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Natural Gas Retraces Gains, Tests Key Support Levels
By: Bruce Powers | June 17, 2024
• While a further drop could risk failure of recent bullish activity, holding support around $2.74-$2.76 could set up natural gas for a bullish continuation.
Natural gas further retraced its prior advance on Monday as it fell below the long-term downtrend line to reach support at 2.76. That completed a successful test of support at the purple 20-Day MA. It is the first touch of the 20-Day line since natural gas rose above it on April 26.
Since the 20-Day line is showing support so far, there is a possibility that today’s low completes the retracement. The low price today also completes a successful test of support around the top of the bull pennant pattern.
Test of 20-Day Line Might Complete Retracement
Lower prices begin to put recent bullish activity at risk of failure. Although there could still be a brief drop lower in the short term, if a quick recovery follows it will put natural gas back in a position to progress its uptrend. The 61.8% Fibonacci retracement level is at 2.74. If the 20-Day line is busted, currently at 2.76, then natural gas will likely reach the 2.74 area.
If support is seen from there, followed by a recovery above the 20-Day line, the bullish price structure will be maintained. However, a drop below the 20-Day line where natural gas then stays below the line, will be short-term bearish. A failure of the bull pennant breakout is indicated on a drop below the center line at 2.70.
Rally Above Today’s High of 2.85 Shows Strength
If a bullish setup completes today, then a decisive breakout above today’s high of 2.85 will be a sign of strength. Today’s candlestick pattern may take the form of a bull hammer candlestick pattern. A daily close in the top third of the day’s range will be a stronger indication than a close lower than the top third of the range. A decisive advance above today’s high would then be a sign of strength that should continue to higher prices.
Bearish Weekly, but Quick Bullis Recovery Will Negate Implications
Today’s decline in natural gas also triggered a bearish reversal on a weekly time frame. The weekly pattern last week was of a bearish shooting start candle. It triggered today on a drop below 2.86 and it will confirm on a daily close below that price level.
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At It Again. The Energy Report
By: Phil Flynn | June 17, 2024
Apparently the Biden Administration believes that the Strategic Petroleum Reserve (SPR) is their own little political slush fund. The Biden team is saying that they will potentially tap the reserve using taxpayer money to help influence the outcome of the election. I think I read somewhere that someone else was accused of something like that. Regardless, according to the FT, “The Biden administration is ready to release more oil from its strategic stockpile to halt any jump in petrol prices this summer, as the White House battles to contain inflation ahead of the November election.”’ So, I guess you can spend money, which increases inflation, and put on regulations that raise prices and kill pipelines that raise prices and put on drilling moratoriums that raise prices and then slander the oil and gas industry and mom and pop gas stations then use the SPR to make it all ok. All the while using the SPR for political cover while leaving the country vulnerable if there is a major oil disruption.
We are not just talking about hurricanes. In a year where they are predicting a record amount of hurricanes there is also the growing risk of global conflict that could impact supply and those risks have increased dramatically under this administration.
Russian Warships in the Caribbean, bringing back memories of the Cuban Missile crisis, as wars wage in the Ukraine, Gaza, and ongoing attacks on ships from the Iranian backed Houthi rebels which all are a risk to oil supply. Reports that Russian subs and the Russians carrying supersonic missiles are meant as a gentle threat about Biden’s escalation of the war in Ukraine.
Fox News reported that, “Russia is a longtime ally of Venezuela and Cuba, and its warships and aircraft have periodically made forays into the Caribbean. But this mission comes less than two weeks after President Joe Biden authorized Ukraine to use U.S.-provided weapons to strike inside Russia to protect Kharkiv, Ukraine’s second-largest city, prompting President Vladimir Putin to suggest his military could respond with “asymmetrical steps” elsewhere in the world.
The Washington Post reported that, “One Russian reporter described the visit as retaliation for Biden’s decision to allow Ukraine to strike inside Russia with American weapons. “Last week, President Vladimir Putin made it clear that it reserves the right for a mirror response – that is, supplying long-range weapons to countries that feel the pressure of the United States,” the Russia 24 reporter said.
This comes as the sanctions on Russian oil and gas are failing. The Financial Times reported that, “Europe’s gas imports from Russia overtook supplies for the United States for the first time in two years even though the region must mean itself off of Russia and fossil fuels. The strategic blunders that Europe has made was to go head first into green energy alternatives and becoming more dependent on Russia for supplies and now it seems they just can’t quit. Diesel supplies in Europe are very tight and now they are looking to the US to replenish those supplies but at the end of the day, Russia continues to supply more and more energy to Europe every day.
The FT Reported that, “Following Russia’s full-scale invasion of Ukraine in February 2022, Moscow slashed its pipeline gas supplies to Europe and the region stepped up imports of LNG, which is shipped on specialized vessels with the US as a major provider. The US overtook Russia as a supplier of gas to Europe in September 2022 and has since 2023 accounted for about a fifth of the region’s supply.
But last month, Russian-piped gas and LNG shipments accounted for 15 per cent of total supply to the EU, UK, Switzerland, Serbia, Bosnia and Herzegovina and North Macedonia, according to data from ICIS. LNG from the US made up 14 per cent of supply to the region, its lowest level since August 2022, the ICIS data showed.
The reversal comes amid a general uptick in European imports of Russian LNG despite several EU countries pushing to impose sanctions on them. Russia in mid-2022 stopped sending gas through pipelines connecting it to north-west Europe, but continues to provide supplies via pipelines through Ukraine and Turkey according to the FT.
Gasoline prices are continuing to fade as demand is still struggling as consumers bear the brunt of inflation. John Kemp at Reuters points out that, “U.S. GASOLINE prices at the pump (including taxes) are almost exactly in line with the long-term average, once adjusted for inflation. Nationwide prices have averaged $3.59 per gallon so far in June which was in the 52nd percentile for all months since the start of the century.
This week we are looking for crude supply to fall by 2 million barrels. We are also looking for distillate supply to fall by 2 million barrels. Gas supply should pop 2 million barrels and refinery runs should be flat.
Natural Gas is pulling back after the heat driven rally. Hopes for some moderations are giving us a break. Yet Fox Weather is watching the Gulf Of Mexico. They say that, “The National Hurricane Center (NHC) is monitoring a tropical disturbance in the Gulf of Mexico that could develop into a tropical depression or tropical storm this week, and while the system is expected to stay south of the U.S., fears are growing that tropical moisture being pulled north could lead to flash flooding along the Texas, Louisiana and Mississippi coasts.
EBW Analytics is saying that bearish weekend fundamental catalysts for natural gas were plentiful: off-the-charts record heat for late June retreated, production turned upwards to three-week highs, and LNG feedgas ebbed on maintenance at Corpus Christi LNG. Near-term downside appears likely. EBW says that it technically similarly points to a deeper retrenchment following a bearish double-top pattern at $3.16/MMBtu. While long-term fundamentals also appear weak, however, substantial, scorching heat over the next 30-45 days may still yield higher highs first.
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Crude Oil Continues to Look Strong Overall
By: Christopher Lewis | June 17, 2024
• The crude oil market bounced a bit in the early hours of Monday, as the market continues to see plenty of reasons for a potential rally. This time of year, is typically bullish, and the geopolitics of the Middle Erast is almost always a potential bullish factor as well.
WTI Crude Oil Technical Analysis
The crude oil market rallied in the early hours on Monday as it looks like we continue to see upward pressure overall. Now, the question of course is, will there be any follow through? At this point, it’s a bit difficult to tell, but it certainly looks like we are trying to break higher in the West Texas Intermediate crude oil market.
And at this point, I still think we could eventually try to get to the $80 level. All things being equal, the $80 level is a large round number that a lot of people will be paying attention to. And therefore, I would expect a lot of noise there, as short-term pullbacks should continue to see plenty of buying pressure, especially near the $77.50 level.
Brent Crude Oil Technical Analysis
Brent markets look very positive as well. And if we can break above the $83 level, I think Brent goes looking to $84.50. That of course is a significant area of resistance that we have seen cause problems for the markets more than once. That being said, I think it’s probably only a matter of time before we test that area as well.
And with that being the case, I like the idea of perhaps trying to buy dips in little bits and pieces to show, you know, some type of value along the way before putting money to work. I do think this is a market that you have to be very cautious. And therefore, you have to understand that volatility is a feature, not a bug. Geopolitics and seasonality could both come into the picture of the market to push it higher.
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | June 15, 2024
• Following futures positions of non-commercials are as of June 11, 2024.
WTI Crude Oil: Currently net long 251.5k, up 26.9k.
On the 4th (this month), West Texas Intermediate crude tagged $72.48 intraday before reversing higher. Earlier on April 12th, it retreated after ticking $87.67. That low just about tested the low end of a range between $71-$72 and $81-$82 that persisted for 19 months before the upper end gave way 11 weeks ago and was subsequently lost early May.
This Wednesday, WTI touched $79.32, and sellers promptly showed up, ending the week up 3.3 percent to $78.05. Rally odds are stronger on the weekly, with the daily likely to continue to face resistance just south of $80, or the afore-mentioned $81-$82. The 50- and 200-day moving averages respectively lie at $80.07 and $79.63.
In the meantime, after 13 consecutive weeks of 13.1 million barrels per day US crude production increased 100,000 b/d to 13.2 mb/d; 16 weeks ago, output was at a record 13.3 mb/d. Crude imports grew as well, up 1.2 mb/d to 8.3 mb/d. As did stocks of crude, gasoline, and distillates, which respectively rose 3.7 million barrels, 2.6 million barrels and 881,000 barrels to 459.7 million barrels, 233.5 million barrels and 123.4 million barrels. Refinery utilization decreased four-tenths of a percentage point to 95 percent.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | June 15, 2024
• Top Movers
Lumber (CME) Futures 3.1 %
Orange Juice (NYCE) Futures 2.7 %
Lean Hogs (CME) Futures 2.09 %
Live Cattle Futures (CME) 2.04 %
Coconut Oil 1.81 %
• Bottom Movers
Cocoa (NYCSCE) Futures 4.05 %
Zinc (99.995%) Futures 3.23 %
Zinc (99.995%) Spot 3.16 %
Zinc 3.16 %
NY Natural Gas Futures 2.64 %
*Close from the last completed Daily
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | June 15, 2024
NY Crude Oil Futures closed today at 7845 and is trading up about 9.49% for the year from last year's settlement of 7165. Factually, this market has been declining for 2 months. This price action here in June is warning that we may have at least a temporary high in place beginning perhaps a bearish reactionary move on the monthly level if we see lower prices next month or close lower. Otherwise, there remains the potential for a one-month Knee-Jerk reaction low. As we stand right now, this market has made a new low breaking under the previous month's low dropping to 7248 intraday yet it remains trading back above that previous low of 7699 implying near-term strength.
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 bullish currently with underlying support beginning at 7836 and overhead resistance forming above at 7899. 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 been generally trading up for the past week from the low of the week of June 3rd, which has been a move of 9.437%. 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 neutral on our weekly Momentum Models warning we have overhead resistance forming and support in the general vacinity of 7615. Additional support is to be found at 7796. Looking at this from a wider perspective, this market has been trading up for the past 26 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 has made a low following the previous high of April at 7615. The fact that the market for May close below the previous month's low is a sign of near-term weakness with a possible decline into the next turning point on the Array. Currently, June has traded as rallied to exceed the previous month's high reaching 8157.
Some caution is necessary since the last high 8767 was important given we did obtain two sell signals from that event established during April. That high was still lower than the previous high established at 9503 back during September 2023. Critical support still underlies this market at 6760 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 Healthy Pullback in Prep for Bull Continuation
By: Bruce Powers | June 14, 2024
• Natural gas retraced to 2.87, hitting the 38.2% Fibonacci level, with potential support around 2.84-2.82, signaling possible trend adjustment.
Natural gas continued to pull back on Friday from its recent 3.16 trend high. A new daily low for the retracement of 2.87 was reached at the time of this writing. However, natural gas continues to trade near the lows of the day and could reach a lower price level before the week is over. Yesterday’s low completed a 38.2% Fibonacci retracement and led to a bounce earlier in today’s session. Nonetheless, sellers took back control and continue to dominate.
Uptrend Line Support Tested
The next area to watch for support activity is around the uptrend line and it was reached today. But if the line fails to hold the next lower price zone is around 2.84 to 2.82, consisting of a crossover of two trendlines and the 50% retracement, respectively. The uptrend line is a relatively short-term line having defined support of the rising trend starting from the April swing low of 1.58. It is used as a guide and is not so reliable without confirming evidence.
Trends Adjust
Given that the angle of ascent has been relatively steep, an adjustment to a lower slope angle would be common and healthy for the trend. Rising trends that start steep will eventually reach a point where demand can no longer support the price momentum and they will adjust to a lower slope. Alternatively, uptrends that start with a low slope angle typically see the angle increase as the trend progresses. Frequently, there are three angles that might be observed in either scenario.
Potentially Bearish Weekly Pattern
What about the weekly time frame? The weekly chart is about to close the week with a bearish shooting star pattern. But before being alarmed notice that three weeks ago ended with a similar candlestick pattern. It was followed by a resumption of the uptrend after a brief drop below the bearish week. That was followed by a three-week continuation of the uptrend until this week’s high of 3.16.
Pennant Pattern Points to 3.78
The breakout of the bull pennant just got started and if it follows through it projects an initial target up to 3.78. That target is above the 2023 high of 3.64. Nonetheless, the main point is that there looks to be more upside in natural gas for the current trend. The target may be reached or not, but it is supportive of a continuation higher above this week’s high once the retracement is complete.
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Crude Oil Continues to See Choppiness
By: Christopher Lewis | June 14, 2024
• The crude oil market continues to see a lot of noisy back and forth behavior, as the global markets are trying to price in war, geopolitics, slowing economies, and inflation at the same time. However, this is a time of year that typically is positive.
WTI Crude Oil Technical Analysis
The crude oil market has gone back and forth on Friday, as we continue to look very choppy. And I think at this point we have a market that is trying to do everything they can to show signs of strength and short-term pullbacks Opens up the possibility of finding a bit of value in a market that quite frankly doesn’t really Lend itself to be negative this time of year Although there are a lot of concerns about the Global economy and that of course can have a major influence on demand.
