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Crude Oil Eyes Bullish Signal as Support Levels Hold
By: Bruce Powers | August 15, 2024
• Crude oil's next move hinges on key support levels holding, as a rise above 79.00 could trigger a bullish signal and extend the rally.
Crude oil has been testing support around the 20-Day MA for the past couple of days. The pullback low from the recent trend high of 80.33 was at 77.29, and today’s low was 77.32. Also, the dip has been testing support around the 38.2% retracement at 77.24. Crude traded inside day on Thursday as it attempts to hold above support. It establishes key near-term price levels as a rise through the top provides a bullish signal and a decline through the bottom is short-term bearish.
Bullish Reversal Above 20-Day MA Stronger Than If Below It
A bullish reversal following a relatively minor retracement to the 38.2% Fibonacci level would be strengthened by support seen around the 20-Day MA. The 20-Day line had represented trend resistance until Monday’s bullish breakout. This is the first test of the line as support since then. Therefore, a rally from this week’s lows would show strength relative to a bullish reversal at a lower price level.
Strength Indicated Above 79.00
If crude can rise above today’s high of 79.00, a bullish signal will be triggered. Further still on a rally above Wednesday’s high of 79.22. The trend high and weekly high of 80.33 is then the next major price level to rise above for the bull trend to continue. Also, keep an eye on the 50-Day MA, which is currently at 79.82. You can see on the chart how the price of crude is sandwiched between resistance around the 50-Day MA (orange) and support near the 20-Day MA (purple).
Crude is facing a potential upside breakout of a large symmetrical triangle formation. Even if it doesn’t happen the technical environment points to a likely test of resistance around the top downtrend line of the pattern, currently estimated at 82.70. However, notice that the 78.6% Fibonacci retracement is close by. By the time crude reaches the top line the 78.6% Fibonacci line and the trendline may be identifying a much narrower price range.
Measured Move Upside Target of 84.21
There is a measured move that completes at 84.21. If reached, it would put crude about 16.5% above the recent 72.24 swing low, and above the downtrend line. That is a minimum target as seven of the most recent rallies ended up from 15.4% to 30%.
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Cowardly And Corrupt. The Energy Report
By: Phil Flynn | August 15, 2024
Oil prices shook off supportive data from the Energy Information Administration (EIA) as the cowardly and corrupt Iranian regime most likely won’t attack Israel directly. The Times of Israel, sending high-level team to Doha talks, seen as possible last chance for a deal. Reports say that a team led by heads of Mossad, Shin Bet, Hamas sends mixed messages on participation. Jerusalem is said to demand all 33 hostages returned in first stage must be alive.
Reuters is reporting that three senior Iranian officials have said that only a ceasefire deal in Gaza would hold Iran back from direct retaliation against Israel for the assassination. Hamas said on Wednesday it would not take part in a new round of Gaza ceasefire talks slated for Thursday in Qatar, dimming hopes for a negotiated truce. And while Iran seems to be running out of excuses not to attack Israel, the reality is they’re too cowardly and corrupt to do so.
Inflation pressure is easing as oil demand in the US spikes above 20,523 million barrels a day and while crude oil supply broke its streak of drawdowns with a build of 1.4 million barrels from the previous week crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.7 million barrels.
Products were bullish as gasoline inventories fell by 2.9 million barrels from last week and are about 3% below the five-year average for this time of year. Distillate fuel inventories decreased by 1.7 million barrels last week and are about 7% below the five-year average for this time of year.
Chinese economic data was not overly exciting. The retail spending expectations coming in at 2.7% but industrial production just missed at 5.1% yet the data didn’t suggest that the Chinese economy is contracting dramatically and if they hold steady, oil supplies will continue to be tight if they improve, they’ll be very tight.
The ongoing supply deficit in the continued failures of many green energy projects, the outlook for the fossil fuel industry looks exceedingly bullish. President Donald Trump is vowing to reduce energy prices by half which would be interesting but there’s no doubt that we need a more realistic energy policy to avoid massive price spikes.
Norway has one and they are going to invest in beautiful fossil fuels. Reuters reports that, “Norwegian oil and gas investments are expected to hit a record this year and stay at elevated levels in 2025, driven by ongoing field developments and rising inflation, a national statistics office (SSB) survey showed on Thursday. Norway in recent years sanctioned a string of new field developments as companies took advantage of pandemic-era tax breaks to fast-track projects, part of its strategy to extend oil and gas production for decades to come.
In the meantime, the supply deficit is going to accelerate as we get into the end of the year which means you need to be hedged for a potential price spike. With the futures market already pricing in over a 50% chance of a quarter percent cut in September and the rest dedicated to a 50 basis point cut could cause the oil market to soar.
Natural gas prices continue to rally as we get ready for what could be our first possible withdrawal of the season. The charts and natural gas look very supportive so it’s probably a good time to be prepared for winter.
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Natural Gas Poised for Bullish Continuation After Trend High
By: Bruce Powers | August 14, 2024
• Natural gas rallies to a new trend high, signaling potential for continued bullish momentum if key resistance levels are surpassed.
Natural gas triggered a potential upside continuation on Wednesday as it rallied to a new trend high of 2.276 before pulling back intraday. It is set to complete a higher daily high and higher low following an attempt at a bearish retracement that began yesterday. A daily close above Tuesday’s high of 2.24 will confirm the advance.
At the time of this writing natural gas is at risk of closing relatively weak, near or below the halfway point of today’s trading range. Nonetheless, today’s price action is a sign of strength as buyers took back control after a one-day pullback. And support was found before a test of the 20-Day MA, now at 2.095.
Watching for Further Signs of Strength
It remains to be seen however whether today’s bullish price action will lead to a continuation higher. Support around the 20-Day line may yet be tested. A daily close above today’s high will be needed to confirm a bullish continuation. That will put natural gas in a position to test resistance around the 38.2% Fibonacci retracement at 2.37.
A little higher up is the 50-Day MA at 2.41. It is sloping down and yet may converge with the 38.2% price area before being reached. A daily close above the 50-Day line will then be needed to confirm a bullish breakout above the line. This would be the first test of the 50-Day MA as resistance since natural gas fell below the line in early-July.
Weekly Breakout Supportive of Higher Prices
Earlier this week natural gas broke out above last week’s high of 2.19. And it has continued to strengthen with little retracement into last week’s price range. This is a sign of strength on the longer time frame chart and is supporting evidence for a test of the 50-Day MA. The weekly breakout will be confirmed if natural gas closes above last week’s high on Friday.
Setting Stage to Challenge Trendline
The rally off last week’s low of 1.88 has the potential to eventually test resistance at the top trendline and possibly breakout above the line. There is a rising ABCD pattern that reaches price symmetry between the two legs of the pattern at 3.46. That is the initial target from the pattern. And of course, if reached it would put natural gas above its trendline as well as the most recent swing high of 3.16 (B).
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Crude Inventories Rise By 1.4 Million Barrels, Exceeding Analyst Expectations
By: Vladimir Zernov | August 14, 2024
Key Points:
• Domestic oil production declined from 13.4 million bpd to 13.3 million bpd.
• Strategic Petroleum Reserve increased from 375.8 million barrels to 376.5 million barrels.
• WTI oil tested new lows as traders reacted to the EIA report.
On August 14, 2024, EIA released its Weekly Petroleum Status Report. The report indicated that crude inventories increased by 1.4 million barrels from the previous week, compared to analyst consensus of -2 million barrels.
Total motor gasoline inventories declined by 2.9 million barrels from the previous week, compared to analyst forecast of -1.4 million barrels. Distillate fuel inventories declined by 1.7 million barrels.
U.S. crude oil imports averaged 6.3 million bpd, up by 61,000 bpd from the previous week. Over the past four weeks, crude oil imports averaged 6.6 million bpd.
Strategic Petroleum Reserve increased from 375.8 million barrels to 376.5 million barrels as U.S. continued to buy oil for reserves. Domestic oil production declined from 13.4 million bpd to 13.3 million bpd.
WTI oil remained under pressure as traders reacted to the EIA report. From a big picture point of view, traders continue to take profits after the strong rally. Some traders are ready to bet that the situation in the Middle East will remain under control, and the market’s attention will turn to the weaker-than-expected demand for oil. Currently, WTI oil is trying to settle below $77.70.
Brent oil moved towards the psychologically important $80.00 level as traders focused on the higher-than-expected crude inventories in the U.S.
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Saving Faces Sometimes. The Energy Report
By: Phil Flynn | August 14, 2024
Saving faces sometimes pretend to be your friend, saving faces show no traces of the evil that lurks within, saving faces, saving faces sometimes They don’t tell the truth saving faces, saving faces, Tell lies and I got proof. Iran was looking to save face and attack Israel to show how tough they are but so far it appears they really are not so tough after all.
The way to deal with Iran is to show strength and the move by the US and Israel as well as other allies to show strength had Iran seemingly back off its threatened promise to attack Israel. Oh sure, Iran is ok with sending proxies to do their dirty work, like supporting terror groups like Hamas and Hezbollah and the Houthi rebels. Yet when it comes to directly confronting the US and Israel and their allies, they do not seem to have the stomach for it. What a pity. Perhaps because the regime knows that that attack might lead to the elimination of their nuclear programs and perhaps the end of their oil fields and revenue and perhaps even the end of the Iranian terror supporting regime.
Yet the backing down of Iran should be a template with how to make the world a safer place. Stop coddling the Iranian regime, enforce oil sanctions and go back to the Trump policies of maximum pressure. That is the only thing the Iranian regime understands. It’s foolishness to engage this regime by turning a blind eye to oil sanctions and freeing up billions of dollars so they could fund groups like Hamas that prepared the inhuman October 7th attack. Hopefully Iran will stand down and we all see a reduction in tension.
The oil market took out some of the risk premium that had been built in on fears of a major conflict. Yet the market after the close saw some very bullish data from the American Petroleum Institute (API) with big surprise drawdowns in crude oil supply and gasoline supplies. The time spreads suggest a very tight oil market, but the product crack spreads are signally weakness and demand especially for gasoline.
The API reported that crude oil supplies fell by 5.205 million barrels that was lead with a 2.277 million barrel draw down from the Cushing, OK delivery point. Gasoline inventories also fell by a very impressive 3.689 million barrels. Distilling inventories rose slightly at 612,000. Still the oil market is suggesting tightness and Libya’s Waha oil output seems to be dropping to 100,000 barrels a day after a pipeline fire. It is now thought their supplies once again not reliable.
While the International Energy Agency warned us about Chinese demand the US demand and global demand is still going to hit a record high and global oil production only rose by 387,000 barrels a day which is a far cry of what we will need to do to keep up with growing demand. The supply deficit is real and likely will get larger.
Product crack spreads that have been beat up lately seem to be trying to turn, at least for diesel. There is concern about tight supplies and an increased risk to supplies from places like Russia and Venezuela. Yesterday it seemed like gasoline cracks were on a free fall while the diesel cracks looked like they were turning back higher.
Russia reportedly extended their ban on gasoline exports until the end of 2024 partly because demand is better than expected and the fact that Ukraine keeps hitting their refineries Reports say that Ukrainian forces are moving further into Russia. This is raising concerns that this conflict could impact supplies of natural gas and oil at some point. We’re going to stay tuned to this issue.
Yesterday the weak producer price index help support oil with the expectation that the Fed has a clear path to interest rate cuts. Today we get the consumer price index as well as the weekly inventories. If the crude oil inventories come in similar to what we saw from the American Petroleum Institute report, it will be very difficult to drive prices substantially lower. That is unless of course the inflation number comes out hot. There’s still a lot of concern about global demand even though based on the supply side, it seems to be unjustified at this point.
