We are also getting oil price support on signs that US refineries are ramping up production.
That should start a string of crude oil supply draws and if demand holds up, we could start to realize that this selloff in oil prices last week on reduced war premium and interest rate concerns may have been overdone.
In fact, if you look at the recent pullback in oil, many traders believe that it isn’t about supply and demand for oil but really about the ability of the Federal Reserve to continue to float the economy. That’s why after the inflation data, the market is going to pay very close attention to what Fed Chairman Jerome Powell says today during his speech at 10:00 AM Eastern Time 9a central time. Biden lead inflation has been a problem for the Federal Reserve that initially had planned on an aggressive path of interest rate cuts. Obviously the inflation data changed their narrative and that’s why today’s producer price index number could be key for the direction not only of oil, but the stock market, bonds and other commodities today.
The Fed must realize that they can only control what they can control. They can’t control the aggressive spending coming out of Washington in the Biden administration. They can’t control Biden trying to buy votes by doing things like trying to pay off student loans even though it has been ruled unconstitutional. The Federal Reserve cannot control the border and they cannot control the fact that the Biden administration must spend your tax dollars to support this record surge of illegal immigration.
Not to mention Biden’s approval ratings which are terrible in part because of the failures of his aggressive anti fossil fuel agenda. We know that that US automakers are losing incredible amounts of money.
The Biden-Harris Administration brags that their Investing in America agenda has already catalyzed more than $860 billion in business investments through smart, public incentives in industries of the future like electric vehicles (EVs), clean energy, and semiconductors. Yet based on the track record in the real-world, money looks like it has been wasted if the US automakers must retreat from producing a product that the government wants to force people to buy but nobody wants. Which is probably a good definition of the failures of Bidenomics.
So how does Biden respond to the failure of his electric car push? Very simply by putting tariffs on China and blame them for their own failures. It’s the same playbook as blaming the automakers or the food makers for inflation without stopping to have any self-awareness that their policies of spending and printing money are the main causes of inflation if not the only cause. So the Biden administration says that the tariff rate on electric vehicles will increase from 25% to 100% in 2024. The tariff rate on lithium-ion EV batteries will increase from 7.5%% to 25% in 2024, while the tariff rate on lithium-ion non-EV batteries will increase from 7.5% to 25% in 2026. The tariff rate on battery parts will increase from 7.5% to 25% in 2024. That is going to make US electric cars even more expensive to produce because at the same time Biden is mining for the materials needed to make lithium batteries here in the United States. Stop and think about that for a while. The tariff rate on solar cells (whether assembled into modules) will increase from 25% to 50% in 2024. And I could go on but you kind of get the gist.
Biden’s agenda, when it comes to energy, isn’t really about energy security for the United States. As he has said himself, it’s more about trying to incorporate environmental justice for perceived wrongs to people of color in the past. It is also because Biden says he sees climate change as an existential threat even more dangerous than Iran, Hamas, Hezbollah, Russia, North Korea and other terror networks. Yet Russia continues to try to establish its dominance in global energy production. Russian have laughed off the price caps when it comes to their energy and that has not stopped Russia’s oil revenue from soaring. Russia’s federal budget revenues from the oil and gas industry showed a significant increase to 4.2 trillion rubles ($45.7 billion) in the January-April 2024 period, 82.2% higher than in the same period last year, the country’s Finance Ministry announced on Monday.
Russia reports they have discovered oil and potentially will claim that discovery on waters that are not theirs. The Guardian reported this week that, “Russia has found vast oil and gas reserves in the Antarctic, much of it in areas claimed by the UK. The surveys are a prelude to bringing in drilling rigs to exploit the pristine region for fossil fuels, MPs have warned. Reserves totaling 511bn barrels of oil – about 10 times the North Sea’s entire 50-year output – have been reported to Moscow by Russian research ships, according to evidence given to the Commons Environment Audit Committee (EAC) last week.
We also will look at the American Petroleum Institute supply report. There will be a focus on gasoline demand that in recent weeks has been pretty pathetic. Most people expect an uptick as the weather improves but we continue to see the stress of the American consumer play out on the open road. Bullish gasoline spreads that normally flourish this time of year continue to struggle. Today could be a very key day for the RBOB gasoline futures. Diesel prices have struggled as farmers have struggled to get the crop in as planting delays are hurting demand.