Either way, I believe the $80 level above is the target and I do like the idea of buying short-term pullbacks. I believe that sooner or later, you will have a massive amount of buying pressure willing to step in on value propositions.
Brent Crude Oil Technical Analysis
Brent certainly looks very much the same as the $81.50 level in Brent has been important. We are pulling back slightly, and I do think that given enough time, we will find plenty of value hunters underneath willing to step in and take advantage of cheap oil.
$84.50 is my target, but that doesn’t mean we get there overnight. So please do keep that in mind. With that being the case, I’m a buyer of dips, looking at it as value. And if we could break above the $84.50 level, I would be extraordinarily aggressive and bullish. At this point, I would be a buyer hand over fist, at least for the short-term.
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Throwing A Flag Day. The Energy Report
By: Phil Flynn | June 14, 2024
It’s Flag Day today and what better day to point out that OPEC called a penalty flag on the International Energy Agency IEA calling their peak oil demand narratives dangerous for consumers and could lead to unprecedented pain. That was a warning given by OPEC sec-gen Haitham Al Ghais about the recklessness of the IEA that could lead to unprecedented shortages because of the lack of investment that was made by an agency that while calling for peak demand in the future, had to raise its oil demand projections across the board.
Oil Analyst Giovanni Staunovo on the IEA oil market report: Something which went unnoticed, demand level upward revisions 2022 is now at 100.11 from 99.81 mbpd one month ago 2023 is at 102.24 from 102.09mbpd one month ago 2024 is at 103.20 from 103.16mbpd one month. The IEA has been so wrong about their projections of future demand, even having to back off previous peak demand calls as well as calls to stop all investment in fossil fuels.
So, OPEC called them out. Haitham Al Ghais became OPEC Secretary General said that, “We have also heard similar types of narrative before. Ones that have proven to be wrong. Ghais points out that, “The IEA suggested that gasoline demand had peaked in 2019, but gasoline consumption hit record levels in 2023, and indeed continues to rise this year. It also stated that coal demand had peaked in 2014, but today coal consumption continues to hit record levels.
Ghais said that, “Many net zero futures focus almost exclusively on replacing hydrocarbons, which make up more than 80% of the global energy mix today. Rather than adding new energy sources to the mix, the focus is on substituting energy sources, which flies in the face of the history of supplying energy to the world. The emphasis is on rhetoric over reality, constraint over consumer choice. Ghais says that, “Today, wind and solar supply around 4% of global energy, with electric vehicles (EVs) having a total global penetration rate of between 2% and 3%, even though the world has invested over $9.5 trillion in ‘transitioning’ over the past two decades.”
He also says that OPEC welcomes all the progress made in renewables and EVs, but it is nowhere near close enough to replace 80% of the energy mix. Furthermore, electricity grids, battery manufacturing capacity and access to critical minerals remain major challenges. We should also remember that the development of renewables and EVs require some oil-related products. Their future expansion will add to oil demand.
Someone might want to tell Transportation Secretary Pete Buttigieg that. Biden’s so called landmark 2021 infrastructure legislation included 7.5 billion dollars to fund 500,000 electric vehicle chargers, but just eight chargers were built, which if you do the math it costs about 937.5 million per charger. Ok, to be fair, they do have plans to build more but because of the way they wrote the law that when it comes to building charging station, white people need not apply.
The Free Beacon wrote that, “White House ‘Equity’ Requirements Holding Back EV Charging Station Construction, Internal Docs Show. “ The Beacon wrote that, “internal memos from the Department of Transportation obtained by the Washington Free Beacon, as well as interviews with those who are responsible for overseeing the implementation of the electric vehicle charging station project, say the delay is in large part a result of the White House’s diversity, equity, and inclusion initiatives. “These requirements are screwing everything up,” said one senior Department of Transportation staffer who spoke on the condition of anonymity. “It’s all a mess.”
The Beacon says that Biden wants quicker action, but they say he has only himself to blame. “Shortly after taking office, the president signed an executive order mandating that the beneficiaries of 40 percent of all federal climate and environmental programs should come from “underserved communities.” The order also established the White House Environmental Justice Advisory Council, which monitors agencies such as the Department of Transportation to ensure the “voices, perspectives, and lived realities of communities with environmental justice concerns are heard in the White House and reflected in federal policies, investments, and decisions.”
In order to qualify for a grant, applicants must “demonstrate how meaningful public involvement, inclusive of disadvantaged communities, will occur throughout a project’s life cycle.” What “public involvement” means is unclear. But the Department of Transportation notes it should involve “intentional outreach to underserved communities.” That outreach, the Department of Transportation states, can take the form of “games and contests,” “visual preference surveys,” or “neighborhood block parties” so long as the grant recipient provides “multilingual staff or interpreters to interact with community members who use languages other than English.” “This all just slows down construction,” says Jim Meigs, a senior fellow at the Manhattan Institute who focuses on federal regulation. “These ‘public involvement’ requirements are impossible to quantify and even open builders up to lawsuits by members of the community where an electric vehicle charging station is set to be constructed.”
How these equity requirements are relevant to the construction of a single electric vehicle charging station is unclear, Meigs said. But all applicants for federal funding must in many cases submit reports that can total hundreds of pages about how they will pursue “equity” every step along the way. This leads to delays and increases costs throughout the construction process, one senior Department of Transportation official told the Free Beacon. “Highly Qualified” applications, internal memos state, must “promote local inclusive economic development and entrepreneurship such as the use of minority-owned businesses.”
Getting back to oil, it seems their products are leading the oil market back higher. A big spike in diesel and a lesser spike in gasoline is churning momentum more positive to end the week. While the Biden administration has been hopeful about falling gasoline prices in the Midwest, we just can’t get a break.
Barbara Powell at Bloomberg wrote that, “BP’s Whiting, Indiana, refinery plans to conduct a turnaround beginning late July on the 255k b/d Pipestill 12 crude unit and the largest coker, people familiar with operations said. The work on the largest of three crude units and its 95k b/d companion coker is scheduled to extend into early September with additional days needed to restore operations to normal The turnaround was originally scheduled to begin in early September and run for 2 months No reason given for advancing the work The last turnaround for Pipestill 12 occurred in September and November 2018 The crude unit was converted in 2013 to process mostly heavy Canadian oil .* The shutdown of the biggest crude unit, coming in the middle of the summer gasoline season, could tighten Midwest fuel supplies, sending regional gasoline prices higher at the pump and margins higher.
John Kemp pointed out that U.S. oil refineries had been processing petroleum at the fastest rate for the time of year since before the pandemic, but rising fuel inventories have begun to weigh on crack spreads and likely signal a slowdown ahead. Refineries processed 17.5 million barrels per day (b/d) of crude and other feedstocks over the week ending on June 7, the fastest seasonal rate since 2018, according to data from the U.S. Energy Information Administration (EIA). Refineries were employing 95% of their operable capacity, up from 94% last year, and the highest percentage since 2019, weekly data from the EIA show.
But intensive processing produces more gasoline and diesel than is being used domestically and exported – resulting in a persistent accumulation of stocks. The inflation-adjusted 3-2-1 crack spread is now exactly in line with the average for the 10 years before the pandemic, indicating the fuel market is comfortably supplied. Now with the Whiting refinery being down, maybe that will change that scenario just a little bit.
Crude oil demand numbers have been impacted by what is called the Costco effect. Local gas stations see less activity as more people go to Costco to fill their gas tanks when inflation is high. Some people are saying the Costco effect for one of the reasons why the gasoline demand numbers seem to be skewered to the downside.
Natural gas prices have pulled back after an incredible run of hot weather. The market is also concerned about a heat zone but also about what’s happening down in the Gulf of Mexico. Fox Weather is reporting that The National Hurricane Center (NHC) is monitoring a second potential tropical disturbance that could form over the weekend across the southwestern Gulf of Mexico. The first area of interest, Invest 90L, is now in the Atlantic. “Environmental conditions appear conducive for gradual development of this system, and a tropical depression could form during the early or middle part of next week while it moves slowly westward or west-northwestward,” the NHC said in its latest outlook Thursday evening of the action across the Pacific and the Bay of Campeche in southern Mexico. Download the Fox Weather App to watch this.
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Crude Oil Faces Pullback After Hitting Resistance
By: Bruce Powers | June 13, 2024
• Crude oil reached resistance at 79.46, forming a shooting star candlestick pattern, indicating a potential pullback as it remains in a downtrend.
Crude oil reached an initial top target zone yesterday before selling off to end the day in a weak position Wednesday ended with a shooting star candlestick pattern that points to a likely pullback from that high. Wednesday’s high of 79.46 was an exact test of resistance at the long-term downtrend line. That line begins from the 2022 peak. A failed bullish breakout of the line occurred in April, leading to a decisive decline below the line. This tells us to watch that line going forward as the market has recognized it again.
20-Day Support Holds
Nevertheless, Thursday’s low of 77.82 tested support around the 20-Day MA and it held. If today ends above the 20-Day line crude oil will have four daily closes above the line since breaking above it on Monday. That is a bullish clue. The rally from the recent trend low of 72.73 was an impressive 9.25% in only six days. If crude continues to hold above the 20-Day line, it has a chance to further test resistance and possibly break the trendline once more.
Wednesday’s rally hit the lower part of a resistance zone that goes up to the most recent swing high of 81.0. The short-term downtrend line is included in the zone. It was busted yesterday but the day’s close was below the line. So, the significance of the breakout was not confirmed. The 200-Day MA is at 79.88 currently, followed by the 50-Day MA at 80.50. Notice that the 50-Day line (orange) converged with the internal uptrend line today. They are each marking the same price level.
Downtrend Suggests Key Decision Point
Yet, crude remains in a downtrend and saw resistance at the downtrend line, which confirmed that the downtrend remains dominant. This could lead to a deeper pullback from Wednesday’s high. Potential lower retracement price levels are marked on the chart with the 50% retracement being highlighted. That is because there is a trendline at the bottom of a prior small broadening formation that runs through the 50% zone. Two indicators identifying a similar price is a notice to pay particular attention to this price zone if it is approached.
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Natural Gas Faces Healthy Pullback
By: Bruce Powers | June 13, 2024
• After a bullish breakout last week, natural gas faces a normal pullback, with key support levels and higher targets still in sight.
Natural gas triggered a deeper pullback today following a breakdown of an inside day. It was followed by a three-day low of 2.90. Support was seen off that low leading to an intraday bounce. Today’s low tested support around the prior trend high of 2.92, which was followed by a rejection the upside. This is a normal and healthy minor pullback following a clear bullish breakout last week. Natural gas broke out above both the long-term downtrend and bull pennant trend continuation pattern last week.
Uptrend Line Shows Dynamic Support
An uptrend line marks dynamic support for the current advance that began from the April 25 swing low. Also, the downtrend line identifies a price area for potential support. If the uptrend line is broken the downtrend line is the next line to watch for possible support. The two lines cross at a price of 2.84, marking another price to watch. That price area can be watched along with this week’s low of 2.86.
A little lower is the important 20-Day MA at 2.75. Notice that the 20-Day line has now converged with the top boundary line of the pennant pattern. Each is marking a similar price support area. It is also interesting that the day the 20-Day MA hit the bottom boundary line of the pennant on June 6, was the day of the pennant breakout. Although it closed weak, the next day’s upside continuation made up for it.
Trend Anticipated to Resume Following Minor Retracement
Given the strong bullish behavior of natural gas during the current ascent, higher targets remain in sight. At the same time, the relative strength index momentum oscillator (RSI) is beginning to show signs of a bearish divergence. It is still early though but should be watched as the trend progresses.
Breakout Above 3.09 Shows Strength
Given today’s pullback, a rally above the day’s high of 3.09 provides a sign of strength. The next higher target zone, above the nearby 3.18 to 3.20 Fibonacci confluence zone, is the 3.39 swing high from early-January. Nevertheless, a decisive breakout above this week’s high of 3.16 has a good chance of exceeding that swing high eventually, if not on the first approach.
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EIA Natural Gas Storage Build Of +74 Bcf Misses Estimates
By: Vladimir Zernov | June 13, 2024
Key Points:
• Working gas in storage increased by 74 Bcf from the previous week.
• Stocks are 573 Bcf above the five-year average for this time of the year.
• Natural gas prices are moving lower as traders react to the EIA report.
On June 13, 2024, EIA released its Weekly Natural Gas Storage Report. The report indicated that working gas in storage increased by 74 Bcf from the previous week, compared to analyst consensus of +75 Bcf. Last week, the working gas in storage increased by 98 Bcf, so today’s report showed that demand for natural gas is rising.
At current levels, stocks are 364 Bcf higher than last year and 573 Bcf above the five-year average for this time of the year. High inventory levels are a key problem for natural gas bulls.
Natural gas prices moved lower as traders reacted to the EIA report. The report has mostly met analyst expectations, but it looks that the market hoped for a lower increase in inventories due to hot weather.
The current demand for natural gas remains high due to high temperatures across the U.S. The weather forecasts stay bullish, and hot weather is expected in the next 15 days.
From the technical point of view, natural gas bulls continue to take profits after the recent move. The nearest significant resistance level for natural gas is located in the $3.02 – $3.09 range. A move above $3.09 will push natural gas towards the next resistance at $3.28 – $3.32.
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Exceeding Congressional Authority. The Energy Report
By: Phil Flynn | June 13, 2024
Commodity price volatility is exploding after the Fed disappoints. Some markets including the petroleum markets, even after the soft inflation reading, oet confused after an Energy Information Administration (EIA) report that had in data almost improbable asked the late surge of votes by Joe Biden in that last election. Now the American Petrolem Institute (API) accuses Biden’s EPA of exceeding their congressional authority. I guess sort of like when they defied the constitution and the Supreme Court to give away your tax money to pay for some student loans in an attempt to win votes.
Oil prices try to shake off yesterday’s Fed Statement that suggested that many Americans are not wrong about hating this Biden economy even as the Administration tells them things are so great. The Fed sees that inflation is cutting into most Americans pocketbooks and their financial security. The Consumer Price Index number showed inflation rose 3.3% from a year earlier, that was a three-year low and slowing from April’s 3.4% rate, the Fed seemed to think it was too little too late. The Fed said that they expect core inflation to be 2.8% by year’s end, that was higher than their last inflation forecast of 2.6%. And they project that unemployment will stay at its current 4% rate by the end of this year and edge up to 4.2% by the end of 2025. The Fed said that they’ve seen only modest further progress towards their 2% inflation goal in recent months and now they see the Fed funds rate at a median of 5.1% at the end of 2024 that’s just decreased the odds dramatically of the two rate cuts this year and even the one rate cut is now in question by some analysts.