The ingenuity of the US energy industry is amazing. Reuters is reporting that, “Greater operating efficiencies in the top U.S. shale patch are squeezing out more oil without higher spending, according to the latest output numbers, which will boost global oil market supplies as OPEC also plans to unwind its output cuts later in the year. Producers are extending their wells to as much as three miles, squeezing more wells onto a single drilling pad and fracking several wells at once, boosting production, according to industry experts and company executives on recent earnings calls.
Reuters says that taken together, these efficiency gains have led several big producers to raise their full-year shale oil production targets. Chevron (CVX.N), lifted its full-year Permian output target to an about 15% gain, up from an earlier forecast of a 10% gain. Diamondback (FANG.O), APA Corp (APA.O), Devon Energy (DVN.N), and Permian Resources (PR.N), also forecast higher than expected Permian shale production in coming months. Occidental Petroleum (OXY.N), raised its outlook for the basin for 2024 by 1,000 barrels per day (bpd) excluding its acquisition of Permian-focused CrownRock.
Natural gas is hanging in on promises by some producers to cut production. EBW Analytics pointed out that the September contract gained in five straight sessions to post as much as a 20% low-to-high swing before fading Tuesday. Near-term upside is possible, but it may require another bullish catalyst to lift prices over resistance. Still, a rare midsummer EIA storage draw is possible on Thursday, producers shutting-in 2.5 Bcf/d of production helped reinvigorate upside, and August 2024 could feature the smallest August monthly storage injection in history.
Modest upside is favored for the October contract should supply cuts deepen, storage surpluses whittle away, and storage containment fears abate. A wide discount to winter 2024-25 contracts may also offer a degree of support. Yet a cascade of returning supply may quickly rebuild storage surpluses in a normal winter weather scenario. With a gusher of supply likely to add 3.0-5.0 Bcf/d from October to December, the Cal 2025 strip may eventually find itself under pressure absent external support from a cold winter.
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Crude Oil Poised for Further Gains After a Rest
By: Bruce Powers | August 13, 2024
• Crude oil's 11.2% advance signals further upside potential, targeting 84.15. The bullish reversal and strong momentum support a continued rally above key resistance levels, but a pullback may occur first.
Crude oil completed a five-day advance on Monday with a high of 80.33. A 61.8% Fibonacci retracement was also completed at 79.97, while the 50-Day MA was at 79.58. Crude was able to close above the 50-Day line but not the Fibonacci level. Moreover, yesterday’s advance took the price of crude above the interim swing high of 79.67, triggering a bullish reversal in the price structure of the prior downtrend retracement. Subsequently, today crude took a rest and traded inside yesterday’s price range.
This Week’s High Completed a 11.2% Advance
Monday’s high completed an 8.09 point or 11.2% advance in the price of crude oil. Support was seen around the lower trendline of a large developing symmetrical triangle formation at 72.24. Once crude reverses off support at the bottom of the triangle, the top of the triangle becomes an eventual target. Therefore, given the strong bullish momentum seen since the reversal from the 72.24 low, it seems likely that the top line will be reached in this case. Prior to the top trendline, there may be signs of resistance around the 78.6% Fibonacci retracement at 82.07.
Measured Moves Point to 84.15 Target
Notice that the prior two advances saw the price of crude rise by 12.01 points or 16.5% and 16.51 points or 23.1%, respectively. Note that the 23.1% rally is only measuring the portion of the advance where momentum spiked (purple arrow) and therefore it does not measure the full move. The current advance was up by 8.09 points or 11.2% at Monday’s high. Based on this metric alone, crude should continue to rally following a pullback.
Potential Symmetrical Triangle Breakout
A match with the 16.5% advance will occur if crude oil reaches 84.15. That would put it above the top trendline and therefore a bullish breakout of the symmetrical triangle would have already occurred. Since March 2023 there have been seven upswings that measured between 14.5% and 30%. So, it is not a stretch to anticipate a 16.5% advance for the current rally. And since that is the low end of prior measured moves, the 84.15 target could easily be exceeded. Especially, since a symmetrical triangle breakout opens the door to higher targets.
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Natural Gas Bearish Reversal Signals Pullback
By: Bruce Powers | August 13, 2024
• After triggering a bearish reversal, natural gas faces a pullback. Support at 2.09 and 2.025 levels will be critical for the next upward move.
Natural gas triggered a daily bearish reversal on Tuesday as it fell below Monday’s low of 2.155. A daily bearish shooting star candlestick pattern was generated on Monday. It points to a pullback that may be short lived. Today’s price range establishes a lower daily high and lower daily low for the first time since the rally began a week ago. Given that today’s price action is on track to complete a second shotting star candlestick, a pullback to test support before a continuation higher look very likely. Plus, natural gas is on track to close in the lower quarter of the day’s price range at the time of this writing.
Drop to 20-Day MA at 2.09 Next in Line
A decline below today’s low of 2.14 will trigger a bearish continuation of today’s pullback. The 20-Day MA at 2.09 looks to be the first area to watch for support. If it fails to hold, there is a price zone to watch from around 2.03 to 2.02, and it includes the 61.8% Fibonacci retracement at 2.025. One of the reasons that natural gas is anticipated to continue higher following a pullback is that it triggered a bullish weekly reversal signal last week on a rally above the three-week high at 2.15.
Weekly Reversal Just Getting Started
A reversal week completed last week, and the week ended strong, in the top quarter of the week’s trading range. Also, the week ended above 2.15 at 2.16. Moreover, Monday’s rally triggered a bullish continuation of the weekly chart. This was the first time in eight weeks that natural gas exceeded the high of a prior week. These signs of strength should lead to further upside.
Since the 20-Day MA was cleared last week with a rally above 2.10, natural gas is showing strength that may result in a continuation of the current advance up to the 50-Day MA, now at 2.42. Prior to that price level there is the 38.2% Fibonacci retracement at 2.37, while the 50% retracement is at 2.42.
Watching for Clues During Pullback
Characteristics of the current pullback should assist in determining short-term underlying strength in natural gas. A bullish reversal following a test of support at the 20-Day line would be a stronger sign than a drop to test support around the 61.8% Fibonacci level at 2.025, for example.
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The IEA’s Oil Supply Deficit. The Energy Report
By: Phil Flynn | August 13, 2024
What does No Peak oil demand? What no peak Gasoline demand!
The International Energy Agency (IEA) is acknowledging what the oil market structure has been suggesting for a while and that the physical markets for global oil supply are tightening. In fact, the IEA is saying that oil supply is struggling to keep pace with peak summer demand, tipping the global oil market into a deficit. While the IEA is quick to point the finger of blame at OPEC Plus and their production cuts, they too hold some responsibility as they have discouraged investment in fossil fuels giving OPEC Plus more power to control the market.
The IEA said that global observed oil inventories fell by 26.2 mb in June, following four months of builds totaling 157.5 million barrels. They also had to back away from their ‘peak gasoline’ demand prediction as electric cars sales are not happening like they thought they might. The IEA said that it no longer expects 2024 gasoline to peak in global gasoline consumption in 2024, as it now forecasts a small increase in demand in 2025. In fact, the IEA puts gasoline demand at 27.4 m b/d, consumption next year would be 500,000 higher than in 2019.
This supply deficit comes at a time when the world is on edge as it seems like the world is on the verge of a major escalation in war and no one seems to be able to do anything about it. The war premium kicked in yesterday as reports that the U.S. Defense Secretary Lloyd Austin has ordered the deployment of a guided missile submarine to the Middle East and suggests that Iran could attack Israel within hours. Yet oil prices are easing because it appears the market is wondering whether this attack will happen or is it the little boy that cried wolf. Iran may be having second thoughts about the attack especially with this show of force from the United States as well as its allies.
Reports that the Ukraine had an incursion in Russia raised conerns that Russia might cut off gas supplies or that Ukraine. Both countries played down those concerns. Reuters is reporting that, “Russian forces on Tuesday struck back at Ukrainian troops with missiles, drones and airstrikes in actions that one senior commander said had halted Ukraine’s advance after the biggest attack on sovereign Russian territory since the war began. Ukrainian soldiers smashed through the Russian border a week ago in a surprise attack that Russian President Vladimir Putin said was aimed at improving Kyiv’s negotiating position ahead of possible talks and slowing the advance of Russian forces along the front.”
Of course the International Energy Agency report doesn’t make us feel too comfortable that the world will be able to handle a war and keep the global markets supplied. Once again the International Energy agencies prediction demand have proven to be incorrect.
The IEA said that, “global oil demand increased by 870 kb/d in 2Q24, with a contraction in China limiting gains. Demand is set to rise by less than 1 mb/d in both 2024 and 2025. This is largely unchanged from last month’s report and far slower than last year’s 2.1 mb/d growth as comparatively lackluster macroeconomic drivers come to the fore.
World supply rose 230 kb/d to 103.4 mb/d in July as a substantial OPEC+ increase more than offset losses from non-OPEC+. Annual gains accelerate from 730 kb/d in 2024 to 1.9 mb/d in 2025. Non-OPEC+ production increases by 1.5 mb/d this year and next, while OPEC+ may fall by 760 kb/d in 2024 but rise by 400 kb/d in 2025 if voluntary cuts stay in place.
Global refinery throughputs are forecast to increase by 840 kb/d to 83.3 mb/d in 2024, and by 600 kb/d to 83.9 mb/d next year. Margin weakness continues to weigh on processing rates, with Chinese runs now expected to decline y-o-y. Margins fell further in July in Europe but rose in Singapore and on the US Gulf Coast, led by stronger naphtha and gasoline cracks. This comes as Quantum Energy reported that Crude oil continued to rally into a fifth session at the start of the week as US recession fears waned and focus shifted back to Middle East geopolitical risks, shaking off and expectations of falling demand in China from OPEC.
The oil market must wait to see if it will overcome today’s producer price index. Recession fears have been played out after the weak jobs report and the manic stock market, but this inflation data today may give the market more of an indication as to whether the Fed has enough cover to cut interest rates. More than likely they probably do.
Natural gas had a nice pop. Inventories could see its first supply withdrawal this summer. Expectations of a three BCF withdrawal are making the rounds.
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Crude Oil Continues to Rally a Bit
By: Christopher Lewis | August 13, 2024
• The crude oil market rallied a bit in the early hours of Tuesday, as the price continues to rise. At this point, both grades that we follow are pressing against significant resistance.
WTI Crude Oil Technical Analysis
The West Texas Intermediate crude oil market has been somewhat sideways for a moment here in the early hours on Tuesday as we continue to hang around the $78 level. The $78 level of course is an area that previously has been resistant, so it does make a certain amount of sense that we would see the market hesitate here. A short-term pullback from here opens up the possibility of valuable buy on the dip type of scenarios as there are certainly plenty of geopolitical concerns in the Middle East to drive the price of oil higher.
That being said, demand is threatened and as a result, I think we’re going to continue to see a lot of volatility. Somewhere near the $75 level, maybe even $76, I think you would see buyers coming in to take advantage. If we can break above the $79 level, then the $80 level gets targeted.
Brent Crude Oil Technical Analysis
The Brent market looks very much the same. A move above $82 opens up a move to $84. A short-term pullback should see plenty of support near $80 and then again at $79. I think at this point in time, the oil markets don’t really know what to do because it is travel season and cyclically, we are typically fairly bullish this time of year.