The natural gas recovery has been good to see for many producers as it has been a demand led recovery. There are increase flows to LNG export trains that has been a savior for the beleaguered market. While the Biden administration plays politics with liquefied natural gas which arguably could be the most important fuel source to drive the global economy, Qatar is looking to regain its position as one of the dominant players. Blomberg reports that, “With its 2030 LNG expansion plan, Qatar is looking to solidify its position as one of the world’s biggest producers of the fuel along with the US and Australia. Total Energies, Exxon, Shell and other international oil majors are shareholders in the first two phases of the project.
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Natural Gas Surges to New Highs, Faces Potential Resistance Zone
By: Bruce Powers | May 13, 2024
• Technical analysis highlights potential price reversal for natural gas, with resistance at 2.37 to 2.46 indicating a potential turning point.
Following a drop below Friday’s low earlier in Monday’s session, natural gas rallied to a new trend high, generating a bullish outside day. In addition, last week’s high was exceeded. If today’s close is above last week’s high of 2.34, another bullish clue will be indicated.
Demand remains strong at the time of this writing as trading continues near the highs of the day, which currently is 2.38. Natural gas has entered the start of a potential resistance zone that begins at 2.37 and ends around the 200-Day MA, now at 2.46. That range is derived from several pieces of analysis.
Weight of Technical Evidence
Like criminal investigations shown on TV, technical analysis also looks at the weight of evidence to assist in identifying what the market might be telling us. Clues are provided in price behavior and price patterns. The approaching resistance zone is a good example of this as there are at least five pieces of analysis pointing to potential resistance in the range of 2.37 to 2.46.
In other words, there is a confluence of potential price targets in that range. Either could turn the market down on their own. But when combined relatively close together they provide a warning sign to pay extra attention to price action as the zone is entered. And for simplicity, not all clues are included in today’s article.
Confluence of Price Targets from 2.37 to 2.46
The specific price levels identified are 2.37, 2.40 and 2.46. Two indicators point to 2.37, the completion of a rising ABCD pattern extended by the 161.8% Fibonacci ratio, sometimes referred to as the golden ratio, and a target from the bottom symmetrical triangle consolidation pattern (light blue arrows).
Next is the 2.40 price target. It is derived from the completion of a measured move that matches the percentage rise in the price of natural gas from the December 13 swing low. The December 13 rally ended with a 51.8% advance in the price of natural gas. Similarly, the current rally from the April 25 swing low, will be up by 51.8% at a price of 2.40.
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YE Old Oil Conundrum. The Energy Report
By: Phil Flynn | May 13, 2024
If you wonder why U.S. consumer confidence is as bad as it is, just look at oil and gasoline. The price of oil is 8.7% higher than it was a year ago. The cost of gasoline is higher, even as consumers are consuming less of it. According to AAA, the cost of Regular Unleaded Gasoline is $3619 a gallon up from $3.537 a gallon a year ago. This comes as the Energy Information Administration reported that over the past four weeks, gasoline demand averaged 8.6 million barrels a day, down by 4.0% from the same period last year. And while we expect to see an uptick in demand as the weather warms up, it’s clear that consumers are feeling more stress from the inflationary policies of the government.
Oil is trying to bottom out as it looks ahead to what should be a very tight market globally. The demand for oil should be very close to record high even as we seem to be sputtering a bit here in the United States. The global supply and demand balance for oil, gasoline and diesel is still extremely tight. The oil market recently has taken a lot of war premium out of the price of oil. While the world is still a dangerous place with the Israeli movement on Rafah and the threats from Hezbollah and Houthi rebels, we haven’t seen a major disruption due to these tensions. We do know that the tightness of supply of oil and gas really is going to put more pressure on the Biden administration that is seeing its approval ratings plunge in every major poll. Why? It’s the economy stupid.
The Biden administration’s green energy policies have had a major part in raising the cost of oil and gasoline. There policies discouraged investment in gas but overregulation and threats against the oil and gas industry are going to increase inflationary pressures.