Still my base case is that we will see a rate cut before the election. Most of the bets are on December cut. That is why my expectation is we will see some more data that will confirm the slowdown in inflation. Today’s producer price that price index could be key in the direction of markets.
After last week’s EIA report, I wrote an article titled “OPEC and Other Oils” which pointed out that the main driver in a surge of demand was in the ‘other oil’ category. Once again that “oil category” is raising eyebrows as the EIA has had weeks of wild swings in oil and demand adjustment numbers and has the market now focused on other oils that include the gasoline additive naphtha and miscellaneous other products includes all finished petroleum products not classified elsewhere, including petrolatum, lube refining byproducts (aromatic extracts and tars), absorption oils, ram-jet fuel, petroleum rocket fuels, synthetic natural gas feedstocks, and specialty oils.
According to Tim Dallinger some of the demand for that could be refiners and oil producers trying to reduce their emissions. The reality is that the swings in the other oil data are unlike anything we’ve ever seen in this category since they’ve been keeping records. After the demand for other oils surged last week, it plunged by 1.5 million barrels a day. In such wild swings and the crude oil supply numbers by the EIA on massive adjustments, it’s possible that the EIA is just having a very difficult time identifying what type of oil is going into storage and into refineries and that’s just throwing it into the other oil category until they figure out what the heck they’re dealing with. In this week’s report the Energy Information Administration had to adjust downward their crude oil number by 1.51 million barrels a day.
Last week they had to increase their oil adjustment by 1.3 to 6,000,000 barrels a day so that means a downward adjustment of supplies of 2.477 million barrels a day which just having the major impact and the market questioning whether this report really reflects the real state of crude oil supplies in this country. In other words, it’s very possible that some of the supply that is being counted as barrels of oil as being misidentified and maybe giving the market a false sense of security as to where our supply situation is.
There is also a question as to why the US imported the most oil last week since 2018. The EIA said that the U.S. crude oil imports averaged 8.3 million barrels per day last week, up by a whopping 1.2 million barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 7.2 million barrels per day, up an incredible 11.4% more than the same four-week period last year. Even after all the adjustments, the EIA says that supply in every major category is below average. The EIA says that, “S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.7 million barrels from the previous week. At 459.7 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year.
Total motor gasoline inventories increased by 2.6 million barrels from last week and are slightly below the five-year average for this time of year. Distillate fuel inventories increased by 0.9 million barrels last week and are about 7% below the five-year average for this time of year.
Demand over the last four-week period averaged 19.8 million barrels a day, down by 0.8% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.1 million barrels a day, down by 1.3% from the same period last year. Distillate fuel product supplied averaged 3.7 million barrels a day over the past four weeks, down by 3.5% from the same period last year. Jet fuel product supplied was up 11% compared with the same four-week period last year.
While gasoline prices have come down in recent weeks, the Biden administration is still feeling the heat from Americans that are not only being hit with much higher gasoline prices over the last few years but also because of overall inflation and now the industry is standing up. The Biden administration with their restrictive policies will only serve to make America less competitive economically in the future when it comes to energy policy.
Reuters is reporting that, “The nation’s largest oil trade group, which includes Exxon Mobil (XOM.N), and Chevron will file a federal lawsuit on Thursday seeking to block the Biden administration’s efforts to reduce planet-warming emissions from cars and light trucks and encourage electric vehicle manufacturing, the group said. The U.S. Environmental Protection Agency issued new tailpipe emission rules in March that will force the nation’s automakers to produce and sell more electric vehicles to meet the new standards. Under the rule, the administration projects up to 56% of all car sales will be electric between 2030 and 2032.
The American Petroleum Institute (API) says the EPA has exceeded its congressional authority with a regulation that will eliminate most new gas cars and traditional hybrids from the U.S. market in less than a decade. “Today, we are taking action to protect American consumers, U.S. manufacturing workers and our nation’s hard-won energy security from this intrusive government mandate,” API Senior Vice President and General Counsel Ryan Meyers said. In the final rule, Biden slashed its target for electric vehicle adoption amid auto worker backlash, but the watering down of the measure did little to pacify an oil industry that needs gas-powered cars to survive. For both Biden and his Republican rival, Donald Trump, the road to the White House goes through industrial states Michigan, Wisconsin and Pennsylvania where workers fear that the EV transition threatens jobs.”
Prices have recovered their OPEC plus taper tantrum and we’re getting more commitments from OPEC cheaters that they will make compensation cuts that might make any increase in production negligible.
Reuter reported that, “Iraq’s oil ministry said on Wednesday it is fully committed to compensating for any crude oil overproduction in 2024, referencing estimates by secondary sources of overproduction by 203,000 barrels in May above levels agreed with OPEC+. The ministry “is committed to the production level required in the agreement, of 4 million barrels per day, for June and the subsequent months, in addition to compensating the surplus production since the beginning of this year throughout the compensation period, which will run until September 2025,” it said in a statement.
The natural gas recovery seems to have stalled as supplies seem to be getting caught up with demand. Above average heat has powered the move but now we await the report from EIA.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | June 12, 2024
• Top Movers
NY Natural Gas Futures 7.67 %
Wheat #2 3.8 %
Cocoa (NYCSCE) Futures 3.79 %
AU - Queensland Base-Load Electricity Futures 3.29 %
Wheat CBT Futures 3.13 %
• Bottom Movers
Orange Juice (NYCE) Futures 4.6 %
Lumber (CME) Futures 2.94 %
Zinc 2.85 %
Zinc (99.995%) Spot 2.85 %
Tokyo Rubber Futures 2.81 %
*Close from the last completed Daily
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Natural Gas Bullish Continuation Targets 3.20 and Beyond
By: Bruce Powers | June 11, 2024
• Natural gas surged above 3.15, aiming for the 3.18-3.20 zone, supported by a bull pennant breakout and a bullish 20-Day and 200-Day MA crossover.
Natural gas triggered a bullish trend continuation today as it rallied above Monday’s high of 3.15. It is on track to close strong, near the highs of today’s trading range. It looks like the next higher target zone from 3.18 to 3.20 will be reached. The 88.6% Fibonacci retracement and an extended Fibonacci target define the range.
Bull Breakouts Follow Through
Last week natural gas triggered a breakout from a bull pennant trend continuation pattern. The fact that the breakout of the pennant occurred around the same time as a breakout above the long-term downtrend line triggered, makes it more interesting. Trendlines by themselves are not too reliable as a signal, but this breakout is more interesting because of the pennant. The pennant consolidation formed near resistance and therefore the two breakouts are starting the next leg up rather than triggering a breakout further into an advance when momentum is more likely to die off following a breakout.
Bullish Confirmation Signs
Further supporting bullish evidence includes the recent bullish crossover of the 20-Day MA above the 200-Day MA, and a successful test of support at the 20-Day line recently. If natural gas can eventually exceed the 2023 high at 3.64, further confirmation of a bullish reversal will be indicated. Further, a rally above the next swing high of 3.39 and daily close above that price level, improves the chance that the 2023 high may be exceeded. The monthly chart also reflects improving demand in natural gas as the 20-Month MA was exceeded this month for the first time since natural gas fell below it in December 2022.
Pennant Targets 3.78
There are several interim targets on the way to the calculated target from the pennant pattern starting with the 88.6% retracement. The pennant structure provides a potential target of 3.78. That is above the 2023 peak of 3.64. Nevertheless, it is still a way away and the target may never get hit. If the 3.18 to 3.20 price zone is exceeded, January swings high at 3.39, followed by the 2023 high at 3.64 become targets.
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Crude Oil Eyes Bullish Targets
By: Bruce Powers | June 11, 2024
• Crude oil surged above key resistance levels, reaching a new high of 78.52, and may continue its bullish trend towards the 200-Day MA at 79.96.
Crude oil rallied above potential resistance around the combined 20-Day MA and the 61.8% Fibonacci retracement on Monday, and then closed above it. Today, that price zone was tested as support and breached briefly before buyers took back control from a low of 77.39 earlier in the session. Subsequently, last Friday’s high of 78.45 was exceeded slightly to reach a new trend high of 78.52. This would seem to indicate that the bounce in crude may not be done.
Holds Above 20-Day MA Support
The 20-Day line is at 77.77. If crude ends today above the line today, upside targets become more likely. A bullish trend continuation signal would then be generated on a move above today’s high. It looks like a test of the 200-Day MA at 79.96 could be the upside for the move. Lower potential resistance areas are near the trendlines on the chart. In addition, keep an eye on the 78.6% Fibonacci retracement at 79.23. Once the 61.8% price target is exceeded the 78.6% price zone becomes more likely to be reached. Notice that the price level is confirmed by the January 29 swing high.
Bullish Weekly Reversal Triggered
It may be that last week’s low of 72.73 completed the retracement. But crude remains in a downtrend and could test lower price levels if resistance turns it back down. However, the weekly chart shows an improving short-term bullish environment as well. On Monday, crude triggered a bullish weekly reversal as last week’s high of 77.81 was exceeded. Monday confirmed the advance with a close above the high.
Deeper Retracement Indicated on Drop Below 77.39
If a deeper pullback comes before a test of resistance at higher prices, a drop below today’s low of 77.39 will provide a signal. A prior weekly support level is 76.60, while a little lower is the 38.2% Fibonacci retracement at 76.31. That is followed by the 50% retracement at 75.62. Also, notice the small lower trendline across the bottom of the most recent consolidation period, which was a broadening formation. It can be used as a guide if the price zone is approached.
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$WTIC $OIL - We got the 'Hammer' to the 200/MA on the Wkly close I was looking for. Price now trying to bullishly confirm it...
By: Sahara | June 11, 2024
• $WTIC $OIL - Latest
We got the 'Hammer' to the 200/MA on the Wkly close I was looking for. Price now trying to bullishly confirm it...
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Price Caps Woking Some, What? The Energy Report
By: Phil Flynn | June 11, 2024
Oil prices had its best day in two months as the market got over its OPEC cut “taper tantrum”. The market seemed to awaken to the fact that with demand trends being what there are and production cuts by OPEC and falling rig counts in the US, we are sleepwalking into a global oil supply deficit. Yet at least according to U.S. Treasury secretary Janet Yellen, the sanctions on Russian oil were working “somewhat”. Well, if she means they are working for Russia, then she is right.
Russia built a new market for its oil and gas and according to data from the Russian finance ministry, Russia’s revenues from oil and gas surged by 73.5% in the January through May period of 2024 compared to the first five months of 2023. After raking in so much cash from places like China and India and other black-market buyers throughout Europe, they can afford to be a bit magnanimous when it comes to cutting back production to try to get in line with their promises to the OPEC cartel. The oil market took notice after it was announced that Russia made one of its deepest production cuts in a year, lowering their production in 9.393 million barrels a day. There was a cut of 344,000 barrels a day and while they are still about 34,000 barrels above their target range, it shows a sign of good faith that Russia is on board with the production cuts as we have been predicting for some time.
Still, some OPEC members are struggling or cheating on the production cut. I know, it’s shocking. According to a Platts Survey, OPEC increased output by 120,000 barrels a day despite Russia’s cut. The OPEC cheater list happens to be the usual suspects such as Iraq in Nigeria. On the compliance side, the gold stars go to not only Russia but Kazakhstan and Mexico. Mexico cut their oil output to a four year low. This came as Venezuela flooded the markets ahead of sanctions.
Janet Yellen tries to convince the world that price caps work somewhat yet the black oil market trade continues to flourish. Sanctions enforcement is abysmal.
According to Tanker Trackers, have witnessed or identified 221 shift oil transfer sessions in the Riau archipelago, which is double what they saw a year ago.
Bloomberg said, “Russia has shipped about 3.4 million barrels a day of crude so far this year, valued at about $37 billion at the point of export, and working around western sanctions has been part of that.
Russian oil proceeds to the state budget increased almost 50% in May from a year ago. And while Russia’s oil producers are set to flourish here in the United States a cutback in the right counts is starting to raise questions as to whether US oil production is getting close to a peak.
Yesterday the markets saw in report from Bloomberg that got a lot of attention that said that unless the US oil rig count starts to rise, then U.S. oil production could fall by as much as 1,000,000 barrels a day as existing oil fields start to see a decline.
Bloomberg pointed out that drilling in the US shale patch dropped to the lowest level in almost two-and-a-half years as operators vowed to make good on promises to investors for subdued production growth this year.
According to the article, Adam Rich, deputy chief investment officer at Vaughan Nelson, a Houston-based investment manager said that “We could probably keep the 12-13 million barrel-per-day level for six to nine more months, but if we don’t see rig counts really start moving up here, that’s going to be a big problem.”
Add to that threats by Senate Democrats who go after US shale oil producers for price fixing is going to create a situation that is potentially going to leave the United States very undersupplied and very dependent on foreign sources of oil. Will the madness ever end?
Regardless oil prices had a huge comeback day yesterday one of its best day of months after people started to realize that the OPEC “taper tantrum” regarding the OPEC production cuts was way overdone and the fact that we are facing a potential supply deficit later in the year.
And if you look at OPEC data, they expect the demand for their crew to add average roughly 43.65 million barrels a day of the second half of 2024 to that table that would imply a crude deficit leading to a drawdown of 2.63 million barrels a day,. That is assuming that they were going to maintain its April production of 41.02 million barrels.
Goldman Sachs also said in its latest report that it expects a supply deficit of up to 1.3 million bpd by the third quarter of 2024 as travel and cooling demand ramps up through the summer. That has been in line with what the energy report has been saying. Obviously, we’re glad the market is starting to come to that same assessment.
And while gasoline demand in the United States has been rocky it’s still not that far from being able to get back near record highs.
We know that air travel demand is the highest level that’s been since 2019 now there are signs that global demand is starting to pick up. There are even reports of shortages of jet fuel in Japan as the yen has made travel to Japan attractive.
So overall there seems to be a global oil demand bounce. Bloomberg reported that, “- Gunvor Group, one of the biggest independent oil traders, is snapping up benchmark-defining cargoes of crude oil that other companies are offloading, a possible indication of the firm being bullish. The Geneva-based company has kept 17 out of 18 North Sea crude cargoes that have been put into so-called forward chains so far this month. The total volume controlled by one single company is the highest since at least December 2019 when Bloomberg started compiling data. Each cargo is 700,000 barrels.