But at the same time, it looks like the economy globally is starting to slip. Concurrently, you also have plenty of tension around Israel and the greater Middle East as a whole. So, it all comes together for plenty of volatility.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | August 13, 2024
• Top Movers
Eggs 15.53 %
NY Crude Oil Futures 4.19 %
Coffee (NYCSCE) Futures 3.6 %
London IPE Brent Crude Spot 3.31 %
London IPE Brent Crude Futures 3.31 %
• Bottom Movers
Cocoa (NYCSCE) Futures 5.93 %
AU - Victoria Base-Load Electricity Futures 3.79 %
Rough Rice Futures (CBOT) 2.02 %
Soybean Meal CBT Futures 1.87 %
Soybeans Futures (CBOT) 1.64 %
*Close from the last completed Daily
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Natural Gas Faces Resistance at Key Level After Initial Rally
By: Bruce Powers | August 12, 2024
• A rally in natural gas to 2.26 met resistance, risking a pullback. The 2.27 level remains crucial in determining the next directional move.
Natural gas rallied to a high of 2.26 on Monday before encountering resistance that led to an intraday pullback. Whether it becomes more than just a pullback remains to be seen. Since today’s high natural gas has fallen to the lower third of the day’s trading range, putting short-term bullish momentum at risk of failure that could lead to a deeper pullback. It is on track to end the day with a bearish shooting star candlestick pattern. Today’s advance showed strength initially but was unable to recapture the more significant price level at the prior interim swing high of 2.27.
First Wedge Target May See Pullback
That 2.27 price level was resistance on July 22. It also marks the beginning of a bullish descending wedge pattern (orange boundary lines). The beginning of the wedge is typically the minimum target for the pattern. Arguably, that target of 2.27 was reached with today’s high of 2.26. After today’s close a drop below the 2.155 low of the day will trigger a daily bearish reversal. The 20-Day MA is the first obvious target at 2.09.
20-Day MA is Crucial Near-term Support
A near-term bullish outlook would be maintained as long as natural gas stays above the 20-Day line. It had been marking trend resistance since late-June until last Thursday’s bullish breakout. Subsequently, if price is rejected to the upside upon approach, the 20-Day line will be confirmed as having switched to a line of potential support.
That would be bullish behavior that may mark the end of a retracement. However, there is also a potential support zone lower down around 2.03 to 2.02. That range begins with the low from last Thursday and was an area of daily support or resistance at more than several times over the past month.
Weekly Bullish Reversal Points to Higher Prices
If a pullback comes before a rally above the 2.27 interim swing high, it is anticipated to eventually resolve itself to the upside as a bullish reversal may still be in its early stages. In addition to a bullish wedge breakout last week, natural gas also triggered a bullish reversal on the weekly chart. Today’s advance further confirms the breakout. It was the first time in eight weeks that a prior week’s high was exceeded to the upside. This is bullish behavior occurring on the longer time frame chart, which is more significant than the daily and lower periods.
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Inventories Matter. The Energy Report
By: Phil Flynn | August 12, 2024
Oil inventories matter when the risks to supply are high as we head into a world of a supply deficit. Oil prices are rising on geopolitical risk and falling inventories even as OPEC cuts 2024 global oil demand growth forecast to 2.11 million barrels a day. That is down from the previous forecast of growth of 2.25 million barrels a day. OPEC also cut their 2025 global oil demand forecast to 1.78 million barrels a day from a previous forecast of 1.85. This comes as OPEC production has been creeping higher as OPEC decides to tapered off its cut.
Saudi Arabia increase their production by 97,000 barrels a day in July to back over 9 million barrels a day. Iran, despite alleged sanctions on the country, saw their production rise again to 20,000 barrels a day to 3.27 million barrels a day. That of course we’ll bring in plenty of cash for Iran to continue to fund Hamas Hezbollah and other bad actors. Of course, it’s been the policy of easing that put pressure on Iran that has caused the world to be a more dangerous place in a lot of respects. The US is having to get more involved because of the Biden administration by its lax Iranian policy.
The Wall Street Journal reports that, “the U.S. is sending a guided-missile submarine to the Middle East and is speeding up the arrival of an additional aircraft carrier as the region braces for a possible Iranian response to the killing of Hamas’s political leader in Tehran. U.S. Defense Secretary Lloyd Austin told his Israeli counterpart Yoav Gallant by phone Sunday that the deployments strengthen the U.S. military posture in the Middle East considering recent tensions and reflect a “commitment to take every possible step to defend Israel.”
The oil markets reacted strongly to the increased geopolitical risk even as OPEC has shown some concern about its demand growth. Regardless of the demand growth numbers that they are giving us it still leads us into a supply deficit. At the end of the day falling inventories will matter.
OPEC is tapering off cuts but more than likely will extend their production cut and that should keep a floor under oil. Other countries are promising more compensation cuts in the future and that should give the market underlines support.
The other war that we must worry about is Russia Ukraine that has moved into some Russian territory and is raising the stakes of further escalation. Reuters reported that, “President Volodymyr Zelenskiy said Ukraine had launched an incursion into Russian territory to “restore justice” and pressure Moscow’s forces, in his first acknowledgement of Kyiv’s surprise offensive into the western Kursk region. Moscow’s forces on Sunday were in their sixth day of intense battle against Kyiv’s largest incursion into Russian territory since the start of the war, which left southwestern parts of Russia vulnerable before reinforcement started arriving.
Still the war has done little to hurt Russia’s oil and gas revenues which continue to rise. The Biden administration seems to not understand how to shut this revenue off and t’s because they don’t want to.
The oil market is making a nice move and technically should have a test of $80.00 soon, $78 short term is some resistance but with the expectations that we should see another drawdown in crude oil inventory this week should keep the market on the upward track. We are looking for crude oil supplies to be down to a million barrels this week. We are also looking for products to be down to a million barrels apiece that goes both for gasoline and distillate inventories. Refinery runs be down 0.5.
The natural gas market is bouncing back on an incredible short covering rally. Expectations that we will see an inventory withdrawal this week is fueling the rally along with the fact of expectations of LNG exports rising. Some producers pledge to cut back production and that is giving the market some support.
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | August 10, 2024
• Following futures positions of non-commercials are as of August 6, 2024.
WTI Crude Oil: Currently net long 208.6k, down 38.5k.
The week began with Monday’s sharp move lower to tag $71.67 intraday, which attracted bids. West Texas Intermediate crude rallied the next four sessions to end the week up 4.5 percent to $76.84/barrel.
On the weekly, a bullish hammer showed up after four consecutive weekly drops. Earlier on July 5th, the crude tagged $84.52 intraday and headed lower.
Oil bulls have an opportunity here to push WTI higher toward the upper end of a months-long range between $71-$72 and $81-$82. The lower support was successfully tested this week.
In the meantime, US crude production in the week to August 2nd rose 100,000 barrels per day to a fresh record 13.4 million b/d; earlier, 13.3 mb/d was hit 11 times from last December, including four consecutive weeks through the week to July 26th. Crude imports decreased 729,000 b/d to 6.2 mb/d. As did crude stocks, which declined 3.7 million barrels to 429.3 million barrels. Stocks of gasoline and distillates, however, rose 1.3 million barrels and 949,000 barrels respectively to 225.1 million barrels and 127.8 million barrels. Refinery utilization grew four-tenths of a percentage point to 90.5 percent.
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Natural Gas Eyes Higher Prices After Weekly Bullish Reversal
By: Bruce Powers | August 9, 2024
• Natural gas rallies after a breakout, testing key levels, with potential bullish continuation following a weekly reversal signal.
Natural gas made a new rally high of 2.19 on Friday but failed to follow through much beyond yesterday’s high of 2.18. The interim swing high of 2.15 was exceeded yesterday and a close above that price level will confirm a breakout above the swing high.
That will provide the next sign of strength for natural gas. At the time of this writing, it is trading around 2.15 and may close above or below that level. Today is the fourth day in a row how higher daily highs and higher lows. Taking somewhat of a rest is not unusual and healthy for the trend.
Bullish Signs Following Descending Wedge Breakout
A decisive bullish breakout triggered on Wednesday as natural gas broke out of a bullish descending wedge pattern. Following the breakout upward momentum stayed strong. Each of the past three days closed in the top quarter of the day’s trading range. The 2.15 daily swing high is also a weekly high from last week. This means a weekly bullish signal was also triggered this week. So, a daily close above 2.15 will also confirm the weekly reversal. It follows seven weeks down from the most recent swing high at 3.16.
Further Rest Possible Before Trend Continues
There could be a pullback before natural gas progresses higher and, in that case, the first price level to watch is the 20-Day MA at 2.09. It was successfully tested as support with today’s low of 2.10. Lower down is the 50% retracement level at 2.04, followed by a price zone around the 2.03 to 2.01 daily lows from Thursday and Wednesday, respectively. That would also be roughly around the top boundary line of the wedge pattern.
Watching for Short Term Weakness
The degree of retracement, if it comes before a bullish continuation, may tell us something about the underlying strength in demand for natural gas. Of course, finding support at or above the 20-Day line and then continuing higher would be the more bullish behavior. Nevertheless, the weekly reversal was just triggered, and it indicates there will likely be a continuation to the rally. What is not clear is the aggressiveness of the rally. A prolonged retracement or consolidation prior to a bullish continuation is possible. But, given the clear bullish breakout this week it is also possible that the bulls maintain control into higher price levels.
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Lean Forward. The Energy Report
By: Phil Flynn | August 9, 2024
Hedge funds in energy are probably leaning the wrong way after the feared stock market crash may only be a healthy correction. Despite fears of subdued demand, global oil inventories are tightening.
While it appears that Iran backed down from a direct attack on Israel as the regime weighed the real possibility of being totally annihilated, they still have their minions, the Houthi rebels, attack another ship.
And in Libya a shutdown of its largest oil field should help give oil support. The hedge funds, despite their best efforts, failed to take out the $70 a barrel handle and with the seasonal tendency for both gasoline and diesel to bottom on in mid- August, the hedge funds may have to run for cover.
Iran must believe that when you face annihilation it’s probably a good time to think about compromising. Bloomberg News reports that, “Iran’s president told his French counterpart Emmanuel Macron the US and Europe must urge Israel to accept a truce in Gaza to reduce tensions in the Middle East. Masoud Pezeshkian’s comments on a call with Macron on Wednesday hint at a diplomatic path to de-escalation as Israel braces for retaliation after the killing of a top Hamas leader in Tehran.”
Reuters is reporting that, “The Delta Blue crude oil tanker reported a third and fourth incident in the last 24 hours off Yemen’s port of Mokha, the United Kingdom Maritime Trade Operations (UKMTO) agency said on Friday. The crew and vessel are safe and proceeding to their next port of call, the UKMTO said in an advisory note. The latest incidents included an attack by an uncrewed surface vessel and another by a missile that landed near the ship, UKMTO said. On Thursday, the ship’s captain reported that two small craft had approached and fired a rocket-propelled grenade which exploded near the Liberia-flagged Delta Blue some 45 nautical miles south of Mokha. Each of the two small boats had four people on board, UKMTO said.
The renewed push by the Biden administration to restart talks between Israel and Hamas probably will not bear fruit. Hedge funds of course have jumped on every ceasefire talk deadline to push oil prices lower.
At some point they may realize that the ceasefire talks are not a reason to sell more oil.
Hamas knows that if they give up their hostages, they’re probably going be wiped off the face of the earth. Hamas has no respect for human life, not even their own and they will use humans as shields as they are their only means of survival.
Libya’s oil that had surprisingly has been flowing consistently over the last couple of months, has once again shut due to political upheaval. The Libyan National Oil Corporation declared a force majeure with a shutdown the Shahara oil field. According to reports the oil field, which does have the capacity to produce 300,000 barrels a day, is offline for a while and that should further tighten global supplies of light oil.