You can give tax breaks to electric cars, but you can’t make people buy them. The amount of money US automakers are bleeding with electric cars is almost amazing. The auto industry only moved into electric cars because the Biden administration promised massive subsidies and even with massive government subsidies you can’t sell an inferior product. Most Americans realize, for their needs, the electric car is impractical. Still the Biden administration refuses to back down on this electric car fantasy.
I have always supported all exploration and sources of energy from the very beginning. For many years I pointed out that this dream of an electric car transition was not possible. We do not have the power grid to support this along with the new demands for power coming from artificial intelligence, cryptocurrency mining and other power generated businesses. It also never makes sense from an environmental standpoint because it takes so much more fossil fuels to create an electric car and there’s very little benefit until these cars are on the roads for a very long time. While electric cars can be part of the solution, they will never be efficient enough to carry the entire U.S. economy on its back or on its wheels.
US carmakers are losing so much money on EVs, the Biden administration’s only plan is to try to put on sanctions on Chinese electric vehicles. Bloomberg News reports that, “Joe Biden will quadruple tariffs on Chinese electric vehicles and sharply increase levies for other key industries this week, unveiling the measures at a White House event framed as a defense of American workers, people familiar with the matter said. Biden will hike or add tariffs in the targeted sectors after nearly two years of review. The total tariff on Chinese EVs will rise to 102.5% from 27.5%, the people said, speaking on condition of anonymity ahead of the announcement. Others will double or triple in targeted industries, though the scope remains unclear according to Bloomberg.
Oil traders were very nervous over the weekend that Iraq did not plan to go along with the OPEC plus production cuts. Reuters reported that, “Iraq is committed to voluntary oil production cuts agreed by the Organization of the Petroleum Exporting Countries (OPEC) and is keen to cooperate with member countries on efforts to achieve more stability in global oil markets, Iraq’s oil minister told the state news agency on Sunday. The minister’s comments followed his suggestion on Saturday that Iraq had made enough voluntary reductions and would not agree to any additional cuts proposed by the wider OPEC+ producer group at its meeting in early June.
In Fact according to S@P Global OPEC crude oil production contracted 210,000 b/d in April to its lowest since August 2023 (not including Angola), but members subject to output quotas were still a collective 249,000 b/d above their caps.
Vindictive Joe Biden and his team of regulators are now going after big oil in the US adding to OPEC’s dominance. Last week they accused Scott Sheffield, the former CEO of natural resources, of attempting to collude with OPEC and its allies to increase prices. That opened a can of worms according to the Financial Times that will add even more to the cost of oil and gasoline. Not only do U.S. oil and gas industries have to compete with the likes of OPEC but they really have to compete and defend themselves against US regulators that seem to have a target on their backs. The Financial Times reported, ”The US shale oil industry faces a barrage of lawsuits alleging some of the largest companies in the sector colluded to curb output and raise prices, after similar claims were made by US antitrust regulators. ExxonMobil, Occidental Petroleum and Diamondback Energy are among the companies named in at least 10 class actions alleging they conspired to co-ordinate and constrain shale oil production, which had the effect of raising US retail petrol prices.”
Of course what they don’t tell you is that if the US oil and gas industry didn’t crack the shale oil code, we would all be paying much higher prices for oil and gasoline. Without the US shale industry we would be totally dependent on OPEC and Russia and Canada for our supplies. Our economy would be subservient to these oil producers. The Biden administration seems to want to lash out with regulations as opposed to understanding the challenges that the US oil and gas industry has to deal with in the real world not in the fantasy electric car world. This is a world where’re the demand for oil and coal and gas will reach all-time highs. This is a time when we should allow the US oil and gas industry to prosper because they are trying to power the US economy and increase our national security.
We all know about the vicious boom and bust cycles in the oil and gas market. It was not too long ago where we saw the oil and gas industry in the United states brought to its knees because of production war in OPEC. They saw the prices fall below zero and that threatened to put many U.S. oil and gas producers out of business. Without quick and decisive action by President Donald Trump, we would already be more dependent on Russia and OPEC for supply. Trump’s actions have kept prices from being much higher than they are today.