Years ago, I was involved in a potential refinery project that never got off the ground. The plan was to try to take advantage of the shale oil revolution. Te problem that we have in the United States that our US refineries were not really built refine the light shale oil. The idea was to build a refinery to solve that problem.
Yet that that time the inability to be able to hedge the niche market became a difficulty and was eventually a nonstarter for the potential investors.
Yet years later it seems that a refinery project that is looking to do exactly that is getting off the ground because on so many levels it makes sense. Yet they are facing some of the same challenges.
Reuters is reporting that, “Element Fuels Holdings, a Dallas-area startup proposing to build the first all-new U.S. oil refinery in nearly 50 years, on Thursday said it was relaunching efforts to build a large plant in South Texas.
The Brownsville, Texas, project has been proposed by entrepreneur John Calce at least twice before by his ARX Energy, and Jupiter startups, with one leading to a bankruptcy filing. The project was originally owned by a holding company that also owned Centurion Terminals.”
Element is looking to raise funds for the first phase, which will allow the refinery to process about 50,000 to 55,000 barrels per day of naphtha feedstock into gasoline. The company estimates the initial phase will cost about $1.2 billion, Calce said. The company said it was in talks with banks, private credit funds as well the U.S. Department of Energy for funding from the Inflation Reduction Act.’ I wish them luck.
Yesterday’s sharp rebound should have broken the downtrend for oil and products.
We should be in a buy the brake’s mode perhaps until the 4th of July. We have macro headwinds with inflation data and the Fed, but the trend is back up as demand should outpace supply.
We also get the American Petroleum Institute (API) report. We expect a draw of 2 million barrels on Crude oil. We also expect to see the same draws for gasoline and distillate. After massive crude adjustments in the Energy Information Administration (EIA)report as well as a hug surge in demand for other oils last week, we could be due for a very bullish report as the adjustments start to level out.
The mishmash energy policy of course is keeping people confused but now there is more pressure to give consumers the choice and what type of vehicle they buy and where they drive and when they drive it. Now in a pressed release “U.S. Senate Commerce Committee Ranking Member Ted Cruz (R-Texas) announced his plan to force a vote on President Biden’s anti-consumer EV mandate.
Cruz will introduce a disapproval resolution under the Congressional Review Act (CRA) to overturn a soon-to-be final rule from the National Highway Traffic Safety Administration (NHTSA) that would effectively ban gas-powered vehicles and mandate electric vehicles for American consumers. As proposed, NHTSA’s Corporate Average Fuel Economy (CAFE) standards for passenger cars and light-duty trucks would increase the price of a new gas-powered vehicle by nearly $1,000 with, at best, speculative benefits. When combined with the administration’s massive increase in CAFE civil penalties and the Environmental Protection Agency’s (EPA) vehicle emissions rule, the expected final rule will raise car prices for consumers and hurt U.S. auto workers.”
Natural Gas has been getting the nice rebound hitting the highest price since January on the hot temperatures and weather but one of the things that has been relatively quiet has been this start to the hurricane season that was being predicted to be so active. And while the Atlantic looks extremely quiet for right now Fox Weather is keeping an eye on the gulf. Fox Weather says that another window of tropical development is looking more likely this upcoming weekend for the Gulf of Mexico.
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Hedge Funds have the lowest Oil positioning ever. Worse than 2020.
By: Macro Charts | June 10, 2024
• Hedge Funds have the lowest Oil positioning ever.
Worse than 2020.
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Natural Gas Eyes Higher Targets After Key Breakouts
By: Bruce Powers | June 10, 2024
• With natural gas testing new highs, recent trendline and pennant breakouts indicate more upside potential if key support levels hold.
Natural gas continued its ascent today, reaching a new trend high of 3.10 before pulling back intraday. That high almost completed a 1.414 (3.11) Fibonacci extended retracement of the most recent decline that began from the May 23 peak. Today’s low of 2.86 successfully tested support at prior resistance from last Thursday’s high, as well as support of the long-term downtrend line that was recently broken. Although Monday looks like it will close weak, in the red and in the lower third of the day’s trading range, the bigger picture remains promising for the bulls.
Two Breakouts Confirm Strength
Today’s pullback follows three up days culminating in a long-term trendline breakout confirmed by last week’s close above the line. In addition, there was a bull breakout of a shorter-term pennant trend continuation pattern last week as well. The breakouts just began, so there should be more upside to go. However, how the price of natural gas behaves around key price levels will provide clues. All breakouts can fail and some follow through faster than others.
Watch Behavior Around Support
The pennant breakout should help maintain upward momentum (faster) as the long-term breakout of the trendline progresses (slower). Pullbacks should recover quickly and not retrace too deep. The area around support of the declining trendline is key for the bullish outlook to be maintained in the near term. However, if there is a daily close below the trendline, the risk of a deeper retracement rises.
There are several price areas to watch for support below the trendline. First, there is the top boundary line of the pennant. Thursday’s low is at 2.79 and be used as a guide as well since it bounced off support of the top boundary line. Further down is the 20-Day MA at 2.64 currently, and the 200-Day MA at 2.46.
Upside Targets Start with 3.18
On the upside, there is a target derived from the bull pennant up at 3.78. It remains to be seen whether that target will eventually be reached, and it could take a little time. Interim price targets include the swing high from January at 3.39 and the 2023 peak at 3.64. There is also the completion of an 88.6% Fibonacci retracement at 3.18.
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Crude Oil Continues to Look For Buyers
By: Christopher Lewis | June 10, 2024
• The crude oil market rallied slightly in the early hours on Monday, as the market digests a lot of oversold conditions, and of course the attack on shipping over the weekend.
WTI Crude Oil Technical Analysis
Crude oil has rallied slightly on the 4-hour chart in the West Texas Intermediate Grade, and it looks like we are trying to continue the upward trajectory. Quite frankly, this is a market that had gotten far too oversold and now it looks like we are starting to come to grips with the idea of perhaps the worries about the economy were overdone because quite frankly, in the United States, we had a larger than anticipated jobs number that has people thinking that perhaps the demand for crude oil will continue to be strong in America.
That being said, we also have to worry about a lot of geopolitical concerns, and that could drive oil higher as well. There was an attack in the seas over the weekend so again, we’ll just have to see how this plays out. But clearly, this is an oversold market. I think at this point in time, short term pullbacks continue to be buying opportunities. But you probably want to be somewhat rapid to take your profit.
Brent Crude Oil Technical Analysis
The Brent four-hour chart looks pretty much the same as you would expect with the $80 level offer a little bit of resistance, but if we can clear that, then it’s possible we could get to the $82 level. Short-term pullbacks continue to be buying opportunities, and it is worth noting that both Brent and the West Texas Intermediate crude oil grades had hit a very low level that historically has been fairly well supported. So I think value hunters are coming in to pick up the market. With that being said, I like the idea of buying this dip and I have no interest whatsoever in shorting.
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The Energy Report
By: Phil Flynn | June 10, 2024
Iranian backed Houthi rebels are kind of like cockroaches that you can’t get rid of. They keep coming back and attacking. Despite the Biden administration’s plan to stop them, so far it has not. Back in December of 2024, the Biden administration launched the so called, “Operation Prosperity Guardian” which was a coalition of more than 20 nations committed to defending international shipping and deterring Houthi attacks in the Red Sea yet the attacks continue. Over the weekend Houthi rebels attacked two commercial ships in the Gulf of Aden, increasing the number of launched attacks since Nov. 19, 2023, to 175 according to Reuters. This must be frustrating for the Biden Administration as it is another clear failure that they will have to find a way to blame on Donald Trump.
You would think the Houthis would be nicer to Biden because back in February of 2024 his administration tried to appease the rebels and Iran and removed the Houthis from the Foreign Terrorist Organization and Specially Designated Global Terrorist lists. Biden must have thought if you can’t trust a Houthi, then whom can you trust? But the real reason he did it was because his hated rival, President Donald Trump or that gentleman, as Biden calls him, originally put the Houthi’s on the terror list in the first place. It was just another thing Biden unwound from President Trump like border policies, Federal drilling policies and the politically vindictive killing of the Keystone XL pipeline.
Yet despite this appeasement it appears it has just made the Hothi rebels more aggressive. I guess when you’re not designated as a terror group you want to try harder to get the recognition you think you deserve.
So back in January Biden once again designated the Houthi rebel group as a terrorist organization. The Biden administration was forced to do an about face because after his move the Hothi rebels launched drone and missile attacks on U.S. military ships and commercial vessels operating in the Red Sea. The Biden Administration, empowering the rebels and their major funder Iran, became an international embarrassment, so they had to put them back, grudgingly, on the list.
Now it appears that before the weekend attack the rebels may now be in the hostage taking business. The AP reported that at least, “nine Yemeni employees of United Nations agencies have been detained by Yemen’s Houthi rebels under unclear circumstances, authorities said Friday, as the rebels face increasing financial pressure and airstrikes from a U.S.-led coalition. Others working for aid groups also likely have been taken.
For the oil market this is simmering geopolitical risk. It’s almost unthinkable that a small rebel group can disrupt global shipping lanes and the Biden administration continues to let it happen. Or at the very least has been very ineffective at stopping it.
On the supply side there are reports that Iraq’s oil minister sees a deal to allow more oil flow. Reuters is reporting that Iraq’s Oil Minister Hayan Abdel-Ghani said there has been progress in talks with Kurdistan region officials and representatives of international companies operating there for a deal to resume northern oil exports. Stay tuned.
Retail gasoline prices are sliding. US air travel continues to rise. According to the TSA US air travel is up 7.7% at 2019 numbers that’s incredible. On the ground there are still big questions about gasoline demand and weekly demand numbers that have been all over the map and while we’re seeing signs that demand is still relatively strong, there still seems to be some resistance from drivers because of being squeezed by inflationary pressures.
US oil production is at the very least straining on growth if not hitting a peak. Reuters reports that, “U.S. energy firms this week cut the number of oil and natural gas rigs operating to the lowest since January 2022, energy services firm Baker Hughes (BKR.O), opens new tab said in its closely followed report on Friday. The oil and gas rig count, an early indicator of future output, fell by six to 594 in the week to June 7, decreasing for the second time in three weeks. Baker Hughes said that puts the total rig count down 101, or 15% below this time last year.
Oil and petroleum held up rather well even in the face of a jobs report that seemed to blow away expectations and raise concerns that the Federal Reserve would not be able to cut interest rates. The market is starting to realize in the aftermath of the OPEC plus cartel session to extend their production cuts, that we are going to see a very tight market later this year.
Oil inventory declines are going to continue and if the jobs market numbers are correct the demand for gasoline should improve. In fact I would argue that gasoline demand has been underreported here in the last few months and we will expect to see it continue to recover.
The Biden administration has taken advantage of the weakness in oil to buyback oil for the reserve. Reuters reports that, “The administration of President Joe Biden said on Friday it has sped up offers to replenish crude oil for the Strategic Petroleum Reserve following its historic sale from the stockpile in 2022. Energy Secretary Jennifer Granholm said in an exclusive interview on Tuesday that the department could speed replenishment of the SPR this year, beyond a roughly 3-million-barrel month pace.” They still have a long way to go and I doubt the Biden administration is going to live up to Jennifer Granholm Holmes hopes that they could refill the SPR by the end of the year. At this point they better hope for the end of the decade.
European politicians are getting the green energy slap back as people in Europe realize these policies are not meant to save the planet, they’re just meant to take away their freedoms. Bloomberg reports that, “European voters handed gains to right-wing parties in many countries, while support for the Greens plunged, leaving the bloc more fragmented and its ambitious environmental goals in doubt. While Ursula von der Leyen’s center-right European People’s Party looks set to win the largest number of seats in the European Parliament, boosting her chances of a second term, dramatic losses for the governing parties of France and Germany upended the core of the European project.
In France, President Emmanuel Macron’s party was trounced so badly by Marine Le Pen’s far-right National Rally that he called snap legislative elections for June 30. In Germany, the anti-immigration won a bigger share of the vote than Chancellor Olaf Scholz’s Social Democrats, which recorded their worst-ever showing. Overall, the results present a setback for European unity and the chance of major reforms.”
The reality is that people in these countries realize that these policies from the global elitist are meant to take wealth away from them and put it into the hands of the powerful. They are trying to take away people’s rights in the name of so-called climate change and take away national identity. It’s only a precursor for more government control on individual’s rights. Their policies are failing and people are waking up to the fact that this sham about the energy transition is really about amassing more power for themselves.
As I have written many times before, the green energy policies of the leftist has made the world less secure and energy more expensive. This is especially true in Europe and people have had enough. Analyst Anas Alhajji also point out that the decline in the Euro relative to US dollar means higher energy bills for the EU, even if oil and gas prices remain flat! Funny that the largest energy subsidies to consumers in the world are in the EU and that includes “fossil fuel” subsidies! No wonder they want to send those that championed these crazy policies packing.
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Oil: In contrast to futures market's expectations, Goldman Sachs forecasts a positive outlook for oil prices over the next 3 months
By: Isabelnet | June 10, 2024
• Oil
In contrast to futures market's expectations, Goldman Sachs forecasts a positive outlook for oil prices over the next 3 months.
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COT on energy: OPEC+ ill-timed production hike announcement, when prices were under pressure from softer macro data, drove the #Brent long to a ten-year low last Tuesday. Potentially setting the stage for strong rebound once the tech. and/or fund. outlook turn more favorable
By: Ole S Hansen | June 9, 2024
• COT on energy: OPEC+ ill-timed production hike announcement, when prices were under pressure from softer macro data, drove the #Brent long to a ten-year low last Tuesday. Potentially setting the stage for strong rebound once the tech. and/or fund. outlook turn more favorable.
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | June 8, 2024
• Following futures positions of non-commercials are as of June 4, 2024.
WTI Crude Oil: Currently net long 224.6k, down 59.9k.
In the wake of a breach last week of a rising trendline from last December when West Texas Intermediate crude bottomed at $67.71, there was more selling this week, dropping 1.9 percent to $75.53/barrel.