That should also boost exports of U.S. oil as they look for a replacement for Libyan oil. That should increase the odds of continuing drains on US crude supplies and should also start to support products as we said in August traditionally, we see a little bit of a bump up in prices as we get closer to winter.
According to the Moore Commodity Research center for the December contract our RBOB gasoline has gone up between August 14th and August 29th 13 out of the last 15 years. And for diesel between August 15th and August 29th it has gone up 14 out of the last 15 years.
The market being oversold because of the stock market sell off concerns, both diesel and gasoline futures are ready for a comeback. This is especially as demand rebounds after we start to see a recovery after Hurricane Debbie.
Natural gas is still trying to stand tall as production cut back and record natural gas power burns area easing the natural gas supply glut fears. Yesterday we saw a supportive report from the Energy Information Administration (EIA) that beat expectations on a weekly basis. The EIA said that working gas in storage was 3,270 Bcf as of Friday, August 2, 2024, according to EIA estimates. This represents a net increase of 21 Bcf from the previous week. Stocks were 248 Bcf higher than last year at this time and 424 Bcf above the five-year average of 2,846 Bcf. At 3,270 Bcf, total working gas is within the five-year historical range.
John Kemp at Reuters said natural gas inventories are slowly normalizing as ultra-low prices encourage high levels of gas-fired generation during the peak summer air conditioning period. Inventories accumulated by just +71 billion cubic feet (bcf) over the four weeks ending on August 2, the smallest seasonal increase for more than 14 years in data going back to 2010. Stocks were still +441 bcf (+16% or +1.35 standard deviations) above the prior ten-year average but the surplus had narrowed from +538 bcf (+20% or +1.44 standard deviations) four weeks earlier.
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$Oil $WTIC - Update...
By: Sahara | August 9, 2024
• $Oil $WTIC - Update.
Tapped my Red-Box Target. A good low risk entry point.
Which aligned with the Lwr 'Coil' Line, where it turned and now has a Bi/Wkly 'Hammer' Candle that brings us back inside the 'Bowl...
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Crude Oil Shows Strength as it Heads Towards Top of Triangle
By: Bruce Powers | August 8, 2024
• Crude oil completes a 38.2% Fibonacci retracement at 76.99, signaling potential for a bullish breakout as it targets the top of a symmetrical triangle.
Crude oil completed a 38.2% Fibonacci retracement on Thursday with the day’s high of 76.99. This follows a retracement low of 72.24 from Monday, which was also successfully tested as support the following two days. A bullish breakout triggered yesterday above 75.13 and today’s advance furthered the rally.
Top of Triangle Now a Target
Strength seen this week may be the beginning of an advance that leads to a test of resistance at the top trendline of a large symmetrical triangle pattern that has been forming in crude oil for over eight months. This week’s low found support at a low of 72.24 thereby completing a 78.6% Fibonacci retracement. Also, support was seen at the lower boundary line of the triangle. Once the bottom of a consolidation pattern is reached, there is the potential to swing back to the other side of the pattern. In this case, the downtrend line at the top of the triangle.
Monthly Chart is Bullish
Although a symmetrical triangle can break out in either direction, up or down, there is reason to believe that the triangle in crude may resolve to the upside. The monthly chart (not shown) tells the story. There is a long-term downtrend line drawn from the July 2008 high of 147.08. That line represented resistance until a sustainable bullish breakout occurred in December 2021.
The line was successfully tested as support over multiple months beginning around November 2022. That area represents the bottom of the triangle, which is at 63.67. It turns out that the 50-Month MA was also tested as support around the same time. And the 50-Day line has continued to indicate an area of support on the monthly chart since then.
Lower Volatility Leads to Higher Volatility
Volatility in crude oil has declined as the triangle pattern has evolved. Given the nature of the pattern volatility, with two boundary lines angled towards each other, crude may continue to decline as the boundaries of the pattern move closer together. However, this low volatility environment is setting the stage for a potential large move.
It could come as a precursor to a breakout or following it. A bull breakout above the top trendline will have already triggered once the most recent swing high of 84.74 is broken to the upside. That will confirm that triangle breakout with an earlier signal given on a move above the line. The price represented by the line will depend on when the line is reached, and if it is reached.
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Natural Gas Price Forecast: Rallies After Bullish Reversal; Eyes 2.27
By: Bruce Powers | August 8, 2024
• Following a decisive breakout, natural gas targets 2.27, showing strong bullish momentum and the potential for further gains toward 2.36 and beyond.
Natural gas continued to rally on Thursday following Wednesday’s bull wedge breakout. The descending wedge pattern (orange line) is a bullish pattern once triggered as it formed in a downtrend. It can mark a reversal or continuation signal depending on the direction of the prior trend.
Yesterday’s breakout was decisive, and the day ended near the highs of the day. Today, there is upside follow through. After a pullback earlier in the session today natural gas found support at 2.03 and turned back up. It continues to show strength after reaching a 12-Day high of 2.18 with trading continuing near the highs of the day at the time of this writing.
Bullish Wedge Breakout Targets 2.27
The target from the descending wedge is the beginning of the pattern at 2.27. It is well on its way there now after breaching the 2.15 interim swing high today. Further, a breakout of the 20-Day MA triggered again today with prices continuing to rise from there.
Given the bullish momentum since Tuesday’s daily reversal and hammer candlestick breakout it looks like the retracement may have found a bottom. It will be clearer if natural gas can get above 2.27 and stay above that level. However, today’s advance also triggered a bullish reversal on the weekly chart with a move above last week’s high of 2.15. A daily close above that level will further confirm strength of the reversal.
200-Day MA Higher Target at 2.36
If the 2.27 swing high can be exceeded the next target is up around the 200-Day MA, currently at 2.36. Very close by is the 38.2% Fibonacci retracement at 2.37. Higher up is a target zone that begins around the 50-Day MA, which is currently at 2.45. The previous interim swing low from late-May is then at 2.47, followed by the 50% retracement at 2.52. Last week’s low may have been the low price for natural gas before it attempts to break out above the top downtrend line. The prior dotted trendline remains a little lower for reference.
Higher ABCD Pattern Target is 3.46 (long-term)
Since a bottom has likely been established a rising ABCD pattern can be drawn to help identify higher price targets. The first target from the pattern is at 3.46. That is a pivot level where the price appreciation seen in the AB leg up matches the CD leg up. Once price symmetry is established the potential for a change increases. Also, a breakout through the pivot is a sign of continued strength.
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California Dreaming. The Energy Report
By: Phil Flynn | August 8, 2024
Apparently Governor Gavin Newsom and the California Energy Commission (CEC) are considering following the same playbook that the late Venezuela Hugo Chavez once laid out. No, I am not talking about throwing out the constitution, but they might be for that. What I am talking about is for the state to take over a major part of the California energy industry. Now if you think this is going to be a good thing then you are probably California dreaming. It will not be safe or warm when you’re in LA.
California ran Chevron and its corporate headquarters out of the state after 140 years with government pressure and lawsuits. Sort of like Chavez did before he fired all the oil workers before the government seized the oil industry and of course before Venezuela’s economy went into steep decline. Sort of like how California’s economy has been doing under Governor Newsom.
The move by Chevron will eventually cost California about 7000 jobs. California has some of the strictest regulations in the country as well as specifications on gasoline that’s very expensive and has not only made California’s gas prices among the highest in the nation but also extremely vulnerable of retail gasoline price spikes.
Also, California’s dream to get rid of the internal combustion engine with regulations is going to force some refineries out of business potentially leading to either higher price. Of course, the politicians regulate the industry and discourage investment causing shortages of oil for these refineries. They blamed the oil companies for the price spikes even when it’s quite clear that it’s their policies that keep California prices high and puts undo strain on the people of California as well as their businesses.
Chevron’s CEO Mike Wirt said on his decision to pull its corporate headquarters out of California that, “We believe California has a number of policies that raise costs, that hurt consumers, that discourage investment and ultimately we think that’s not good for the economy in California and for consumers”.
Yet what Hugo Chavez and Governor Newsome have in common is not what is good for the economy or the consumers but what is good for them. California and their misguided desire to transition from fossil fuels continues to fail miserably and its quest. Ed Ring of the Globe pointed out that, “Despite being a sunny, solar friendly state, with ample areas blessed with high wind, California still derives 50 percent of its total energy from crude oil. Another 34 percent comes from natural gas. This fossil fuel total for California energy, 84 percent, exceeds the world average for 2022, which – including coal – came in at 82 percent.”
So it’s like Chavez when he decided to take over the Venezuelan oil industry forcing out people who knew how to run the industry and replace them with government cronies. If California attempts to do this, I predict that they will run it into the ground and try to profit off it as they drive all energy prices in California even higher than they already are.
Oil prices held up amazingly well considering the stock market is still in a state of flux. The unwinding of the carry trade which according to some reports is 3/4 finished along with concerns at the high-flying tech sector needs to come back down to earth, all created uncertainty about the outlook for the economy. Yet despite the fact that some people fear recession the oil inventory numbers while demand was a bit disappointing is saying that a recession is not happening anytime soon. In fact one of the concerns that we should have, and I think the market is starting to realize that, is that we are heading into a supply deficit with crude oil inventories falling for the 7th week in a row.
The EIA said that crude oil inventories decreased by 3.7 million barrels from the previous week. At 429.3 million barrels, U.S. crude oil inventories are about 6% below the five-year average for this time of year. Total motor gasoline increased by 1.3 million barrels from last week and are about 2% below the five-year average for this time of year. Distillate fuel inventories increased by 0.9 million barrels last week and are about 6% below the five-year average for this time of year. So, supplies in the US are below average and it appears that the band is exceeding supply. In fact globally, according to the latest data by JODI, crude oil inventories are down by a sizable 24.4 million barrels since April. JODI also shows that oil demand is slightly higher, roughly by 81,000 barrels per day. Global crude production is falling by about 586.00 barrels per day.
Natural gas prices are coming back. The balance is hoping for expected production cuts by producers responding to low prices. The key thing for natural gas prices is whether or not they have the ability to stay disciplined and keep the market from overproducing. At any rate, today we get the natural gas inventory report, and I am expecting an injection of 22 BCF.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | August 8, 2024
• Top Movers
NY Natural Gas Futures 5.07 %
Coffee (NYCSCE) Futures 4.39 %
Cocoa (NYCSCE) Futures 3.66 %
Cheese 3.16 %
London IPE Gas Oil Futures 3.01 %
• Bottom Movers
NSW Baseload Electricity Continuous 2.61 %
Soybean Meal CBT Futures 2.54 %
Lean Hogs (CME) Futures 2.4 %
Tokyo Palladium Futures 2.38 %
NY Copper Futures 1.86 %
*Close from the last completed Daily
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Natural Gas Triggers Bullish Reversal Signal
By: Bruce Powers | August 7, 2024
• Following a breakout from a bullish wedge, natural gas aims for the 200-Day MA, supported by strong bullish momentum and RSI divergence.
Natural gas triggered a bullish reversal signal on Wednesday as it broke out from a descending bullish wedge pattern (orange trendlines). Resistance for the day was seen around the 20-Day MA (2.10) at the day’s high of 2.12. The 20-Day line has marked key trend resistance for the decline since around June 20. Today’s sharp rally and test of resistance at the 20-Day line makes an eventual bullish breakout above that line more likely.
Watching for Breakout Above 20-Day MA
Above the 20-Day line at 2.10 is last week’s high of 2.15. That will be the next price level to watch following a breakout through the 20-Day MA. Therefore, a bullish weekly reversal will trigger on a rise above that high. The top of the wedge and prior swing high of 2.26 would then be next on the agenda. Higher up is the initial upside target of 2.37. That price level is the 200-Day MA and the 38.2% Fibonacci. Once the 20-Day MA is broken through the 200-Day line becomes the next moving average target.