This comes from an administration that has put a target on the backs of the US oil and gas industry from day one. Biden killed the Keystone Pipeline for purely political reasons and added a slew of new regulations that could force many U.S. oil and gas producers out of business. Biden’s drilling moratoriums on federal lands and the politically motivated pause of LNG export terminal approvals have hurt us economically. This administration has total disdain for U.S. oil and gas industry yet they don’t have a realistic replacement. Instead, they push billions of dollars of taxpayer money into green energy boondoggle to try to show how they have virtue on climate change while the reality is sadly the opposite.
Despite the challenges last week in the week market action we do expect the market to bottom very shortly. Look to get hedged on oil and gas and look to buy option plays. Need ideas and which ones to buy, give me a call.
Natural gas is back from the dead! EBW analytics reports: the June contract launched higher last week as pipeline maintenance ratcheted back supply, Freeport returned all three LNG trains to service, and the technical outlook invited algorithmic buying—collectively sparking a short squeeze leading prices as high as $2.344. Over the weekend, ebbing pipeline maintenance allowed pipeline scrapes to indicate a five-week high in production and near-term consolidation is probable. Still, the rapid surge in NYMEX futures is indicative of medium-term upside potential into the summer season.
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Commodity price changes over last year
By: Charlie Bilello | May 8, 2024
• Commodity price changes over last year
Cocoa: +191%
Copper: +16%
Gold: +14%
Aluminum: +10%
Brent Crude: +9%
WTI Crude: +8%
Zinc: +8%
Coffee: +7%
Silver: +7%
Heating Oil: +4%
US CPI: +3.5%
Gasoline: +3%
Wheat: -3%
Cotton: -7%
Sugar: -9%
Soybeans: -14%
Corn: -23%
Natural Gas: -24%
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | May 11, 2024
• Following futures positions of non-commercials are as of May 7, 2024.
WTI Crude Oil: Currently net long 214k, down 45.7k.
West Texas Intermediate crude rose 0.2 percent to $78.26/barrel this week, but oil bulls were on the defensive. The crude has been under pressure since tagging $87.67 on April 12th, having rallied from $67.71 last December.
This week, WTI dropped as low as $76.89 on Wednesday before bids showed up, but that was not enough to push it past the 200-day at $80.05, with the crude under the average for eight sessions now. The 50-day is above at $81.78.
Last week, the crude fell back into a well-established range between $71-$72 and $81-$82 that persisted for 19 months before the upper end gave way six weeks ago. This Friday, it rallied as high as $79.96 before sellers showed up.
If there is any consolation for the bulls, it is that Wednesday’s low successfully tested a rising trendline from last December’s low, for a weekly doji. That said, odds favor a breach ahead.
In the meantime, US crude production in the week to May 3rd was unchanged for nine consecutive weeks at 13.1 million barrels per day; 11 weeks ago, output was at a record 13.3 mb/d. Crude imports increased 197,000 b/d to seven mb/d. As did gasoline and distillate inventory, which respectively rose 915,000 barrels and 560,000 barrels to 228 million barrels and 116.4 million barrels. Crude stocks, however, dropped 1.4 million barrels to 459.5 million barrels. Refinery utilization rose one percentage point to 88.5 percent.
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | May 11, 2024
This market made a new high today after the past 2 trading days. The market opened higher and closed lower making it an outside reversal to the downside warning that a further decline is possible. Our projected support for tomorrow's closing lies at 7780. Therefore, the closing below the previous low creates an outside reversal to the downside which was a very dramatic swing of 2.27%. Volatility notwithstanding, the market finished on the weak side and it remains below all our internal momentum cyclical support models as well. We have elected 3 Bearish Reversals from the cyclical high established on 05/10.
Up to now, the market remains neutral on the momentum indicator yet bearish on the short-term trend indicator while the long-term trend and cyclical strength are bearish. This market is also trading mostly above the bank of eight moving average indicators suggesting it remains in a mixed posture for now.