From oil bulls’ perspective, the good thing is that the crude finished the week substantially off its low. On Tuesday, it tagged $72.48 intraday. This just about tested the low end of a range between $71-$72 and $81-$82 that persisted for 19 months before the upper end gave way 10 weeks ago and was subsequently lost early May.
The weekly produced a bullish hammer. Odds favor a rally. Immediate resistance lies just under $77.
In the meantime, US crude production in the week to May 31st was unchanged for 13 consecutive weeks at 13.1 million barrels per day; 15 weeks ago, output was at a record 13.3 mb/d. Crude imports increased 289,000 b/d to 7.1 mb/d. As did stocks of crude, gasoline, and distillates, which respectively grew 1.2 million barrels, 2.1 million barrels and 3.2 million barrels to 455.9 million barrels, 230.9 million barrels and 122.5 million barrels. Refinery utilization increased 1.1 percentage points to 95.4 percent.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | June 8, 2024
• Top Movers
Tokyo Rubber Futures 4.54 %
AU - Victoria Base-Load Electricity Futures 2.14 %
Tokyo Silver Futures 1.99 %
NSW Baseload Electricity Continuous 1.93 %
AU - Queensland Base-Load Electricity Futures 1.19 %
• Bottom Movers
ICE Newcastle Coal Continuous 2.13 %
LBMA Silver in USD 0.13 %
*Close from the last completed Daily
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | June 8, 2024
This market made a new high today after the past 3 trading days. The market opened higher and closed lower. The immediate trading pattern in this market has exceeded the previous session's high intraday reaching 7625. Therefore, this market closed below the opening print while also closing down from the previous closing yet it was weak going into the close.
Clearly, this market has broken under the former broader cyclical support which now resides above the market at 7714 rendering it vulnerable to a further decline at this time. The market crossed that critical cyclical support seven sessions ago confirming a bearish trend and now only a rally back above this level would signal a reversal in the tone of the the market implying a rally ahead.
During the last session, we did close above the previous session's Intraday Crash Mode support indicator which was 7126 settling at 7555. The current Crash Mode support for this session was 7297 which we closed above at this time. The Intraday Crash indicator for the next session will be 7444. Now we have been holding above this indicator in the current trading session, and it resides lower for the next session. If the market opens above this number and holds above it intraday, then we are consolidating. Prevailing above this session's low will be important to indicate the market is in fact holding. However, a break of this session's low of 7521 and a closing below that will warn of a continued decline remains possible. The Secondary Intraday Crash Mode support lies at 7196 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...... 7297
Previous... 7126
Tomorrow... 7444
This market has not closed above the previous cyclical high of 8062. Obviously, it is pushing against this resistance level.
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 7725 and support forming below at 7413. 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. Afterwards, the market bounced for 17 weeks reaching a high during the week of April 8th at 8455. Since that high, we have been generally trading down for the past 8 weeks, which has been a very dramatic move of 17.32% in a stark panic type decline. Nonetheless, the market still has not penetrated that previous low of 6771 as it has fallen back reaching only 7248 which still remains 7.044% above the former low.
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 3 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 has made a low following the previous high of April at 7615. The fact that the market for May close below the previous month's low is a sign of near-term weakness with a possible decline into the next turning point on the Array. Currently, June has traded as rallied to exceed the previous month's high reaching 8157.
Some caution is necessary since the last high 8767 was important given we did obtain two sell signals from that event established during April. That high was still lower than the previous high established at 9503 back during September 2023. Critical support still underlies this market at 6760 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 Breakouts Signal Strong Uptrend
By: Bruce Powers | June 7, 2024
• Following a new daily high close in the uptrend, natural gas surged on Friday, confirming a bull pennant breakout and triggering a trendline break.
Following a new daily high close for the uptrend yesterday, natural gas took off on Friday, confirming a bull pennant breakout and triggering a trendline break. Moreover, a bull trend continuation signal triggered above 2.92, on the way to the day’s high and a weekly high of 2.97. However, the market continues to trade near the highs of the day at the time of this writing, and it could reach a higher price level before the weekend.
Unless there is a pullback before today’s close, it is on track to close strong, in the top quarter of the day’s range and possibly above the prior trend high at 2.92. The stronger the close, the more likely it should be able sustain upward momentum.
Dual Breakout: Bull Pennant, Long-term Trendline
Today’s breakout is the latest technical clue that the uptrend in natural gas is improving and becoming more sustainable. Although there were two attempted breakouts of a bull pennant trend continuation pattern recently most of the structure of the pattern was retained. Given today’s strong momentum through a clear breakout level indicates that the market has recognized the change. The downtrend has defined dynamic resistance for the full trend beginning from the 2023 peak at 3.64. That peak is now at risk of being broken eventually if the uptrend continues to strengthen.
Improving Technical Clues
Keep in mind that today’s high puts the price of natural gas up by 95% from the February trend low. That is a healthy swing historically in a relatively short amount of time. Nevertheless, support was successfully tested near the 20-Day MA recently, indicating that the 20-Day line is a good near-term line to watch for the current trend. Also, today’s rise moves natural gas further away from the long-term 200-Day MA, a sign of long-term strength.
Pennant Target Above 2023 High
The measuring objective from the bull pennant offers an initial target of 3.78. That price target is above the 2023 high of 3.64. On the way up it must contend with possible resistance around the 78.6% Fibonacci retracement at 2.99 and the prior interim swing high resistance at 3.02. An interim prior swing high is at 3.39. The weekly chart also contains bullish clues after today as this week’s candlestick pattern should negate the prior two week’s bearish candles.
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Soft Cuts. The Energy Report
By: Phil Flynn | June 7, 2024
Petroleum prices rallied yesterday but are dropping today ahead of the all-important monthly jobs report that is expected to show that the US added 190.000 jobs which may settle the question as to whether the Federal Reserve will actually cut interest rates and when they might do it.
Oil prices, which have suffered 3 weeks of losses on concerns about a softening global economy will get a boost from the fact that the Fed is about to embark upon a rate cutting campaign.
Oil prices and commodities surged as the European Central Bank (ECB) cut rates as expected rates now the pressure is on the Fed to do follow the rate cut leader.
The ECB Cut the deposit rate to 3.75% from a record 4.0%, but failed to signal whther that was on cut and done or just the beginning. This morning’s eurozone GDP came out as expected so that’s not going to give us a hint one way or the other. The Eurozone GDP Revised QoQ Actual 0.3% (Forecast 0.3%, Previous 0.3%) Eurozone GDP Revised YoY Actual 0.4% (Forecast 0.4%, Previous 0.4%)
Part of the rebound in the price of oil and petroleum was the fact that the market started to realize that they misinterpreted the OPEC plus plan to tapper back on production cuts. Both Russia and Saudi Arabia wanted to point out that the market had overreacted to their announcement.
The reason why they thought they could cut back maybe as much as 180,000 barrels a day is because they expect the demand for oil to increase by anywhere from 1.5 million barrels a day to 2,000,000 barrels a day.
They also wanted to make clear that if that demand growth didn’t happen then the taper would not happen.
The cuts that they are going to consider tapering what’s that 2.2 million barrel a day voluntary cuts from 8 different OPEC members.
OPEC Plus signaled that perhaps in October of 2024 to September of 2025 ahead of the winter demand period when they expect to see a supply deficit that some of these countries that we’re volunteering these cuts might start to incrementally add a few barrels back to the market.
The amount they’re talking about maxes out at 180,000 barrels a day. demand growth increases within their range later in the year the market is going to really feel these extra barrels at all .
In 2025 at the end of the year they were talking about bringing back about 200,000 barrels a day each month from January to September of 2025
Energy Intelligence reported that Saudi Prince Abdulaziz that “ Given the uncertainty around demand growth, the producers said the scheduled return of these volumes could be paused depending on market conditions. “We’re waiting for interest rates to come down. [We want to see] better trajectory when it comes to economic growth, global growth, not pockets of growth here and there. [We want to see] more certainty on the overall economic trajectory. That will probably cause demand to increase with a clear path,” said Prince Abdulaziz.
Zerohedge reported that Russia also is on board with trying to reassure the markets that they will not see a flood of oil.
““Our reduction against April continued in accordance with our OPEC+ agreements,” Novak told reporters on the sidelines of the St. Petersburg International Economic Forum, as quoted by Russian news agency TASS.
Asked about exact numbers for the May oil production, Novak said that the scale of the output cut would become clear in about a week.
When the OPEC+ members announced in early March their intentions to extend the cuts into the second quarter, Russia changed its production/export cut plan and said that it would reduce supply by 471,000 bpd in the second quarter in the form of cuts to oil production and exports. In April, Russia pledged to reduce production by 350,000 bpd and exports by 121,000 bpd. In May, the 471,000-bpd reduction would be in the form of a 400,000-bpd cut to production and 71,000 bpd cut to exports, and in June the Russian supply cut would be 471,000 bpd entirely from production reductions.
Output cuts were to account for most of the extra Russian supply cut this quarter, and they could be the result of reduced refining capacity with maintenance in Q2 and refinery rates estimated to have slumped due to Ukrainian drone attacks on Russian refineries.
I do not want to get corny but it’s notable that US Ethanol exports surged in April. Karen Braun at K KANNBWK pointed out that U.S. ethanol exports in April at 811M liters (214M gallons) were the second highest for any month on record and up 51% from the 3yr April avg. Canada accounted for 29%, United Kingdom 16% and India 9%. Huge monthly record for US ethanol exports to the UK.
You had better get ready for the heat wave that’s going to impact large parts of America not only could it affect crops but it’s going to add to demand for electricity as people try to keep cool.
Fox Weather reported that Triple-digit heat wave continues to scorch West as Las Vegas forecast to climb over 110 degrees. The dangerous heat has prompted the issuance of Excessive Heat Warnings from California to Arizona. Numerous record-high temperatures could fall throughout the region as temperatures rise as high as 25 degrees above average.
Natural gas prices are getting support from the heat even after the Energy Information Administration reported a higher-than-expected injection. EIA said that working gas in storage was 2,893 Bcf as of Friday, May 31, 2024, according to EIA estimates. This represents a net increase of 98 Bcf from the previous week. Stocks were 373 Bcf higher than last year at this time and 581 Bcf above the five-year average of 2,312 Bcf. At 2,893 Bcf, total working gas is above the five-year historical range.
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Crude Oil Advances Amid Downtrend, Eyes Key Levels
By: Bruce Powers | June 6, 2024
• Crude oil rallies to 38.2% Fibonacci retracement, targeting 76.87 and 77.84 next, with potential resistance at the 20-Day MA and 200-Day MA levels.
Crude oil rallied to complete a 38.2% Fibonacci retracement today with a high of 76.0. It continues to trade near the highs of the day at the time of this writing and may continue to progress higher. The next higher target is the 50% retracement at 76.87, followed by the 61.8% Fibonacci retracement at 77.84. That higher price level looks interesting as it is close to the 20-Day MA, which is currently at 77.99. Since the 20-Day line has been declining, it may match the 61.8% level by the time crude gets near there. Also, be aware that the 61.8% retracement matches this week’s high at 77.81.
Bouncing Within a Downtrend
Currently, crude is within a downtrend with a larger symmetrical triangle consolidation pattern. It is now retracing its previous decline, but once complete a decline to test this week’s low of 72.73 may occur. Or the lower boundary area of the triangle could yet be tested as support. Potential resistance around the 20-Day MA is the anticipated high of the current bounce. However, resistance could turn crude back down at lower levels as well.
20-Day MA Marks Likely High Target
A daily close above the 20-Day MA would start to improve the near-term outlook in crude. Since it remains in a downtrend the expectation is for a continuation of the downtrend once the current bounce is complete. In addition to the 20-Day MA, the 200-Day MA is at a price of 80.04. It is close to the most recent swing high of 81.0, where resistance was seen. Together, the 200-Day line and swing high identify a potential resistance zone from 80.04 to 81.0.
Week’s Low Hits ABCD Pattern Target Then Bounces
Is there any significance to this week’s low of 72.73? It turns out that 72.56 completes a falling ABCD pattern when utilizing the two most recent downswings. The pattern is marked on the chart. Once price symmetry was matched between AB and CD legs of the pattern, a pivot is identified. The subsequent bullish reaction from that price zone confirms that the market seems to have noticed. It also improves the chance that crude can rally into higher targets before turning back down, if it is to eventually do so.
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Natural Gas Price Forecast: Breaks Out of Bull Pennant
By: Bruce Powers | June 6, 2024
• Natural gas breaks out of a bull pennant pattern, rallying past 2.83 resistance, and aims for further gains with a strong close and trend confirmation.
Natural gas breaks up and out of a bull pennant pattern today with a rally above Tuesday’s 2.83 high. Resistance was seen near the top trendline with a high of 2.88 at the time of this writing. Today was the second test of resistance at the trendline. Natural gas is on track to close weak however, in the bottom half of the day’s range.
This would question the sustainability of the pennant breakout. Next, watch for bullish confirmation with a continuation above today’s high or a drop below the low. The low is currently at 2.72. If natural gas does not close in a strong position, the potential to dip back into the consolidation pattern increases.
Recent Peak of 2.92 Up Next?
The most recent trend high was at 2.92. If the bull trend continues that high should be easily exceeded. Whether the price of natural gas can continue to climb following a trendline break remains to be seen. But so far it is off to a good start. Following Thursday’s close, a daily close above today’s high will confirm the trendline breakout and a daily close above 2.92 confirms a continuation of the bull trend. Nonetheless, even if the progression higher stalls after a trendline breakout, if natural gas stays above the trendline, a continuation higher is the most likely scenario, unless there is a drop through trendline support.
Watching for Further Confirmation of Strength
After a confirmed trend continuation signal with a daily close above 2.92 natural gas would next be targeting two prior swing highs. The first is at 3.39 and the second is 3.64. That top target was the peak for 2023. That peak in October 2023 at 3.64 completed an 87.2% advance from the 1.95 swing low from April of last year. The current rally has already exceeded that advance on a percentage basis as it was up by 92.1% at the recent trend high of 2.92.
20-Day MA is Near-Term Support at 2.58
Regardless of the bull pennant breakout, until there is further confirmation of strength a failure remains a possibility. Key near-term support is at the 20-Day MA at 2.58. It happens to have converged with the lower boundary line of the pattern today and therefore each line identifies a similar support area. Below the 20-Day line is the 200-Day MA at 2.46. It has already been successfully tested once as support and should do so again.