If natural gas can maintain current levels or advance further into the end of August, it has a chance to complete a bullish candlestick pattern set up on the monthly time frame. Notice that there has been a minor bullish divergence recently with the relative strength index momentum oscillator (RSI). As the price of natural gas has continued to fall the RSI has begun to trend up.
Solid Support Seen at Lows
The recent retracement low completed a 78.6% retracement and a successful test of a prior support zone. Given the bullish reaction today, it looks like that could be the bottom for some time. This puts natural gas in a position to eventually once again test resistance at the top trendline. That may help draw buyers as this new test may have greater success than the prior attempt.
Since the possibility of an eventual upside breakout exists, the strong bullish momentum that we saw today and yesterday may continue to propel natural gas higher. If the 200-Day line is exceeded to the upside the 50-Day line at 2.46 becomes a target, along with the 50% retracement level at 2.52.
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Crude Inventories Drop By 3.7 Million Barrels
By: Vladimir Zernov | August 7, 2024
Key Points:
• Strategic Petroleum Reserve increased from 375.1 million barrels to 375.8 million barrels.
• Domestic oil production grew from 13.3 million bpd to 13.4 million bpd.
• Oil markets tested new highs as the rebound continued.
On August 7, 2024, EIA released its Weekly Petroleum Status Report. The report indicated that crude inventories decreased by 3.7 million barrels from the previous week, compared to analyst consensus of -0.4 million barrels. At current levels, crude inventories are about 6% below the five-year average for this time of the year.
Gasoline inventories increased by 1.3 million barrels, while analysts expected that they would drop by 1.8 million barrels. Distillate fuel inventories grew by 0.9 million barrels.
U.S. crude oil imports declined by 729,000 barrels, averaging 6.2 million bpd. Over the past four weeks, crude oil imports averaged 6.8 million bpd.
Strategic Petroleum Reserve increased from 375.1 million barrels to 375.8 million barrels as U.S. continued to buy oil for reserves. Oil prices have recently pulled back towards yearly lows, so U.S. will likely continue to replenish reserves.
Domestic oil production increased from 13.3 million bpd to 13.4 million bpd. This is a surprising development as oil prices have pulled back materially in recent weeks.
WTI oil tested session highs as traders reacted to the EIA report. Interestingly, traders are not worried about rising U.S. domestic oil production. From a big picture point of view, oil markets have calmed down after the recent sell-off, and traders have started to buy the dip. Currently, WTI oil is trying to settle above the $75.00 level.
Brent oil climbed above the $78.00 level amid broad rebound in the oil markets.
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Demand Destruction Hysteria. The Energy Report
By: Phil Flynn | August 7, 2024
It looks like peak oil demand will still be somewhere far out in the future. Despite predictions by organizations like the International Energy Agency (IEA)that oil demand would peak, the fact is that today oil demand is exceeding supply. The IEA as you remember warned that if we kept investing in fossil fuel, we would have a massive oil glut, it seems that the truth has turned out to be the opposite.
The Energy Information Administration said that global oil demand is 103.35 million barrels a day while global oil production is at 102.85 mbpd in June 2024. This comes as the American Petroleum Institute reported a slightly bearish weekly report with a larger than expected 3.31-million-barrel increase in gasoline supplies and crude oil supplies up 180,000 barrels and distillates up 122,000 supplies roughly in line with expectations.
Instead of an oil supply glut we have a supply deficit that may grow wider in the years to come even as the government waste trillions of dollars on electric car subsidies. Even as oil price fretted about the stock market meltdown or correction and fears about slumping demand in China, somehow oil demand is still exceeding supply. Rapid demand growth in India, that according to the latest data increased by 7.4% year over year to a record high 9.653million tons in July, has offset somewhat the demand drop in China.
Reuters reported that China’s daily crude oil imports in July fell to their lowest since September 2022. Reuters records of customs data show, as weak processing margins and low fuel demand curbed operations at state-run and independent refineries. China in 42.34 million metric tons in July, or about 9.97 million barrels per day(bpd), data from the General Administration of Customs showed. India has moved more towards capitalism and China further away from it. And in the US, the world’s largest oil consumer, demand is even better than the Energy Information Administration (EIA) said it was.
The EIA lifted its forecast for 2024 U.S. oil demand by 100,000 bpd to 20.5 million bpd. It left its 2024 world oil demand growth forecast unchanged, with consumption increasing year-over-year by 1.1 million bpd to 102.9 million bpd. The EIA did lower its forecast for 2025 world oil demand to 104.5 million bpd, versus a previous forecast of 104.7 million bpd. Majority of that reduction is due to slowing economic growth in China.
As readers know I’ve been a longtime critic of the International Energy Agency many years ago I called out the agency for losing their vision on energy security. The Financial Times wrote a piece about the International Energy Agency and about the same criticism that I brought up years ago. One of the most glaring points of that article is the differing viewpoints of OPEC and the International Energy Agency on global oil demand.
The FT reported that the IEA and OPEC were once closely aligned on their energy forecast but now have vastly different views of the future of oil. The IEA believes that world well demand will peak in 2029 at 105.6 million barrels a day. OPEC on the other hand, expects to see no peak in the oil demand rising to 116 million barrels of oil a day.
The IEA in the past has been very poor at predicting future oil production. OPEC has a much better track record. So let’s assume that investors believe the International Energy Agency is right and not OPEC. That could be a massive mistake. If we’re investing just enough money to raise global production to 105 million a day and it turns out to be 116 million barrels a day, we’re going to have major problems with the global economy.
Stability on the stock market and the supply squeeze in oil is giving us support even if it appears that Iran is backing off its blustering threats to attack Israel.Some credit diplomacy in Iran’s decision to forgo the attack but I personally believe that they are fearful that if they attack Israel they might get wiped off the face of the earth and the regime will be no more. Some of the military activity overnight may have sent Iran a message. There were reports that last night US and British forces struck Hothi military posts in Yemen.
On the natural gas market as we mentioned, yesterday’s support is being found from the fact that more companies are thinking about cutting production of natural gas and oil to avoid a natural gas glut. The latest report comes from Reuters that says major US natural gas producers are preparing further production cuts in the second half of 2024 after prices sank 40% over the past two months. EQ1 of the top gas producers in the country have embedded about 90 billion cubic feet of strategic curtailments this fall. Apache cut 78 MMCFD of gas production in the second quarter.
The IEA yesterday said that US natural gas production will average about 103.3 billion cubic feet this year that is down from their previous prediction 103 point 8 billion cubic feet produced last year and went downward forecast from July.
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Crude Oil Poised for Rally
By: Bruce Powers | August 6, 2024
• Crude oil may rally after forming a bullish hammer pattern, with potential resistance at key Fibonacci levels and top of a symmetrical triangle pattern.
Crude oil may have reached a bottom on Monday with a new retracement low of 72.24. An intraday bounce followed, leaving a potentially bullish hammer candlestick pattern. Subsequently, an initial upside breakout was attempted today, Tuesday, as crude briefly exceeded Monday’s high of 75.07 before pulling back.
Crude is on track to close below Monday’s high and will not confirm strength of the breakout until there is a daily close higher than 75.07. Heading into Wednesday, today’s high of 75.13 along with the 75.07 high can be watched together for signs of strength.
This Week’s Low May End Bearish Correction
There is reason to believe that Monday’s low may end the bearish retracement and lead to a rally. The decline completed a 78.6% Fibonacci retracement, and it occurred near the lower boundary line of a large symmetrical triangle pattern. Resistance was seen at the top line of the triangle, at the most recent swing high in early-July. Once resistance is seen at the top line of a triangle, a decline to test support around the bottom line becomes a possibility. That turned out to be the case with crude.
Bullish Reversal Signal Above 75.07
A bullish reversal signal will first be indicated on a rally above Monday’s high and then on a move above today’s high. The first area to watch for signs of resistance above Monday’s high should be around the 38.2% Fibonacci retracement at 77.02. A more significant upside price target is then around 78.49. That is the 50% retracement level, and it is confirmed by the 200-Day MA at 78.39.
Higher up presents the 20-Day MA at 79.14, followed by the 61.8% Fibonacci retracement at 79.97. That price area is also marked by the 50-Day MA, which is currently at 79.60. A daily close above the most recent interim swing high of 79.67 would be needed to further confirm a bullish reversal of the retracement.
This week’s low may be the lowest traded price for crude prior to a bullish breakout of the symmetrical triangle formation. Therefore, demand should clearly improve if Monday’s high is exceeded. The chance for a bullish breakout increases as crude gets closer to the apex of the triangle.
Drop Below 72.24 Turns Outlook Bearish
The above bullish scenario changes if yesterday’s low of 72.24 is exceeded to the downside and the price of crude oil stays below that support area. After that the 88.6% Fibonacci retracement is at 70.11. A little lower is marked by two Fibonacci measurements suggesting potential support from 69.57 to 69.46.
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Natural Gas Bullish Reversal Triggers Amid Downtrend
By: Bruce Powers | August 6, 2024
• Natural gas triggered a bullish reversal on Tuesday, breaking above 1.97 and reaching a three-day high of 2.03, with key resistance at 2.15.
Natural gas triggered a bullish reversal on Tuesday on a breakout of Monday’s hammer candlestick pattern. The breakout triggered above 1.97 and put natural gas on track to test initial resistance levels within the downtrend. A high of 2.03 was reached today, putting the price of natural gas at a three-day high. Since it remains in a downtrend, higher prices must be reversed before there are sustainable bullish signs. Nonetheless, natural gas will complete a higher daily high and higher daily low today.
Initial Resistance at 2.11
Initial resistance levels start with the 20-Day MA at 2.11. However, the most recent interim swing high of 2.15 carries greater significance as it makes up part of the downtrend price structure of lower swing highs. A rise above 2.15 opens the door to the next higher interim swing high of 2.27. Once there is a rise above daily close above the 20-Day MA natural gas will be showing indications of a bullish reversal. Further signs of strength will then be needed.
Potential Bullish Falling Wedge
An enhanced view is provided once a falling bullish wedge is identified on the chart. The pattern is bordered by two orange trendlines. It is a bullish pattern as it shows sellers becoming exhausted, which creates space for buyers to take back control. Nonetheless, a breakout trigger would be needed. That is provided on a rise above the top boundary line of the pattern. There are a couple things to be aware of regarding this pattern in natural gas. First, a bullish breakout should be accompanied by strong bullish momentum. Enough to quickly break above the 20-Day line.
Also, the wedge pattern may not be done forming. There may be more of the pattern to complete before a bullish breakout is ready to trigger. If so, natural gas could fall to its next lower target zone that begins at 1.85 yet maintain the parameters of the falling wedge. The lower target zone is identified down to 1.80. If today’s bullish reversal fails before another bullish reversal is triggered, then natural gas is likely heading to the lower price zone before the correction is over.
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Constellation Energy $CEG $6.1 Million OTM Call LEAP
By: Cheddar Flow | August 6, 2024
• $CEG $6.1M OTM Call LEAP
Super unusual amount of premium for a ticker that barely receives flow
This whale is bullish on energy
*Above the Ask & Bought to Open*
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The Energy Report. Recession Fears and Iran Cooling
By: Phil Flynn | August 6, 2024
Recession fears are cooling off as well as the risk that Iran will attack Israel anytime soon. Perhaps diplomacy had Iran change their mind about a direct attack against Israel or maybe it was because they know that if they did it might be goodbye to the Iranian regime. Iran knows in a direct confrontation with Israel they would lose, and they did not like the fact that Israel was relishing the opportunity to have an excuse to take out all of Iran’s nuclear and oil producing capabilities.