During the last session, we did close above the previous session's Intraday Crash Mode support indicator which was 7595 settling at 7926. The current Crash Mode support for this session was 7830 which we penetrated intraday and closed below warning this market is in a panic type sell-off. The Intraday Crash indicator for the next session will be 7751. Remember, opening below this number in the next session will warn that the market may enter an abrupt panic sell-off to the downside. Normally, when you open back above this pivot number or closed back above it then the sell-off is subsiding. So, watch this number which is dynamic for it changes with each session. The Secondary Intraday Crash Mode support lies at 7510 which we are trading above at this time. A breach of this level with a closing below will signal that a sharp decline is possible.
Intraday Projected Crash Mode Points
Today...... 7830
Previous... 7595
Tomorrow... 7751
This market has declined 10% from the last important cyclical high of 8767. Since that last important cyclical high, the market has made lower low of late over the course of the last 1 event.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Crude Oil Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2020 and 2009 and 2001 and 1998 and 1994. The Last turning point on the ECM cycle high to line up with this market was 2022 and 2018 and 2011 and 2000.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The historical broader tone of the NY Crude Oil Futures has been a bearish consolidation following the high established back in 2008. Since then, this market has created 2 reaction highs which have been unable to break this overall protracted bearish consolidating trend. Still, the major low was made in 2023 and the market has bounced back for the last year. The last Yearly Reversal to be elected was a Bullish at the close of 2023.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Nevertheless, it closed last year on the weak side down from 2022. Pay attention to the Monthly level for any serious change in long-term trend ahead.
Looking at the indicating ranges on the Daily level in the NY Crude Oil Futures, this market remains moderately bearish position at this time with the overhead resistance beginning at 7841 and support forming below at 7755. The market is trading closer to the resistance level at this time.
On the weekly level, the last important high was established the week of April 8th at 8767, which was up 17 weeks from the low made back during the week of December 11th. We have seen the market drop sharply for the past week penetrating the previous week's low and yet it recovered to close above the previous week's close of 7811. We are trading below the Weekly Momentum Indicators warning that the decline is very significant and we need to pay attention to the timing and reversals. When we look deeply into the underlying tone of this immediate market, we see it is currently still in a weak posture. Immediately, this decline from the last high established the week of April 8th has been important closing sharply lower as well. Before, this recent rally exceeded the previous high of 7960 made back during the week of November 27th. Nonetheless, that high was actually lower than the previous high made the week of October 16th suggesting this market has really been running out of sustainable buying for right now. This immediate decline has thus far held the previous low formed at 6771 made the week of December 11th. Only a break of that low would signal a technical reversal of fortune and of course we must watch the Bearish Reversals. Right now, the market is below momentum on our weekly models casting a bearish cloud over the price action. Looking at this from a wider perspective, this market has been trading up for the past 21 weeks overall.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2021 while the last low formed on 2023. However, this market has declined in price with the last cyclical low formed on 2023 warning that this market remains weak at this time on a correlation perspective declining in both price and Momentum.
Looking at the longer-term monthly level, we did see that the market made a high in September 2023 at 9503. After a four month rally from the previous low of 8346, it made last high in September. Since this last high, the market has corrected for four months. However, this market has held important support last month. So far here in May, this market has held above last month's low of 8070 reaching 8070.
Some caution is necessary since the last high 9503 was important given we did obtain one sell signal from that event established during September 2023. That high was still lower than the previous high established at 12368 back during June 2022. Critical support still underlies this market at 6700 and a break of that level on a monthly closing basis would warn of a further decline ahead becomes possible. Nevertheless, at this time, the market is still weak trading beneath last month's low.
Natural Gas Potential Retreat or Further Rally Ahead?
By: Bruce Powers | May 10, 2024
• Natural gas surged to new highs before meeting resistance, with potential for a retreat or further rally depending on key support and resistance levels.
Natural gas rises to a new trend high before hitting resistance at 2.34, the high for the day. It sold off from there intraday and is trading near the lows of the day at the time of this writing. Today’s high was a little shy of the next potential resistance zone, which begins at 2.37. It put the price of natural gas 48.1% above the April 25 swing low at 1.58.
Thursday was a wide range day and a little pause in the ascent is to be expected. It remains to be seen whether today’s high leads to a deeper retracement and it won’t be apparent unless yesterday’s low of 2.15 and the five-day low of 2.13 are broken to the downside. Until then the possibility of testing higher price levels remains.