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OPEC and Other Oils. The Energy Report
By: Phil Flynn | June 6, 2024
Oil prices are trying to bottom, again, as OPEC Plus tries to calm the markets surrounding its oil production cut tapering plans and after the Energy Information Administration (EIA) report that suggests that while gasoline demand and diesel demand fell, the demand for those mysterious “other oils” surged.
Oh yes! The EIA has heads spinning again with data and adjustment numbers that, to say the very least, are raising some skeptical eyebrows.
Not only did the EIA have to use a massive 17.1-million-barrel adjustment number to make the data fit in all the right places, but the petroleum product demand data also raised more questions than answers.
The EIA seemed to feed into the weak gasoline and diesel demand mantra that has been permeating the marketplace, but other data seems to raise questions as to whether that data was really telling the whole story.
The EIA said that gasoline demand fell last week on the week that ended May 31st by 20300 barrels a day to week to 8.916 million barrels a day.
They also said that distillate demand fell 429,000 barrels a day to 3.367 million barrels a day.
Yet overall oil product demand rose because of the other oils category that a massive demand spike of 1.481 million barrels a day to 5.93 million barrels a day that shattered the seasonal record.
That surge in demand for other oils that include the gasoline additive naphtha as miscellaneous other products includes all finished petroleum products not classified elsewhere, including petrolatum, lube refining byproducts (aromatic extracts and tars), absorption oils, ram-jet fuel, petroleum rocket fuels, synthetic natural gas feedstocks, and specialty oils.
And we all know that we see a lot of demand for these other oils on Memorial Day weekend. Maybe some use them to cookout and BBQ! That is perhaps why the demand for those other oils is at an all-time high for this time of year.
And so, while the market has been bemoaning what they perceive as weak gasoline and diesel demand it’s amazing that we saw overall demand for all petroleum products hit 20.510 million barrels a day.
The data suggests that the demand numbers that have been perceived as weak are not as weak has a market has thought.
And as my good friend Tim Dallinger who is a mechanical engineer and a hydraulic specialist and energy analyst points out, the weak demand mantra the trade has been concerned about doesn’t really fit the reality. He points out that if you look at crude inputs from the EIA they are at a seasonal record.
Considering a 4-week moving average, the EIA product demand proxy matches 2019 high’s. Dallinger did say that the moving average for implied distillate demand is down but is only just 0.356 MMBD from the all-time peak.
EIA said that crude oil refinery inputs averaged 17.1 million barrels per day, which was 61 thousand barrels per day more than the previous week’s average. Refineries operated at 95.4% of their operable capacity last week. Gasoline production decreased last week, averaging 9.5 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day.
And if you look at the supply according to the Energy Information Administration, we are below average in every major quarter category, even more so if you consider that the Biden administration has drawn down the strategic petroleum reserve to historically low levels.
The EIA said that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.2 million barrels from the previous week. At 455.9 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year. Total motor gasoline inventories increased by 2.1 million barrels from last week and are about 1% below the five-year average for this time of year. Distillate fuel inventories increased by 3.2 million barrels last week and are about 7% below the five-year average for this time of year.
So, it’s very possible that the market has way overplayed itself to the downside based on this perception that the demand for oil products was falling apart. Perhaps the market got it wrong.
OPEC is suggesting that the market got it wrong and tried to ease concerns about the oil production cut taper tantrum that they created at the last OPEC meeting.
Yesterday Saudi Arabia raised demand concerns when they lowered their Arab like crude official selling price to northwest Europe and Asia. Some people theorized it was because they were worried about weakening demand. Yet OPEC suggests that the move was not inspired by weak demand nor was it an attempt to increase their market share but more than anything the move was to maintain their current market share.
This morning OPEC Secretary General Haitham Al Ghais of Kuwait addressed the OPEC oil taper tantrum. Not only did he say that he expects to see OPEC first quarter oil demand growth to grow by an impressive 2.3 million barrels per day he also wanted to remind people that OPEC had the option to pause or even reverse the will output increase.
He also said that even as they cut prices to Europe and Asia, he wanted to point out that he is not trying to increase open market share. I guess that means he’s just trying to defend what share they have.
Russian Deputy Prime Minister Alexander Novak also seemed to suggest the oil reaction to the oil taper was overdone by saying, “OPEC could react very quickly to changes in the oil market.”
So, if the unemployment report doesn’t scare the market into believing that the Fed is going to be unable to raise interest rates, more than likely the oil and petroleum products have more upside than downside from this point.
This comes against a backdrop of rising geopolitical risk. Joe Biden authorized Ukraine to use U.S. weapons to strike targets inside Russia, a major shift in American policy that has raised the risk of further escalation in the war the war that started on Biden’s watch.
Now Russian president Vladimir Putin has threatened Germany and the United States as a response he could provide long-range weaponry to NATO adversaries to strike targets in the West in response to the move by the two countries to authorize Ukraine to use arms it provided on sites within Russian territory.
True perhaps and to accentuate that threat, Putin is sending warships to the Caribbean for war games,
The AP reports that, “The U.S. has been tracking Russian warships and aircraft that are expected to arrive in the Caribbean for a military exercise in the coming weeks, in a Russian show of force as tensions rise over Western military support for Ukraine, U.S. officials said Wednesday. The ships also are expected possibly to make port calls in Venezuela and Cuba, as Russia establishes a Western Hemisphere military presence that the senior Biden administration officials said was notable but not concerning. And you know if the Biden administration tells us not to be concerned there’s nothing to worry about. Other than the possibility of nuclear annihilation.
Massive Venezuelan oil and product exports impacted US supplies last month as they dumped supplies as quick as they could ahead of U.S. sanctions. But even as U.S. sanctions go into place, it isn’t stopping Venezuela from negotiating with the US. We’re at least getting their high paid lobbyist to do so.
Bloomberg News reports that, “Venezuela’s opposition is ramping up lobbying efforts in Washington, trying to persuade the Biden administration to intervene in the court-ordered sale of Citgo Petroleum Corp.’s parent company in the US. The company is the South American nation’s most important foreign asset, and its shares are due to be auctioned by July 15. The opposition fears Nicolas Maduro could blame them for Citgo’s loss ahead of crucial presidential elections set for the end of next month.
Natural gas is getting hot as the weather heats up, driving electricity and cooling demand. Fox Weather is reporting that, “Dangerous heat continues to build across much of the West this week as an early-season heat wave grips the region.” Many areas will see temperatures in the 90s and triple digits later this week according to FOX Weather meteorologists.
On the positive side Fox Weather points out that despite the concerns about a record hurricane season, so far, while the season has just begun, we are lucky. Fox Weather said, “We’re just five days into the start of the Atlantic Hurricane season, and yet amazingly with no named storms so far, it’s the latest we have gone in the year without one in a decade.
Natural gas today will get its weekly inventory report Reuters reports that U.S. utilities likely added a smaller-than-usual 90 billion cubic feet (bcf) of natural gas into storage last week, a Reuters poll showed on Wednesday. That compares with an injection of 105 bcf during the same week a year ago and a five-year (2019-2023) average increase of 103 bcf for this time of year. The forecast for the week ended May 31 would increase stockpiles to 2.885 trillion cubic feet (tcf), about 14.5% above the same week a year ago and about 24.8% above the five-year average for the week.
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Natural Gas Bull Pennant Signals Potential Rally
By: Bruce Powers | June 5, 2024
• Natural gas traces a bull pennant pattern, indicating a potential breakout by June 17, with targets at 3.39, 3.64, and 3.78.
Natural gas further traces out a bull pennant trend continuation pattern on Wednesday, as it traded inside Tuesday’s trading range. This pattern is forming on support of both the 20-Day MA and 200-Day MAs. The range of the pennant is tightening as natural gas gets closer to the apex of the pattern on June 17. This means that a bullish breakout or bearish pattern failure from the pennant will happen by then.
Upside Breakout Triggers Above 2.83
An upside breakout of the pennant is indicated on a decisive rally above yesterday’s high of 2.83. Once the recent trend high of 2.92 is broken to the upside, a bullish breakout of the declining trend channel will also occur. If that happens, the prior swing high of 3.39 becomes the next higher target, followed by the 2023 peak at 3.64. Higher up is the target derived from the measuring objective of the pennant pattern. Its target is 3.78.
Strong Bullish Position
The pennant pattern is in an interesting position, holding support of the 20-Day and 200-Day MAs, while further testing resistance at the top trendline. It has the potential to lead to an explosive rally in natural gas. The pullback from the recent trend high has been minor, not even reaching the 38.2% Fibonacci retracement.
This is a sign of strength as buyers could have been waiting for lower prices to get more aggressive. As the price of natural gas consolidates within the pennant pattern it is building up energy for the next swing. The 0.95-point rally prior to the consolidation left a clue as to what may come next. Typically, a bull flag has the potential to match or exceed the rally prior to the consolidation pattern occurring.
Lower Support Levels
On the downside, maintaining support above the 20-Day MA, currently at 2.545, is key to the current environment. The 20-Day MA showed strength recently as it rose above the 200-Day line recently after being below it since February 2. Notice that the 20-Day line is close to converging with the bottom boundary line of the pennant pattern. Following lower interim support levels being tested, natural would likely be headed towards an eventual test of support around 2.25 to 2.23. That first level is the 50% retracement.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | June 5, 2024
• Top Movers
Coffee (NYCSCE) Futures 3.24 %
Gold / Silver Ratio 2.98 %
Cotton 1.45 %
US - Dow / Gold Ratio 1.29 %
Wool 0.97 %
• Bottom Movers
NY Natural Gas Futures 6.17 %
Kuala Lumpor Palm Oil Crude Futures 3.8 %
NY Silver COMEX Futures 3.79 %
Orange Juice (NYCE) Futures 3.54 %
Palm Kernel Oil 3.45 %
*Close from the last completed Daily
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Energy Rice Bowl. The Energy Report
By: Phil Flynn | June 5, 2024
While the petroleum markets try to shake off an almost ridiculously bearish weekly American Petroleum Institute (API) that showed a larger than expected 4.05-million-barrel increase in crude supplies and an equally bearish 4.026 million barrels increase in gasoline supply and a 1.975 million barrel increase in distillates, the longer term issues of global energy security remain.
The short-term focus of the market weakness is on conerns that that OPEC’s production cut taper might mean a flood of oil that would be released, Also concerns that weak gasoline demand is because inflation is hammering the poor in middle class in this country.
As politicians continue to pursue inflationary policies and an anti-fossil fuel policies and attack US oil and gas that will not do anything to ease their burden.
In the US we pay lip-service to energy security with grandiose plans and a false vision of trying to drive our economy by interruptible sources of energy with wind and solar and the pipedream of electrifying of car fleet to get rid of the pipe, the reality is that we have and aspirational energy policy that is based on politics and ideology and not cold hard realities.
While the day-to-day fundamentals shift with the season and sometimes the algo traders, the reality of under investment in reliable energy sources and wasted money on many alternative sources of energy raises the risk of our country being woefully under supplied. The question you must ask is whther or not the US will choose to hold their energy rice bowl in its hand, because if we do not, we know that our competitors like China will. How do I know that! Well because they said so.
Ok I am not sure exactly what holding your energy rice bowl in your hand actually means but it sounds more coherent than recent energy polices coming out of Washington.
What I do know is that China has a much more realistic energy approach that includes not only alternative energy but fossil fuels as well.
China has a plan to “accelerate the construction of a new energy system and improve the ability to guarantee the security of energy resources.”
The Chinese National Energy Association (NEA) wrote that “Energy is an important material foundation and power source for economic and social development, and is related to the national economy, people’s livelihood and national security.”
They went on to say that “Based on the national conditions of energy, China has comprehensively promoted supply-side structural reforms, vigorously enhanced domestic resource production guarantee capacity, and continued to increase high-quality and effective supply. We have implemented a series of strategic measures such as releasing advanced coal production capacity, vigorously improving oil and gas exploration and development, and building a new power system, and completed and put into operation a number of world-leading century projects such as Baihetan Hydropower Station and “Hualong No. 1” Nuclear Power Plant, which have historically solved the problem of electricity consumption for the population without electricity.
They say that They “led the world in the development of non-fossil energy, achieved remarkable results in the clean and efficient utilization of fossil energy, further consolidated and improved the diversified supply system of coal, oil, gas, new energy and renewable energy, and continuously improved the level of safe production.”’
The Biden administration always seems to tout and seem to be envious of Chinas advancements in solar panels and other alternative energies and electric cars yet maybe they should understand that Chinas success is based on the fact of them everything in the above energy policy. They include all forms of energy such as coal oil and natural gas mixed in with renewable energy.
I do know that suddenly, the Biden administration is making big steps towards making nuclear right again the reality is that they are political ideology and their anti-fossil fuel agenda is hurting our economy and will do so in the future unless they change course.
Yet instead, the Biden Administration contuse to attack US oil and gas.
May 3Oth the AP reported that “Senate Majority Leader Chuck Schumer and 22 other Democratic senators are calling on the Department of Justice to “use every tool” at its disposal to prevent and prosecute alleged collusion and price-fixing in the oil industry. In a letter Thursday to Attorney General Merrick Garland and other officials, the Democrats said a recent Federal Trade Commission investigation into a high-profile merger uncovered evidence of price-fixing by oil executives that led to higher energy costs for American families and businesses.
The FTC said earlier this month that Scott Sheffield, the former CEO of Pioneer Natural Resources, colluded with OPEC and OPEC+ to potentially raise crude oil prices. Sheffield retired from the company in 2016 but returned as CEO in 2019. After retiring again in 2023, he continued to serve on its board.
The case against Scott Sheffield does not measure up to the realities of the global energy market nor does it add to US energy security. In Fact, it weakens it.
I have just been reminded of a speech given by Darren Woods of Exxon Mobil gave in November of 2023 where he said that “ Climate change is real, Human activity plays a major role, And, it is one of the major problems facing the world today – the need to address the very real threat of climate change. But it is not the only one. Here’s another global problem, equally important – the need to continue producing affordable energy to maintain and raise living standards around the world.