Yet Iran, flush with cash, continues to add instability in the world by funding terror groups creating global instability. And while the Biden administration may take credit for the diplomatic dance that held back the Iranian attack, it was the Biden administration failing to enforce sanctions and freeing up billions of dollars provided Iran the capabilities to create havoc in the world. The reality is that Iran will continue to try to destabilize Israel and continue to pick away at their ultimate goal which is “death to America” and western civilization.
Iran has been more emboldened under Biden, leading to bad consequences and increased risks for American Military Forces. Reuters reported that, “at least five U.S. personnel were injured in an attack against a military base in Iraq on Monday, U.S. officials told Reuters, as the Middle East braced for a possible new wave of attacks by Iran and its allies following last week’s killing of senior members of militant groups Hamas and Hezbollah. One Iraqi security source said the rockets fell inside the base. It was unclear whether the attack was linked to threats by Iran to retaliate over the killing of the Hamas leader. The U.S. officials, who spoke to Reuters on condition of anonymity, said one of the wounded Americans was seriously injured. The casualty count was based on initial reports which could still change, they said.
Now oil prices are back on the rise as everyone asks whether the worst is over for the stock market. Despite the job market jitters and the unwinding of the yen carry trade, the sense is that the data while slowing is still from recessionary. While some data and measurements suggest a recession is coming or may be already here, it is not being backed up by the oil economic reports and the oil demand data.
Yesterday Fed Officials like Chicago Fed President Austin Goolsby seemed to give the market stability by suggesting that the market action was overdone, and the Fed would fix it if need be. Talk of an inter meeting Fed cut also seemed to be less likely after the Institute for Supply Management came in at a higher than expected 51.4% last month from 48.8% in June. The June reading was the lowest since May 2020 and the rebound this month shows that last month’s number was impacted by weather and other transitory factors.
This morning Caterpillar reported better than expected second quarter earnings that was a surprise considering the fact that many thought that the agricultural sector was in bad shape. This is not feeding into the recession scenario.
Don’t let the sun go down on me but it is going down on green new deal stocks. Javier Blass at Bloomberg reports that, ”SunPower, once a venerated name in the US solar industry, has filed for bankruptcy. TotalEnergies is the majority shareholder. In 2021, at the peak of the ESG bubble, SunPower was worth >9 billion; yesterday, it was ~$200 million.”
Remember how the Biden administration lauded California for their forward-thinking green energy policies? John Kemp at Reuters pointed out that California’s residential electricity customers paid twice as much per kilowatt-hour as those in Texas in 2023. California residential power prices have increased at a compound average rate of almost 6.0% per year over the last decade compared with an increase of just under 2.4% per year in Texas.
The biggest comeback story in yesterday’s oil market really was gasoline futures that closed higher and a big run up in the gasoline crack spread when all of a sudden gasoline demand seemed to rebound at a time when everybody thought it was easing. And it’s been focused on potential supply risk coming from the Israeli Iranian conflict. We saw that Libya’s the Sharara oil field, Libya’s biggest, halted crude production due to anti-government protests and security concerns. The Sharara oil field was producing 270,000 bpd before it was shut down.
Tonight, we will get the American Petroleum Institute supply report. We’re hearing mixed signals from many of the analysts, but we expect to see a drawdown of 2,000,000 barrels in crude oil a 2,000,000 drawdown in gasoline inventories and a 2 million barrel draw down in distillates. Refineries will see lower activity down 0.5%.
Traders still have to be on guard. If the market gives up the recovery gains but as wicked as the market actions seem to be, it’s looking more and more like a much-needed correction. Regardless, it all but assures us that we will get that much needed interest rate cut in September and it gives the Fed to go bigger if they want to. That should provide us with a floor for oil unless the market totally melts down. But a total meltdown at this point is looking less likely.
Natural gas is still getting pressure, hurricane Debbie did shut down some terminals temporarily but it’s the power outages it’s really going to take its toll on natural gas. Massive flooding could cause more power outages in the days ahead. Let’s keep the people impacted by the storm in our prayers.
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Natural Gas Faces New Lows Amid Bearish Retracement
By: Bruce Powers | August 5, 2024
• After hitting a new low of 1.88, natural gas remains at risk of further declines, eyeing the 1.85 to 1.80 support zone.
The bearish retracement in natural gas continued Monday with a fall to a new trend low of 1.88. An intraday bounce followed but natural gas remains at risk of testing lower price levels. Today’s decline dropped below the 1.92 bottom of a support zone.
Notice that on Friday support was found at 1.92, the low of the day, followed by a bounce. At the day’s low the price of natural gas was down by 1.28 points or 40.2% from the most recent swing high at 3.16 (A). This is the second largest correction since March 2023 swing high. This factor by itself is enough to indicate that the decline is getting close to bottoming.
Lower Down is 1.85 to 1.80 Support Zone
Given that the next identified potential support zone is lower down from around 1.85 to 1.80, it seems likely that natural gas may at least touch the support zone before bottoming. The support zone begins at the completion of a gap fill at 1.85 and is followed by the completion of a falling ABCD pattern at 1.83. That is where the CD leg of the downtrend is extended by 200% of the price change in the AB leg of the pattern. The lower price level is the middle of the symmetrical triangle bottoming pattern.
Regardless of the potential to test the lower support zone, a signal is needed. A drop below today’s low triggers a bearish continuation of the retracement. How natural gas reacts upon encountering the support zone should be telling and provide clues as to what is next.
Bounce Indicated Above 1.97
Alternatively, today was the third day of lower daily highs and lower daily lows. If there is a rally above today’s high of 1.97, natural gas is indicating a likely bounce is coming. The 20-Day MA is now at 2.13 and the most recent swing high of is close by at 2.15. If natural gas can rise above each of those price levels a bullish reversal will be confirmed. That swing high is also the weekly high from last week. Lower price levels to watch for resistance include the prior swing high at 2.00. Keep in mind though, that a bounce from current levels is taking place within a clear downtrend.
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Stormy Landing. The Energy Report
By: Phil Flynn | August 5, 2024
Petroleum markets are giving up gains as the hoped for soft economic landing is starting to look less likely. The possibility of war in the Middle East is getting real with Iran threatening to retaliate against Israel for taking out a Hamas leader. Israeli seems to be suggesting to Iran to go ahead and make their day and even reported that they might take out Iran’s oil fields.
Netanyahu warned Iran saying, ‘We are ready, we’ll exact a heavy price for any aggression.” The US said they believe Iran could attack Israel within next 24 to 48 hours according to reports and sent ships into the region.
Bloomberg is reporting that, “Iran signaled it wants to avoid all-out war with Israel, perhaps because they have a soft spot in their heart for their money-making oil fields. Reuters is reporting that Iran is not looking to escalate regional tensions but believes it needs to punish Israel to prevent further instability, the country’s foreign ministry spokesperson said.
Despite these risks we are seeing markets melt down in a risk-off mode. The stock market falling as the jobs report has the market convinced that the Fed once again fell behind the curve and the talk of the massive unwinding of the Japanese carry trade.
The monthly jobs report on Friday saw an increase of just +114,000 non-farm jobs versus Wall Street’s expectations for a gain of +180,000. Plus, we saw downward revisions for the previous month down from 179,000 to 206,000 initially. There was also a notable jump in the unemployment rate to 4.3% from +4.1% previously. This fear along with mixed data overseas is putting markets in a risk off mode.
The unwinding of the yen carry trade is part of thew weakness but weak job data in the US has the market believing that the Fed is once again behind the curve.
This comes against a backdrop of other supply issues. Reuters reported on Saturday that protesters at the field had forced the personnel at the field to begin winding down production, citing two unnamed engineers working at there. Sharara has a capacity of 300,000 bpd.
Bloomberg reported that Saudi Arabia raised the price of its flagship crude to Asia for the first time in three months, a tentative sign that the kingdom remains confident about demand in the world’s largest importer.
State-owned Saudi Aramco raised the September official selling price of Arab Light crude for customers in Asia by 20 cents to $2 a barrel above the regional Oman-Dubai benchmark, according to a price list seen by Bloomberg. Still, it was less than the increase of 50 cents forecast in a Bloomberg survey of five traders and refiners.
There were significant cuts for other regions. In Europe, the kingdom slashed its Arab Light price by $2.75, the biggest reduction since the depths of the Covid-19 pandemic. The equivalent price in the US was cut by the most since February.
The oil and product trade is going to be cautious as the market tries to get a handle on how bad the global market meltdown is going to be. Our expectations are that this is a major correction and not a crash but until the market gets more confidence, it will be a rocky road. Look to buy options.
Natural gas is also getting caught up in the oversupply situation economic instability doesn’t help the market mood. On top of that Hurricane Debbie didn’t really impact production or exports. Fox Weather reported that – Hurricane Debby made landfall early Monday morningalong Florida’s Big Bend, blasting the state with flooding rain, damaging winds and life-threatening storm surge.
The Category 1 storm hit near Steinhatchee about 7 a.m. ETwith winds estimated at 80 mph. Shortly after landfall, power outages skyrocketed to above 250,000 utility customers in the Sunshine State.
By midweek, the storm is expected to dump extreme amounts of nearly 2 feet of rain on parts of Georgia and South Carolina.
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Fears of a US recession appear to outweigh the rising geopolitical risk. Oil prices can fall in this deflationary environment. However, an actual attack on Iran's oil refineries could quickly change everything.
Commodity price changes over last year...
By: Charlie Bilello | August 3, 2024
• Commodity price changes over last year...
Cocoa: +112%
Coffee: +38%
Gold: +25%
Silver: +19%
Copper: +7%
Zinc: +6%
US CPI: +3.0%
Aluminum: +2%
Lumber: +1%
WTI Crude: -8%
Brent Crude: -8%
Wheat: -16%
Gasoline: -17%
Cotton: -19%
Corn: -19%
Natural Gas: -21%
Soybeans: -22%
Heating Oil: -23%
Sugar: -25%
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | August 1, 2024
• Following futures positions of non-commercials are as of July 30, 2024.
WTI Crude Oil: Currently net long 247.2k, down 39.6k.
West Texas Intermediate crude tumbled 4.7 percent this week to $73.52/barrel. After rallying for four weeks in a row and peaking at $84.52 on July 5th, this was the fourth consecutive week of decline.
This week’s drop followed several unsuccessful attempts last week – as well as this week – to reclaim the 200-day moving average ($78.40). Thursday, the crude tagged $78.88 intraday before reversing lower hard; Friday was even worse. With this, WTI has fallen at the low end of a months-long range between $71-$72 and $81-$82. This support is unlikely to give way right away.
In the meantime, US crude production in the week to July 26th was unchanged at record 13.3 million barrels per day for the fourth week in a row; the level was previously hit seven times from last December to February. Crude imports increased 82,000 b/d to seven mb/d. As did stocks of distillates, which grew 1.5 million barrels to 126.8 million barrels. Stocks of crude and gasoline, however, fell 3.4 million barrels and 3.7 million barrels respectively to 433 million barrels and 223.8 million barrels. Refinery utilization decreased 1.5 percentage points to 90.1 percent.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | August 3, 2024
• Top Movers
Palm Kernel Oil 3.18 %
Soybean Meal CBT Futures 2.66 %
Tokyo Rubber Futures 2.02 %
Coconut Oil 1.94 %
LME Tin (99.85%) 1.72 %
• Bottom Movers
London IPE Gas Oil Futures 3.77 %
NY Crude Oil Futures 3.66 %
NY Heating Oil Futures 3.65 %
London IPE Brent Crude Spot 3.41 %
London IPE Brent Crude Futures 3.41 %
*Close from the last completed Daily
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Crude Oil Continues to Look Soft
By: Christopher Lewis | August 2, 2024
• The crude oil markets have fallen again this week, as we continue to see a lot of concerns when it comes down to the overall global economy.