Upside Target at 200-Day Moving Average
The 200-Day MA is at the top of the next higher price range at 2.46, along with the 50% retracement. These indicators themselves provide a realistic higher target for the current rally. However, there are several other factors that point to a price range from 2.37 to 2.46 as being significant. This doesn’t mean that higher prices are reached, but they could be. The 2.37 price level is identified twice. It is an initial target derived from measuring the bottom symmetrical triangle that natural gas broke out of on April 26. Also, a rising ABCD pattern with the CD leg extended by 161.8% of the AB leg completes at that price.
Measured Move Targets 2.40
There is also the completion of a measured move at 2.40. The measured move identifies price symmetry with the last large rally that began from the December swing low. During that advance the price of natural gas increased by 51.8%. On a percentage basis the current rally will match at 2.40. Again, this doesn’t mean it will be reached but when there are five indications identifying a similar price area, some attention is warranted.
Weekly Close May Provide a Clue
Since the week is about to end, the closing price relative to the week’s trading range may provide some guidance. In general, the higher natural gas closes above the halfway point of the weekly range, the stronger the close. The halfway point is at 2.24. Also, this week’s low of 2.13 is a key pivot level as it is a third sequential higher weekly low.
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Crude Oil Continues to See Support
By: Christopher Lewis | May 10, 2024
• The oil market has seen a bit of buying this past week, after initially falling a bit. A this point, I suspect there is a lot of buying pressure underneath current levels.
WTI Crude Oil Weekly Technical Analysis
The West Texas Intermediate crude oil market initially started falling during the week but then turned around to show signs of strength. It looks as if we are threatening the $80 level which of course is a large round psychologically significant figure. It’s probably also worth noting that the 50% Fibonacci retracement level has offered support and therefore technical traders will be paying close attention.
If we can break above the $80 level, then I suspect that we will get more money flowing into the market, and this does make sense considering this time of year is typically a big travel season time. If we break above the $80 level, then it could very well send this market looking to the $82.50 level. Short-term pullbacks should more likely than not end up being buying opportunities.
Brent Crude Oil Weekly Technical Analysis
Brent has done the same thing and initially peaked just below the 50% Fibonacci retracement level only to turn around and rally towards the $84.50 level. If we can break above that, then we could go look into the $87.50 level and then eventually $90 above. Keep in mind that markets are not pricing in anything along the lines of a geopolitical risk and that is something that is a major influence on what could happen.
Perhaps some of the value traders and investors have stepped in and recognized that. Maybe that’s what this last week has been about. I do favor the upside. I don’t necessarily think we’re going to have a massive spike higher, but I do think that we will go higher from here. That being said, it doesn’t mean we go straight up in the air, just that we have a lot of reasons to continue to the upside.
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Real Pain At The Pump. The Energy Report
By: Phil Flynn | May 10, 2024
The oldest gas price cliche in the oil industry and media is to say that when gasoline prices go up we feel “pain at the pump” or some derivative of that. The reason why we use the “Pain at the pump” phrase is there’s probably no other commodity in America that reflects the feeling of financial independence and confidence than the cost of a gallon of gasoline. The reason for that is gasoline is a necessity for almost every American whether they’re retired, going to work or maybe a vacation! In fact, even if you don’t drive an internal combustion engine vehicle or any vehicle at all, the cost of gasoline can impact you because it can raise the cost of other goods we all buy.
The Energy Information Administration (EIA)is predicting that U.S. retail gasoline prices across the United States will average near $3.70 per gallon from April through September, which is similar to prices during the same period last year. The fact is the current price of gasoline is weighing on the psyche of Americans at a very high level which is a warning sign perhaps for the over all health of our consumer driven economy. You can look at the cost of gasoline in gasoline demand and that can sometimes give you a better judge of the state of the US consumer than any consumer confidence index that’s been released.
We can clearly see the angst of the gas consumer because even as the current gas price according to AAA has fallen about 3 cents from a week ago to $3.636 cents a gallon, prices are still 10 cents a gallon higher than a year ago and that is taking a toll on demand as consumers are being hit not only with higher gas prices but inflation pressure that is unlike anything many Americans have seen in their lifetime.