Mr Wood Said that “Three billion people fall short of modern living standards, and far too many remain trapped in extreme poverty with no access to electricity or clean cooking fuels. The global North-South divide will only be bridged when we commit to solving the world’s energy and emissions challenges simultaneously.” Oil and gas are at the center of both. Combusting them is a leading source of man-made greenhouse gas emissions. That is the societal cost, and it’s real. At the same time, the societal benefits of oil and gas are unmatched in human history. They have done more to grow economies, eradicate poverty and improve quality of life than anything else.”
Oil and gas companies reliably provide affordable products essential to modern life. Making them into villains is easy. But it does nothing – absolutely nothing – to accomplish the goal of reducing emissions.
In fact, it puts the reliable supply of energy at risk…destabilizing global economies, degrading people’s standards of living, and, as we saw in Europe, raising emissions. The better approach – the constructive approach – is to harness the industry’s capabilities for change.
Mr wood begs “Put us to work. We have got the tools – the skills, the size, and the intellectual and financial resources – to bend the curve on emissions.”
Yesterday U.S. Treasury secretary Janet Yellen said that “a Russian oil price cap is still somewhat effective.” So, we got that going for us.
US gasoline demand has been horrible. Prices in many markets are coming down but prices in Chicago is almost 70 ahead of the national average. The market’s reaction to the OPEC production taper is overdone especially because the compensation production should more than offset most of the so-called tapering of the supplies.
This problem the OPEC cartel right now seems to be Iraq which continually overproduces. That’s going to raise tensions in the cartel unless they start to cut back production very shortly. The reimposition of sanctions on Venezuelan oil could also tighten up supplies as we will see a reduction in Venezuelan exports which surged over 30% in the month of May.’
The markets are trying to hold these levels even after the bearish API report keep an eye for the Energy Information Administration status report to see if it shows better demand than the API is suggesting.
If they do, then we probably have a good case at the bottoms end if not get prepared for a test of $70 on crude.
Natural gas is getting support because we’re going to get our first significant heat wave.
Fox Weather reported that “ Just a handful of days into meteorological summer, and heat is already becoming life-threatening in the western U.S. Heat alerts have been issued for parts of California, Nevada, Utah, Arizona, New Mexico, and Texas. It’s possible that Las Vegas could set a record for its earliest 110-degree day during this heat wave.
Fox Weather also reports that “Rare June atmospheric river storms are dumping rain on the Northwest this week. The first ended earlier Monday before the second one arrived Monday evening. Flood alerts are up for parts of Washington.
A region of Kilauea volcano in Hawaii that hasn’t erupted since 1974 became active Monday. Officials said the eruption is happening in a remote area and is low in volume, but “vog” (the visible haze s of gas and aerosol of tiny particles and an acidic droplets created when sulfur dioxide and other gases emitted from a volcano chemically interact with sunlight atmospheric oxygen and moisture and dust could become a problem for areas downwind of the volcano. “
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Bull Signal Says Buy Oil Giant Ahead of OPEC+ Meeting
By: Schaeffer's Investment Research | June 5, 2024
• Chesapeake Energy stock has been ascending in a channel of higher highs
• Running alongside CHK’s ascending channel’s floor is its 50-day moving average
Since we last checked in with the stock in September, Chesapeake Energy Corp (NASDAQ:CHK) has been busy. Back in January, the energy giant revealed a $7.4 billion all-stock deal to combine with Southwestern Energy (SWN). The merger created one of the largest natural gas producers in the nation -- and follows in the footsteps of oil and gas leaders Exxon Mobil (XOM) and Chevron’s (CVX) own recent billion-dollar mergers.
Since then, Chesapeake Energy stock has been ascending in a channel of higher highs, that culminated with a fresh annual peak of $93.58 on April 30. The shares have since consolidated and traded sideways, even after announcing layoffs of 80 workers in its Oklahoma City location to sharpen focus and efficiency boosting. Those sort of workforce reductions often translate to a short-term bounce, and a lack of distinct upward movement from CHK underscores how the equity may have run out of steam.
The drawdown – although minimal in the long term – comes at an interesting time, with all eyes on the Organization of the Petroleum Exporting Countries and their allies’ (OPEC+) highly-anticipated conference on June 2. The meeting could trigger unrest in the sector if the group fails to extend voluntary output cuts by several months.
Running alongside CHK’s ascending channel’s floor is its 50-day moving average, of which the stock has come within one standard deviation of. Per Schaeffer’s Senior Quantitative Analyst Rocky White, this tends to be a historically bullish signal for the energy stock. CHK has spent a significant period of time above the 50-day, defined for this study as having traded north of this trendline 80% of the time in the past two months, and in eight of the past 10 trading days.
Per White, seven similar signals occurred during the past three years, with CHK averaging a 5% one-month gain, finishing positive 86% of the time. A move of this magnitude from the equity’s current perch of $90.65, would put the shares at $95.18 -- a fresh annual high.
Chesapeake Energy stock looks ripe for a short squeeze, which could catch bears off guard, as bearish bets have increased by 11.8% in the most recent reporting period, and the 17.74 million shares sold short now accounts for a hefty 14.2% of the stock’s total available float. At the security’s average pace of trading, it would take shorts 10 trading days – two full weeks! – for shorts to buy back their bearish bets, an ample amount of buying power that could snap CHK out of its recent slump. Even better, options are looking affordable, per the stock’s Schaeffer’s Volatility Index (SVI) of 19%, which ranks in the low 23rd annual percentile, suggesting options traders are pricing in low volatility expectations at the moment.
Keeping a close eye on the June 2, OPEC+ meeting remains an overhang in the coming weeks for energy bettors. However, with options affordable and a bull signal flashing, now could be the perfect time for bulls to move in on Chesapeake Energy shares.
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Natural Gas Bullish Breakout Fizzles, Testing Support Levels
By: Bruce Powers | June 4, 2024
• After an initial bullish breakout, natural gas faces resistance and is testing support levels, with eyes on the 20-Day MA and 200-Day MA.
Natural gas triggered an upside breakout of a bullish flag on Tuesday, but quickly showed signs of failure by falling back into the consolidation pattern. A bullish breakout triggered a rally above yesterday’s high of 2.80 earlier in the session. However, resistance was seen at 2.83, leading to a decline. At the time of this writing the bears remain in charge and natural gas is trading near the lows of the day. It looks to be heading for an eventual test of support near the lower boundary line of the pennant consolidation pattern. That price level is estimated at 2.54 if reached today and is close to the 20-Day MA, currently at 2.52.
Pennant Pattern Failure May Lead to Resized Pattern
Although today’s breakout is showing signs of failure, it is also possible that the pennant pattern expands into a larger consolidation pattern. Certainly, it is too early to say but how the price of natural gas behaves near potential support levels should leave clues. Nevertheless, a new top pennant boundary line has been added to the chart using today’s high.
In addition to possible support of the 20-Day line mentioned above, the 200-Day MA is at 2.45. It is a key long-term trending indicator and had one successful test as support last week with a 2.475 swing low. Therefore, it should act as an area of support again, or strong support is seen at a higher price level.
Key Trend Support at 20-Day MA and 200-Day MA
The 20-Day MA may provide a higher price level to find support than the 200-Day line. It has not yet been tested as support since the price of natural gas gapped above it on April 26. Notice that the 20-Day MA is on its way to converging with the lower boundary line of the pennant and it now matches the price level from the minor interim swing low at 2.52. Two indicators pointing to the same price add to the potential significance of the identified pivot. Therefore, natural gas is anticipated to retain a bullish posture if it stays above the 200-Day MA average.
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Crude Oil Drops to New Lows, Eyes Key Support
By: Bruce Powers | June 4, 2024
• WTI crude oil continued its decline, hitting a new low of 72.73, with key support levels between 72.12 and 71.38 in focus.
WTI crude oil continued to weaken on Tuesday as it fell to a new retracement low of 72.73. Support showed up from there leading to an intraday bounce. That low put crude oil 17.3% below the most recent swing high of 87.89. Notice that today’s low was essentially bouncing off a bottom trend channel line. It was also just above the 78.6% Fibonacci retracement at 72.12. If today’s low is exceeded, that retracement level becomes the next lower target zone.
Also, keep an eye on the lower rising trendline that makes up part of a large developing symmetrical triangle type pattern with the apex around mid-September. Does this mean that crude oil may further trade within the boundaries of the rising and falling trendlines? Not necessarily. But it does mean that it will break out of that pattern before mid-September.
Bottom of Large Triangle Consolidation May Offer Support
The lower uptrend line will soon converge with the 78.6% retracement level presenting a more formidable potential support zone. Also, monthly support (daily swing low) from February was 71.38. It can be combined with the other price levels mentioned above to generate a larger support zone from 72.12 to 71.38. Notice that February’s swing low began an accelerated rally that peaked at 87.89 in April. Maybe a test of the February support zone will complete a round trip and set the stage for the next advance. However, a decline below 71.38 followed by further weakness will trigger a breakdown from the symmetrical triangle consolidation pattern.
Moving averages are showing turning bearish. Recently, the short-term 20-Day MA fell back below the 200-Day MA, and it continues to point down. The 50-Day MA has also begun to turn down. If it crosses below the 200-Day line, another bearish signal will be generated.
Rise Above Today’s High Will Show Strength, But Sustainability Questionable
On the upside, it wouldn’t be a bad idea to allow for a day or a few to occur to see how the market in crude develops. There are no current signs that a spike bullish reversal may be coming soon. An advance above today’s high of 74.39 will provide the next sign of strength. But, given the potential for a test of support at the bottom of the triangle and the lack of buying signs so far, it may not be sustainable just yet.
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OPEC’s Little Taper Tantrum. The Energy Report
By: Phil Flynn | June 4, 2024
Somewhere, Former Fed Chairman Ben Bernanke may be smiling. It seems OPEC has created its own little taper tantrum causing the massive sell off in the price of oil and products and raising concerns about the broader strength of the global economy. Oil fell over 2% this morning, hitting the lowest level since February after OPEC failed to convince the market that their tapering off voluntary cuts was going to be data dependent.
So many times, the price of oil seems to be a barometer for the confidence of the global economy and after OPEC laid out the possibility that they may start to have an exit strategy from voluntary production cuts, the market has not been pleased. It hasn’t helped of course that here in the US we have seen some surprising crude builds in oil inventories over the last couple of months but now we may have an answer as to why that has happened.
Part of it has been subpar gasoline demand but also it has been because Venezuela was dumping oil and products ahead of the reimposition of US sanctions going into place. The Biden administration lifted sanction on Venezula, in return the Maduro government promise to hold a free and fair election. After the Maduro government failed to live up to its commitment of holding a free and fair election (I know you are shocked), the Biden administration had no choice but to reimpose sanctions that were supposed to start June 1st. So, Venezuela jumped to oil as fast as they could, causing their exports to rise over 30% last month.
Reuters reported that a total of 50 vessels departed Venezuelan waters last month carrying an average 708,900 barrels per day (bpd) of crude and fuel, and 614,000 tons of petrochemicals and oil byproducts, according to internal PDVSA documents and shipping data from financial firm LSEG. The volume of oil shipped in May was 30% larger than in April, and 7% above the same month a year earlier. Exports of petrochemicals and byproducts were the highest in 13 months, the data showed.
While the market frets about a potential exit strategy of some of the OPEC production cuts, we are going to get a cut from Venezuela’s exports that should start showing up in the data in June. It’s possible that Venezuela exports could be cut in half after the sanctions reducing exports to about 354,000 barrels a day and it could be even worse if the Biden administration decides to really enforce these sanctions.
Of course, the Biden administration’s record of enforcing sanctions, judging by what’s happening with Iran, hasn’t really been promising.
As the shakedown in the oil market seems to be spreading to other commodities, we’re seeing pressure built in things like copper and silver and some weakness in the Dow Jones futures this morning as well as the S&P. Brent crude breaking down below 80 is significant from a psychological viewpoint and it raises concerns that the drop in price is signaling something more ominous to the market. Of course we believe the market got the wrong signal from OPEC just like Ben Bernanke when he first started to talk about tapering it caused a big shake up in the market because people reacted more to the punch bowl being taken away as opposed to the reality that the market was probably justifying that it was time for the Federal Reserve to start tapering back on bond purchases.
It may take a day or two for the oil market to realize that they are overreacting to this news, but the real true test of course will be oil inventories tonight we get the American Petroleum Institute report and if the whisper numbers are correct, we should see a substantial drop in the crude supply number.
But the key thing will be demand. Gasoline demand has been erratic to say the least and even when we saw the report on consumer confidence rising last week, the true test of consumer confidence may be in the gas tank. Are consumers cutting back on gasoline purchases because inflation is getting more ominous at the same time consumers are going to be hit with higher taxes.
In the meantime, the Biden administration announced that 3-million-barrel buyback for the Strategic Petroleum Reserve. While they may say that they made money by selling high and buying it lower, the reality is the use of the reserve for political purposes should never happen again.
The government intervention in the market to try to control gasoline prices is simple market manipulation. It does longer term damage to the market. If the government is going to get involved in the market on a regular basis it can discourage investment in refining capacity and oil production. The normal market mechanisms can be impacted. The SPR shouldn’t be used to get a couple of cheap political approval points.
On the product side, Mother Nature has bailed out the diesel market and that has helped demand fall to multi-decade lows.
Reuters reported that, “U.S. diesel demand fell to its lowest seasonal level in March since 1998, while crude oil output rose to a multi-month high, data from the U.S. Energy Information Administration showed on Friday. Demand for distillate fuels, which includes diesel and heating oil, has been hit sharply this year under pressure from sluggish manufacturing activity, milder-than-expected winter weather and booming renewable fuel supply.
While petroleum is falling now, we’re seeing natural gas now pushing higher. That was the inverse of what we saw a few months ago. Production restraint, increased demand for LNG exports as well as hot temperatures is giving the market a bit of a bounce. As we look out here for the next few weeks it seems like the demand for air conditioning will be humming. Hopefully you put on some of those long-term options that we recommended a few months ago.
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Unfortunately #USO failed to follow through from last week’s Bullish setup
By: Intelligent Investing | June 4, 2024
• Unfortunately #USO failed to follow through from last week’s Bullish setup. It can happen, as not all charts turn into golden eggs. And that’s what stops are for.
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Natural Gas Bull Pennant Forms with Breakout Above 2.80
By: Bruce Powers | June 3, 2024
• Consolidating near trend highs, natural gas shows bullish potential with a pennant pattern, supported by the 20-Day and 200-Day MAs.