WTI Crude Oil Weekly Technical Analysis
The West Texas Intermediate crude oil market initially tried to rally but gave back gains and we have now gotten absolutely hammered. We have broken outside of the symmetrical triangle that I had been watching, so that is clearly something that is no longer important in this market. That being said, the market, I believe, still has a lot of support underneath. And when you look at the weekly chart, although it is very negative, the reality is there’s a lot of work to actually break the overall supportive region.
If we were to break down below the $70 level, then it’s possible that we could or sell. It’ll be interesting to see how this behaves. I think we are still very much in the range. And with that being the case, it just looks like we’re going to spend the rest of the summer just bouncing around. Now where the actual bottom of the range is, I believe is probably closer to the $67.50 level. The market I think probably sees a lot of resistance at the $90 level. So, when you look at this, it’s just the same as last year.
Brent Crude Oil Weekly Technical Analysis
The same thing has happened in the Brent market. That’s not a huge surprise. I look at the 7250 level as potential support in the Brent market as it is important. I also believe that somewhere near the $92.50 level is the absolute top in the market. When you look at last year, it looks very much like this year. We’re just going back and forth in this same range. And with this, I think sooner or later you will see a bounce, but I wouldn’t get aggressive at this point in time.
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Two-Font War. The Energy Report
By: Phil Flynn | August 2, 2024
Petroleum prices seem to be fighting too different battles causing wild swings in the market. Conerns about the economy versus the stark reality that supplies are still tightening against a backdrop of incredible historic geo-political risks. Oil prices were riding high after a very bullish Energy Information Administration (EIA) reported another crude oil drawdown and reports that Iran vows revenge on Israel could create a multitude of scenarios that could imperil oil supply.
Fox News reported that Ayatollah Ali Khamenei has commanded Iranian forces to launch a “direct” attack against Israel, according to a report Wednesday. Three Iranian officials confirmed the situation to the New York Times. The news comes hours after Hamas’s leader, Ismail Haniyeh, was assassinated in Tehran on Wednesday.
Yet a stag-flationary reading from the ISM on manufacturing caused a massive retreat in stocks that drug down petroleum. Lower expansion, less jobs and higher prices paid freaked out stocks putting more importance on today’s monthly unemployment report
The crude oil market is also preparing for an extension of OPEC production cuts. Yesterday’s JMMC meeting seems to suggest that the status quo would stay in place. OPEC Plus is still talking about tapering off some of the production cuts in the last part of the year. Yet unlike the last oil taper tantrum, the market didn’t seem as concerned.
Russia is showing more signs of cutting back production partly because they keep getting attacked by Ukraine but also because they want you do compensation cuts for their previous overproduction. Bloomberg News reports that Russia’s oil firms have reduced pace of drilling from last year’s record as the nation deepened its OPEC+ production cuts. Rigs drilled 14,370 kilometers (8,930 miles) of production wells in Russia from January to June, 2.5% lower than the same period a year ago, according to industry data seen by Bloomberg News.
The bottom line here is that we believe that the fundamentals for oil are still extremely bullish. Concerns about the economy I think are overstated at this point mainly because the Federal Reserve will more than likely cut rates in September.
China demand continues to be a concern. JODI reported today that China’s oil demand fell by 108 kb/d in May m/m while product exports rose by 159 kb/d.
Gas pains in the Midwest could be getting some help. The AP reported that, “The Environmental Protection Agency is issuing an emergency fuel waiver to help alleviate gasoline shortages in four Midwest states after the shutdown of a refinery in Illinois. Exxon Mobil shut down its refinery in Joliet, Illinois, last month after a power outage when tornadoes and severe storms swept through the region. Power has been restored, but it can take weeks to restart a facility like the Exxon Mobil refinery about 40 miles outside of Chicago, which can produce about 9 million gallons of gasoline and diesel fuel per day. In addition to Illinois, the waiver was approved by the EPA for Wisconsin, Indiana, and Michigan.
Chevron has had enough of California even though Chevron has deep roots in California. The adversarial relationship they’ve had with Gavin Newsom has forced the company to move their company’s headquarters from San Ramon CA to Houston TX.
Fox weather is reporting that Florida remains on alert for torrential rains as invest 97 L takes aim at the eastern Gulf of Mexico. This storm will be watched very closely as it couldn’t impact oil exports as well as offshore production. That’s why it’s very important that you download the FOX weather app to keep up with any changes in the storm.
Natural gas could get support from the storm but fell below $2.00 after the EIA reported, “Working gas in storage was 3,249 Bcf as of Friday, July 26, 2024, according to EIA estimates. This represents a net increase of 18 Bcf from the previous week. Stocks were 252 Bcf higher than last year at this time and 441 Bcf above the five-year average of 2,808 Bcf. At 3,249 Bcf, total working gas is within the five-year historical range.
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Natural Gas Faces Potential Bearish Breakdown
By: Bruce Powers | August 1, 2024
• Natural gas faces pressure near $2.00, risking a drop to $1.92 and potentially $1.68, with critical support levels being tested.
Natural gas continued to consolidate on Thursday following a failed attempt to advance higher yesterday. It is set to close in a weaker position today, near the lows of the day with a lower daily low and lower daily high. Trading continues near the lows of the day (1.965) at the time of this writing. That price level marked horizontal resistance at the top of the bottom symmetrical triangle formation in March.
It marks a full swing back to test the 2.00 zone as support. That zone has maintained support for more than two weeks, yet it is at risk of failing. Natural gas has been unable to sustain a rise from the 2.00 price area since it was first reached on July 17. Therefore, it remains at risk of testing lower support levels.
Drop Below 1.99 Points Lower
A decisive drop below the trend low at 1.99 puts the 1.94 to 1.92 target zone in sight and crude is heading there now. The lower level is the completion of a 78.6% Fibonacci retracement, and it is the top of a gap from late-April. Since the gap ends in that price zone and since gaps will typically fill eventually, this gap may also fill. If natural gas falls to 1.92 and continues to show signs of weakness, it may fall further and will fill the gap at 1.85, based on one measure. Alternatively, the gap fills around 1.68. That 1.68 price area beings a potential support zone down to an estimated 1.80.
Monthly Low at Risk
Last month’s low support was 1.99. Therefore, a decline below 1.99 has triggered a bearish monthly signal and a daily close below that price level will confirm weakness. If that happens, certainly the lower price zones are at risk of being tested as support before natural gas bottoms.
It is also critical to be aware of support for the month of June, which was at 1.91. Subsequently, a decline below 1.91 will trigger a second bearish monthly signal and therefore increase the chance the natural gas reaches the lower 1.68 price zone.
Bearish Weekly Patterns
Last week ended with a bearish shooting star candlestick pattern and a weekly close at the low for the week. Further, this week natural gas is on track to complete a similar pattern. Unless Friday brings a clear rally in natural gas, it will close in a weak position on the weekly time frame.
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Crude Oil Faces Resistance Near 50-Day Moving Average
By: Bruce Powers | August 1, 2024
• Resistance at 79.67 halts crude oil rally; a bullish breakout depends on overcoming the 50-Day MA and key resistance levels amid a large symmetrical triangle formation.
Crude oil found resistance on Thursday at a high of 79.67 before it turned down. That was another test of resistance around the 50-Day MA. Notice that the 50-Day MA has marked an area of resistance for the past since July 22. Therefore, a breakout above the 50-Day line at 79.89 for a sign of strength that may be sustainable. This week’s high was 79.67 and it is an earlier pivot for signs of strength. Since this week is not yet over, the high for the week could change.
Signs of a Possible Bottom Remain
A 78.6% Fibonacci retracement looks to have been completed on Tuesday as it was followed by a daily bullish reversal. Given the bullish reaction from support, it is likely the correction is complete. Of course, a drop below the swing low at 75.42 would indicate that is not the case and lower prices will likely be tested support.
Large Symmetrical Triangle Formation
The swings in crude have been narrowing over the past six months or so it as traces out a symmetrical triangle formation. This is a consolidation pattern that encompasses a generally choppy trading environment. This needs to be considered currently as the trading range in crude has continued to narrow. As crude progresses towards the apex of the triangle it gets closer to breaking out. The apex of the full triangle is in February 2025, however there is an internal triangle as well that ends in December.
Unless there is a decline below the June swing low at 72.73 the expectation is that gold will likely resolve itself to the upside eventually, with a bullish triangle breakout. If so, it could make a new attempt with the current developing rally from Tuesday’s swing low at 75.41. It is possible that the low was the best price before an upside breakout.
Breakout Above 79.67 Points to Higher Prices
This week’s high was 79.67 and last weeks was 80.35. An advance above each of those price levels will indicate strengthening in the price of crude oil and signal an upside breakout that could lead to higher prices. However, keep in mind the 50-Day line at 79.89. There is also the 20-Day MA at 80.38 and there might be signs of resistance around that line. Nonetheless, it is an important potential pivot level.
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Bullish Star Alignment. The Energy Report
By: Phil Flynn | August 1, 2024
Are the stars out tonight? Some days all the bullish stars align. Some call it a Doja Star bottom but really what we are seeing is the price of oil and products acknowledging the increasingly bullish underlying fundamentals. Oil and products are back on an upward trek as the Energy Information Administration (EIA) reported that demand was much better than previously reported. In fact, it broke a record. Now they tell us.
The EIA also reported that US oil production fell in the month of May for the first time since January. That was less than previously reported. This comes as weekly crude oil stocks in the US fall for the fifth week in a row against a backdrop of rising tensions in the Middle East and the possibility of a wider war and the oil sellers who sold oil on hopes of an Israeli Hamas ceasefire must change course. Those who thought that the Fed could not cut rates this year also have to change course after changes to the Fed statement and comments by Fed Chairman Jerome Powell.
The EIA acknowledged that they had underreported gasoline and oil demand by a mile. In fact, as reported by Reuters, “U.S. oil demand rose to a seasonal record in May as American cars guzzled the most gasoline since before the pandemic, data from the U.S. Energy Information Administration (EIA) showed on Wednesday.”
Total crude oil and petroleum product supplied, the EIA’s proxy for demand, rose by 792,000 barrels per day (bpd) month-over-month to 20.80 million bpd in May, the data showed. That is the highest monthly figure since August, and a record high for the month of May. Reuters wrote that, “The data marks a significant reversal in the trajectory of U.S. oil demand: weekly updates from the EIA had pegged oil demand for May at just around 20 million bpd.
Demand for gasoline alone rose to a post-pandemic high of 9.40 million bpd, the most since August 2019. The previous post-pandemic high for U.S. gasoline consumption was 9.36 million bpd in June 2021. Gasoline demand in the U.S. typically peaks during the summer driving season. This data and the adjustments should have traders and hedgers as to whether they are still overestimating US oil production and underestimating petroleum demand.
In fact, based on the EIA weekly Petroleum Status report data, it is likely that they still are. Based on the data the supply deficit is starting to speak for itself.
According to the EIA report, petroleum demand is higher in every major category and supply is below average in every major petroleum category.
The EIA reported that U.S. commercial crude oil inventories decreased by 3.4 million barrels from the previous week. At 433.0 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year.
Total motor gasoline inventories decreased by 3.7 million barrels from last week and are about 3% below the five-year average for this time of year.
Distillate fuel inventories increased by 1.5 million barrels last week and are about 7% below the five-year average for this time of year.
On the demand side, the EIA said that total petroleum demand over the last four-week period averaged 20.5 million barrels a day, up by 1.4% from the same period last year. Motor gasoline demand based on product supplied averaged 9.2 million barrels a day, up by 4.2% from the same period last year.