The EIA showed that motor gasoline demand averaged 8.6 million barrels a day, down by 4.0% from the same period last year. So the question becomes whether that drop in demand is transitory or is it indicative of a potential consumer led recession. The University of Michigan consumer confidence reading is today but if you look at the last consumer confidence that we got from the Conference Board, it showed that consumer confidence fell for the third straight month and fell to the lowest level in nearly two years.
That is a concern because inflation is just killing the consumer. It also has huge ramifications for politics because the party in charge usually gets blamed for what’s wrong with the economy. And we know what’s wrong with the economy is inflation. And most economists know what causes inflation. Milton Friedman, the American economist from the University of Chicago who received the 1976 Nobel Memorial Prize in Economic Sciences, said it best that the only cause of inflation is government and only government, by changing their spending and money printing ways, can end it.
So again, the gasoline prices are really becoming a problem for Biden. Americans know Biden owns these higher gasoline prices. The average price of gasoline under President Trump was $2.57 a gallon for regular unleaded, and under Biden it’s over a dollar higher today. I heard one Biden apologist say when you look at the price of gasoline and you adjust it for inflation it’s not that bad. I wouldn’t suggest that Biden put that on a bumper sticker.
Americans know that Biden is overseeing one of the biggest bouts of inflation in recent history and as economist Steve Moore points out, Biden’s claim that inflation was 9% when he came into office was wrong. He said the reality is inflation was at a modern era low of 1.4% when Joe Biden took office and while the market did have to spend a lot of money to handle the pandemic shutdown, the real problem with this inflation is that Biden continues to spend money like a drunken sailor. In fact Biden’s only plan to address any problem is to just spend money.
His other plan is to malign the US oil and gas industry. No president has been more anti-American oil and gas in history. No president has ever issued as many executive orders as possible against oil and gas in history. The latest threat from Biden to US oil and gas is being reported by Bloomberg this morning. They reported that, “Climate activists who successfully pushed President Joe Biden to halt new US liquefied natural gas exports are setting their sights on proposed crude oil shipping facilities, after the administration approved a massive petroleum terminal last month. The administration should stop approvals of deepwater oil export facilities and reevaluate its approval process, the Sierra Club wrote on behalf of nearly 20 environmental and community groups in a letter Thursday to the White House and the Department of Transportation.” We know from Biden’s past decisions that he recently has been tending to give into pressure from the environmental fringe as he is desperate to keep their votes. Now here’s a tiscut and a tariff and a red and yellow basket.
Bloomberg reports that Joe Biden is set to unveil China tariffs as soon as next week, targeting key sectors including EVs, batteries and solar equipment. He’s expected to reject the across-the-board tariff hikes sought by Donald Trump. Biden just likes to do everything different from President Trump just because he despises the man. Whether it’s reversing President Trump’s border policy or his energy policies. Biden hands shifted gears and because of that, we’re seeing the results at the gas pump and when it comes to inflation.
So, you can see that oil is set for a weekly gain rate cut expectations have gone up and the geopolitical risk factors to oil have not gone away. We have seen a week where it’s very clear that OPEC is more than likely going to extend their production cuts into the end of the year with the possibility they will run into next year. We are seeing signs that the US energy industry may hit peak oil production because of new regulations put into place by the Biden administration. Reuters reported earlier this week that, “Republican presidential candidate Donald Trump vowed to reverse dozens of the Biden administration’s environmental rules and policies at a meeting with top U.S. oil executives, where he also asked them to raise $1 billion for his presidential campaign, the Washington Post reported on Thursday.
We still believe the weight to be long on breaks and we still think that people should be prepared for significant upside price risk.
Natural gas is really popping up after a bullish report yesterday. It looks like the worst is over for natural gas in the short term and the market looks like it’s breaking out. That is welcome news for many. Natural Gas hit a 14-week high on Monday and now with the bullish report it looks like we’re going to start going back up. Scott Disavino Reuters said that, “forecasts for higher demand over the next two weeks than previously expected as feedgas to liquefied natural gas (LNG) export plants increased with the return of Freeport LNG in Texas.
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