Natural gas has started to trace out a potential bullish pennant pattern as it further consolidates near recent trend highs. It has formed above support represented by both the 20-Day MA and 200-Day MA. An intermediate bullish signal was started last week as the 20-Day line crossed above the 200-Day MA. Today, Monday, natural gas showed strength as it broke out above Friday’s high of 2.62 and kept rallying to a high of 2.80. That high provided a third touch of the top declining boundary line of the pennant, before sellers took back control leading to an intraday pullback.
Small Bull Pennant
The pennant pattern takes the form of a small symmetrical triangle that follows a relatively sharp advance, referred to as the pole. This is a bullish trend continuation pattern that does not become valid until there is a decisive break out of the pattern. Given its small size, a breakout of the pattern will happen within five days or so.
Since this is a bullish pattern, an upside breakout is initially anticipated. Also, the pattern forming around support of the moving averages, especially the 200-Day MA, increases the chance for a bullish breakout. However, a failure of the pattern is always possible. A decline through the lower boundary line signals a pattern failure and increases the chance for a deeper retracement in natural gas.
As it stands now, an upside breakout is triggered on a rise above today’s high, with strength further indicated on a rally above the 2.85 minor swing high. A breakout would be confirmed with a rise above the recent trend high of 2.92, followed by a daily close above that price level.
Target From Pennant
We can calculate a measuring objective from the pattern to identify an initial target of 3.75. To calculate a potential target the pole for the pattern is assumed to have begun at 1.97 on May 2. That is the initial daily breakout that began a period of accelerated upward momentum culminating with the 2.92 trend high. In summary, the pennant identifies a sharp advance that is followed by a consolidation rest period, and then has the potential to lead to another sharp advance. The expectation is that an upside breakout has the potential to rise in an amount equal to or greater than the preceding rally.
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Crude Oil Continues to Fall
By: Christopher Lewis | June 3, 2024
• The crude oil market fell a bit in the early hours on Monday, as the market is seemingly at a crossroads. This is a market that has to be watched closely, as the major support barrier underneath is in focus in both markets we follow.
WTI Crude Oil Technical Analysis
Looking at the WTI 4-hour chart, you can see that the market has pulled back just a bit to show signs of negativity yet again on Monday. The question here is going to be whether or not this support holds. We are most certainly in an area that it needs to. If we break down from here, then it’s likely that we could make a move towards $75.
Quite frankly, this is a time of year that is generally strong for crude oil. So this goes against the cyclicality of the markets. There are a lot of concerns out there as to whether or not the economy is going to tank. This might be one place where traders are playing that idea. But I think if we can turn around and gain the market reaching above the $77.50 level, then it becomes a buying opportunity.
Brent Crude Oil Technical Analysis
Brent looks very much the same, both look pretty weak. I think if we turn around and go looking to the $81.50 level and overcome it, then it’s a buying opportunity. But I have to say that oil looks rather weak at the moment, and I do think that it’s easier to stand out of the way because I do believe sooner or later it’s going to get a lot of buying pressure based on the time of year, geopolitical issues and things like that.
I don’t really like shorting oil on the whole, so I will probably step on the sidelines and just wait for buying opportunity such as the two that I’ve mentioned in this video, but if we do fall from here, then I’ll be looking below at potential support levels as they appear.
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$WTIC $OIL - Could still go lower into red box or even to the Shaded-Band...
By: Sahara | June 3, 2024
• $WTIC $OIL - Heads-Up
Wanted to share the alert as I Know some of you have followed me. Cos oil now clipped both those lwr-targets.
Could still go lower into red box or even to the Shaded-Band. Meanwhile I will be looking for a buy op next...
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Spinning Barrels. The Energy Report
By: Phil Flynn | June 3, 2024
OPEC Spins Barrels like plate spinners trying to dazzle the market without breaking anything. While the market seems confused as to what this meeting accomplished, and the tiers of many production cuts and production baselines, the reality is that OPEC exceeded expectations by extending most of its existing production cuts into the new year even as they then start to wind some cuts down.
So, it’s best to take the cuts one at a time. In the beginning OPEC plus had originally agreed in October of 2022 to cut oil production by two million barrels a day. During the meeting, that original production cut will stay in place not only through the end of this year, but into 2025 year as well. Think of this as the granddaddy of all the production cuts. Later Saudi Arabia tried to get members to agree to an additional cut and produced a voluntary cut to the tune of 1.66 million barrels a day. The reason why that production cut had to be voluntary was because of a disagreement between the original baseline from which many of the producers had to start counting from.
The United Arab Emirates for example wanted to produce more oil because they have that capability, and they wanted the bigger chunk to the pie. The UEA did get an upgrade to its official production quota yesterday as they get to increase it by 300,000 barrels a day. That came after a previous adjustment of 200,000 barrels a day from 2024. This new quota is supposed to be phased in January and their ability to produce oil will be a 3.519 million barrels by September of 2025.
So, the voluntary cuts were meant to send a message to the market that while they did not actually change their quota, members would voluntarily do their part to try to support prices and make those speculators “Ouch like hell”, to steal a phrase from Saudi energy minister Prince Abdulaziz bin Salman. At the meeting they agreed to extend that cut into 2025.
A at the same time they are setting the stage for unwinding some cuts next year and are telling the market that the reduction is going to be gradual and it’s going to be predicated on the demand for actual barrels of oil. So in other words, if the demand for oil falters these cuts more than likely will stay in place. On the other hand, if demand starts to exceed supply this is the amount of oil that they can bring on without even changing their original quota.
The third round of cuts of the voluntary 2.2 million barrels a day that was announced between June and November of last year and were supposed to run out at the end of this month. They will be prolonged for another three months until the end of September and after that they’re going to start phasing the production caps out over the next year. This phase out and production cut is being done based upon what OPEC perceives as a demand for their product. Saudi energy minister Prince Abdulaziz bin Salman said following the announcement of the deal that, “We maintain the choice that we could pause or could reverse. This is not new; we’ve been doing it over the last three years, and I think it has proven to be effective.”
So, if you do the math, if OPEC unwinds the cut as scheduled oil production by OPEC could increase by about 500,000 barrels a day to about 34.35 million barrels by the end of the year. Other producers that have been overproducing should reduce that a little bit because they are supposed to compensate for their overproduction. By the end of September 2025, it would imply that oil production could rise by an additional 1.92 million barrels a day to 36.27 million barrels a day which would basically have the market keep up with demand growth.
We think that the extension of cuts and the modest increases that are going to be dated, should be supportive to the market. While oil prices are not rising from this level, we seem to be building a base at the lower end of the trading range.
It’s going to come down to demand a summer driving season kicks into high gear. Demand in recent weeks has been surprisingly weak and concerns about geopolitical risk factors have taken a back seat to concerns about rising interest rates.
Reuters reported that, “An aide to Prime Minister Benjamin Netanyahu confirmed on Sunday that Israel had accepted a framework deal for winding down the Gaza war now being advanced by U.S. President Joe Biden, though he described it as flawed and in need of much more work.” There are reports that Netanyahu is ready to go ahead with the first phase of this plan.
Demand ultimately, we still predict, will be a very tight market into the second half of the year. We still recommend that this is a good time to be locking in some long-term options as we believe they is going to go up.
Like Black Rock CEO Larry think had a wakeup call in a speech over the weekend he is warning that the world is going to be short on power and that the power-to-power data centers are not going to be able to be maintained with uninterruptible power sources. “The world is going to be short power, short power. And to power these data companies you cannot have just this intermittent power like wind and solar. You need dispatchable power because you can’t turn off and on these data centers.” Is the same guy who was telling us to divest from fossil fuels. I think finally reality is starting to set in.
Fox Business reported in August of 2022 that, “A conservative consumer advocacy group issued an alert Wednesday urging Americans to be wary about investments managed by BlackRock, the world’s largest investment firm. Consumer Research warned that BlackRock uses its massive clout to push a “radical agenda” on consumers. BlackRock, which manages an $8.5 trillion global portfolio, has pushed so-called environmental, social and governance (ESG) standards prioritizing green energy infrastructure like wind and solar development over traditional fossil fuel investments, the group said in the warning.
“BlackRock is using money that doesn’t belong to them to push an extreme agenda with no regard for American families who are paying the price not only now, but through their pension funds which are being weaponized to the detriment of their potential profits,” Will Hild, the executive director of Consumers’ Research, told FOX Business in a statement. “Consumers deserve to know where their investments are going, especially when it’s leading to higher costs everywhere from gas pumps and groceries to rent prices and housing costs,” he continued. Maybe they got through to Fink.
Natural gas is back on the rise! EBW Analytics reports that returning heat into early this week, strong LNG feedgas, and falling storage surpluses remain supportive for natural gas over the next 30-45 days.
Technical suggest deeper consolidation after the steep May run higher, however—and near-term volatility may persist.
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$WTI - The May 2023 low ended major wave A. Major wave B has probably been unfolding as a contracting triangle
By: CyclesFan | June 1, 2024
• $WTI - The May 2023 low ended major wave A. Major wave B has probably been unfolding as a contracting triangle. I expect a wave D low in July at the 30 month MA, then a wave E up into Q4. Major wave C could take crude oil down to as low as 26 in the recession year of 2026.
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Energy stocks $XLE get a jolt into end of month
By: TrendSpider | June 1, 2024
• Energy stocks get a jolt into end of month $XLE
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | June 1, 2024
• Following futures positions of non-commercials are as of May 28, 2024.
WTI Crude Oil: Currently net long 284.4k, up 29.1k.
After three consecutive weeks of defending a rising trendline from last December when West Texas Intermediate crude bottomed at $67.71, oil bulls could no longer defend the support this week. West Texas Intermediate crude dropped 0.9 percent to $76.99/barrel. It rallied as high as $80.62 on Wednesday, but only to attract sellers. The crude failed to recapture the 200-day ($79.81), which is now slightly turning lower, in all of May.
In the end, resistance at $80, or the top end of a range between $71-$72 and $81-$82 that persisted for 19 months before the upper end gave way nine weeks ago and was lost early May, held. A weekly shooting star formed this week.
At this stage, bulls have their back against the wall, and they must defend near-term horizontal support just south of $77.
In the meantime, US crude production in the week to May 24th was unchanged for 12 consecutive weeks at 13.1 million barrels per day; 14 weeks ago, output was at a record 13.3 mb/d. Crude imports increased 106,000 b/d to 6.8 mb/d. As did gasoline and distillate inventory, which grew two million barrels and 2.5 million barrels respectively to 228.8 million barrels and 119.3 million barrels. Stocks of crude went the other way, down 4.2 million barrels to 454.7 million barrels. Refinery utilization increased 2.6 percentage points to 94.3 percent.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | June 1, 2024
• Top Movers
LME Aluminum Alloy 4.27 %
Gold / Silver Ratio 2.68 %
US - Dow / Gold Ratio 2.42 %
Kuala Lumpor Palm Oil Crude Futures 2.08 %
Tokyo Gold Futures 0.87 %
• Bottom Movers
NY Palladium Futures 4.78 %
Coffee (NYCSCE) Futures 4.57 %
Orange Juice (NYCE) Futures 4.37 %
Tokyo Palladium Futures 4 %
NY Silver COMEX Futures 3.47 %
*Close from the last completed Daily
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | June 1, 2024
NY Crude Oil Futures closed today at 7699 and is trading up about 7.45% for the year from last year's settlement of 7165. This price action here in June is reflecting that this is within the scope of a bearish reactionary move on the monthly level thus far.
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 7769 and support forming below at 7670. 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 been generally trading up for the past week from the low of the week of May 20th, which has been a move of 5.869%. 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 neutral on our weekly Momentum Models warning we have overhead resistance forming and support in the general vacinity of 7689. Resistance is to be found starting at 8106. Looking at this from a wider perspective, this market has been trading up for the past 24 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 has made a low following the previous high of April at 7615. The fact that the market for May close below the previous month's low is a sign of near-term weakness with a possible decline into the next turning point on the Array. Currently, May has traded as rallied to exceed the previous month's high reaching 8157.
Some caution is necessary since the last high 8767 was important given we did obtain two sell signals from that event established during April. That high was still lower than the previous high established at 9503 back during September 2023. Critical support still underlies this market at 6760 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.
Natural Gas Intraday Bounce in Natural Gas Sparks Short-Term Optimism
By: Bruce Powers | May 31, 2024
• Despite bearish risks, natural gas shows strength with today's intraday bounce and key moving averages crossing.
Natural gas fell below Thursday’s low today to reach 2.52. Buyers stepped up from there leading to an intraday bounce. At the time of this writing natural gas is in the green and has reached a high of 2.62. But trading continues near the highs of the day. If it can remain near the upper quarter of the day’s range the day may end with a bullish hammer candlestick pattern.
Strength Indicated by 20-Day MA Rise Above 200-Day MA
Today’s low is a higher low than the recent swing low at 2.475, a very minor sign of strength as it is not known whether it will remain a low. Also, the short-term 20-Day MA has started to cross above the long-term 200-Day MA today. This is another sign of strength. Potential support around the moving averages therefore is critical for the sustainability of the rally. The 200-Day line is now at 2.455 and the 20-Day line is at 2.47.
Key Support at 2.46
A decisive decline below the recent swing low and moving averages will signal a deeper retracement. Depending on when it happens, a double top may also be triggered. This week’s high would create the second top. However, the double top is just a possibility until a breakdown triggers. At that point an eventual test of support around the 50-Day MA, now at 2.06, is a possible target. Higher price areas to watch for support include the area around the 50% retracement at 2.25 and further down is the 61.8% Fibonacci retracement around 2.10. Notice that the 20-Day MA has not been tested as support since the gap up on April 26.
Further Consolidation is a Possibility
An alternative scenario may see the price of natural gas further consolidate above the 200-Day MA. Initial resistance would be around the blue dashed downtrend line. Since it is a declining line the price level represented will be falling over time. Subsequently, if the 200-Day line remains an area of support the price range would be narrowing.
Keep an Eye on the Weekly Chart
The weekly chart should also be watched. Both last week and this week have large topping tails and the candlestick patterns are bearish shooting stars. Last week’s low of 2.49 was broken to the downside earlier this week but natural gas quickly recovered and is set to close above that low this week. Nevertheless, these are bearish indications but only if there is a decisive drop below the weekly lows.
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