Distillate fuel demand based on product supplied averaged 3.7 million barrels a day over the past four weeks, up by 3.2% from the same period last year.
Even Jet fuel demand was up 1.2% compared with the same four-week period last year.
Part of this report also suggests that U.S. oil production is starting to peak and could start to fall. We’ve seen a massive drop in rig count and regulatory uncertainty has kept many investors away from investing in drilling. If the polls suggests that Kamala Harris could enter the White House it could be a devastating blow for investment in U.S. oil and gas.
It is no secret that Harris is one of the most anti-fossil fuel politicians and pro New Green Deal in Washington and that is saying a lot. Those that put forth the idea that Biden had no impact on U.S. oil and gas production because we saw US oil and gas producers drive production to a record high really don’t understand the lag time it takes to bring the oil and gas to the market.
There is no doubt that most of the production gains were made on private land. What is more what we are seeing in the data is the damage from Joe Biden’s anti US energy policies. The supply deficit we are going into is partly due to the energy policies put in place by the Biden administration.
In fact, I would argue that the geopolitical risk factors that we are seeing today in oil have a lot to do with Joe Biden’s foreign policy. I warned early on that it was a mistake to engage Iran and it was foolish to resurrect the flawed Iran JCPOA deal. The Biden administration freed billions of dollars of frozen assets for Iran and allowed them to skirt sanctions giving them more billions. That among other things has allowed Iran to fund Hamas and Hezbollah and the Houthi rebels.
That funding of Hamas October 7th horrific terror attack on civilians in Israel. As Israel moves to defend itself and try to rescue civilian hostages it is raising the risk of a larger regional war. The Wall Street Journal reported that, “Israel has determined that it killed top Hamas military commander Mohammed Deif in a July airstrike, the country’s military said Thursday, eliminating a planner of the Oct. 7 attacks and a militant it had tried to kill for decades.
Deif is the most senior military leader of the U.S.-designated terrorist group whom Israel says it has killed in more than nine months of fighting in the Gaza Strip and the third high-ranking enemy of the country to be declared dead in 48 hours. Israel said Tuesday it had killed Fuad Shukr, a top commander with the Lebanese militia Hezbollah, in an airstrike in Beirut, and Hamas political leader Ismail Haniyeh was killed in a mysterious strike just hours later in Tehran. Those two attacks provoked furious responses from Hezbollah and Iran and have sparked concerns of an escalatory spiral that could lead to a wider Middle East War.
Reuters is reporting that, “Top Iranian officials will meet the representatives of its regional allies to discuss potential retaliation against Israel after the killing of the Hamas leader in Tehran, sources told Reuters.
The final bullish aspect is that the Fed is more than likely going to cut rates in September which we already knew but after the Fed statement yesterday pretty much confirms that it’s the direction we’re going. More focus on the Fed dual mandate and not just inflation pretty much ensures a rate cut unless the data changes its stars alignment.
The natural gas forecast backed off after a pretty good run-up on concerns about the heat wave not being as hot and the possibility that the inventories will come in higher than expected. Reuters is reporting that U.S. utilities likely added a near-normal 31 billion cubic feet (bcf) of natural gas into storage last week, a Reuters poll showed on Wednesday. That, compared with an injection of 15 bcf during the same week a year ago and a five-year (2019-2023) average increase of 33 bcf for this time of year. In the prior week ended July 19, utilities added 22 bcf of gas into storage USOILN=ECI. If correct, the forecast for the week ended July 26 would increase stockpiles to 3.262 trillion cubic feet (tcf), about 8.8% above the same week a year ago and 16.2% above the five-year average for the week. The U.S. Energy Information Administration (EIA) will release its weekly storage report at 10:30 a.m. EDT (1430 GMT) on Thursday.’
There were 90 total degree days (TDDs) last week compared with a 30-year normal of just 91 for the period, according to data from financial firm LSEG. TDDs measure the number of degrees a day’s average temperature is above or below 65 degrees Fahrenheit (18 degrees Celsius) to estimate demand to cool or heat homes and businesses.
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Natural Gas Tests Downtrend Line, Bearish Outlook Persists
By: Bruce Powers | July 31, 2024
• Natural gas faced resistance at 2.15, maintaining the bearish trend. Key lower support levels are at 1.94-1.92 and 1.85-1.80.
Natural gas rose to a four-day high of 2.15 on Wednesday before encountering resistance. The high was a successful test of resistance around the internal downtrend line. Subsequently, sellers took back control and drove the price of natural gas to lows for the day.
At the time of this writing, it continues to trade near the lows of the day. Since the attempt to go higher was met by resistance at the trendline, the downtrend may continue to progress. There have been no sustainable bullish reversal signals and consolidation continues near the lows of the trend.
Resistance at Trendline Sustains Bearish Sentiment
Encountering clear resistance at the trendline is a bearish sign and therefore the bear trend is retained. Lower prices are at risk of being tested as support but first a bearish confirmation signal is needed. That would not be provided until there is a drop below the trend low of 1.99. Lower targets would then be in line to be tested. There are two lower target zones. The first is from 1.94 to 1.92, consisting of an interim swing high (now potential support) and the 78.6% Fibonacci retracement, respectively.
1.85 Begins a Price Range
Lower down is a larger potential range of support starting at 1.85. If reached, the upside gap from late-April will be filled. The April swing high is near the completion of a descending ABCD pattern with the CD leg extended by 200% of the AB portion of the decline. It is at 1.83. Finally, the mid-point of the bottom symmetrical triangle pattern at 1.80 is marked as a potential support level.
Rally Above 2.15 Needed for Bullish Sign
Bearish implications will start to change if there is a clear bullish signal. Once Wednesday is complete, a bearish signal will be indicated on a rally above today’s high of 2.15. Natural gas would then be above the downtrend line and about to encounter potential resistance around the purple 20-Day MA, currently at 2.19. Notice that the 20-Day line is falling towards today’s high. If a bullish breakout occurs once the two lines have converged or are close, a stronger signal will be indicated. Further, once there is a daily close above the 20-Day line, natural gas should be ready to progress higher.
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The Fossil Fuel Comeback. The Energy Report
By: Phil Flynn | July 31, 2024
Fossil fuels are making a big comeback as big draws across the board shocked the market back into a semblance of realty. The American Petroleum Institute (API) reported a trifecta of draw down with crude falling by a more than expected 4.495 million barrels and gasoline down 1.917 million barrels and distillates down 322,000.
Yet in a larger sense the fossil fuel comeback is even larger than that as the smart money gets that the need for fossil fuels is growing and despite the shame that some tried to put on investors into fossil fuels, it may be one of the hottest sectors to invest in.
Many investors are waking up and are taking a cue from Charlie Gasperino’s new book “Go Woke, Go Broke: The Inside Story of the Radicalization of Corporate America” and embracing the realities of this brave new world called reality and the economy of the future, power.
Naureen Malik at Bloomberg reported, “just a stunning auction — prices soared to all-time highs for the PJM grid, every gas and coal plant offered into the auction was selected, and Baltimore/Virginia hit price caps of over $400 for every megawatt supplied for every day.” Malik wrote that, “Power prices on the biggest US power grid are about to hit a record-high amid a wave of plant retirements and surging demand, thanks in part to new data centers being built.
Generators that provide electricity to the 13-state grid that stretches from New Jersey to Illinois will get a record $269.92 per megawatt-day from utilities to provide capacity over a 12-month period starting in June, according to results of an auction by grid operator PJM Interconnection LLC disclosed Tuesday. That’s more than a ninefold increase from $28.92 in last year’s auction.
“The market has spoken and it is saying you are going to have to pay a lot more for reliable power,” Paul Patterson, a power market analyst for Glenrock Associates, said in an interview.
Malik said that, “The results of the auction underscore the challenges of the energy transition: cheap solar and wind power are making older plants, including coal-fired generators, less competitive, but a sudden burst of electric demand to meet the needs of factories and data centers to enable artificial intelligence along with broader electrification risks straining grids. “We do believe those higher prices will send a clear investment signal” to maintaining existing resources and building new ones, Stu Bresler, PJM’s executive vice president of market services and strategy, said in a media briefing.
The other factors that are bottoming oil and products are a renewed focus on geo-political risks. The hopes that Israel stated response against the Hezbollah attacks would lower tensions and keep cease fire talk between Hamas and Israel have been dashed.
The Wall Street Journal said that, ”Israel killed one of Hezbollah’s top military leaders in an airstrike in Beirut intended as retaliation for a Saturday attack on the Israel-controlled Golan Heights that killed 12 young people, a response that came amid fears of a widening war in the Middle East. The strike on Fuad Shukr, the highest-ranking leader of the group to be killed in years, risks sharply escalating tensions between Hezbollah and Israel.
Qatar’s Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani, the mediator in the ceasefire reacted by saying, “How can mediation succeed when one party assassinates the negotiator on the other side? Peace needs serious partners & a global stance against the disregard for human life.
Egypt is warning this morningthat the escalation along with no progress in the Gaza ceasefire talks will complicate the situation. Iran supreme leader is now saying that he’s considering avenging the death as a duty as he was killed in Iran.
So the reasons to be pushing fossil fuels further to the downside on the last day of the month are running out. Yet as bullish as these developments seem to be you can always count on the Fed to add a little extra drama.
The first thing oil traders will have to deal with is the Energy Information Administration (EIA) report that comes out at 9:30 if it generally confirms what we saw from the American Petroleum Institute report that should inspire further gains into the market.
Yet that may be tempered by fears of what the Fed may signal or not signal after today’s rate decision at 1:00 PM central time. While most people expect the Fed to stand pat this month, they also expect Federal Reserve Jerome Powell to signal quite strongly that we will get an interest rate cut very shortly.
The Fed does indeed signal rate cuts sooner rather than later. The underlying fundamentals for oil and fossil fuels are extremely bullish. The recent price correction seems to be way overdone and we would expect a retest of the highs over the next month despite concerns about a slowing economy in China and the suspect demand the supply and demand numbers are going to speak for themselves and ultimately we’re starting to see supplies contract.
Natural gas futures are starting to get a boost as the heat is on. Expectations are cooling demand will be through the roof over the next couple of weeks and is keeping the market on edge.
EBW Analytics is reporting that August weather may be the hottest in history, with power burns further amplified by cheap spot gas spurring a further 2.0 Bcf/d of fuel-switching since late June. With Freeport back, August may feature a sub-75 Bcf monthly build.
The production outlook is shifting less bearish with delays to the Matterhorn pipeline and producers highlighting a willingness to curtail supply if prices dip. Still, the market needs tight fundamentals—and low prices to generate supply shut-ins and fuel switching—to narrow surpluses over the next 60-90 days. Short-covering risks pose a chance of non-fundamental upside, however.
With weather being a key factor make sure you download the Fox Weather Ap. Fox weather says that, “A tropical disturbance is being tracked in the Atlantic Ocean for the first time since Hurricane Beryl’s assault on Texas three weeks ago. According to the National Hurricane Center (NHC), a large tropical wave centered several hundred miles east of the Lesser Antilles is producing limited shower activity due to environmental dry air.
“Conditions are forecast to become a little more conducive for development over the warmer waters of the southwestern Atlantic Ocean, and a tropical depression could form late this week while the system is in the vicinity of the Greater Antilles or the Bahamas,” the NHC said in its latest outlook. “Interests in the Greater Antilles, the Bahamas, and the southeastern U.S. should monitor the progress of this system.”
The odds of development have been slowly increasing since the weekend and currently stand at a 60% chance over the next seven days.
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Commodities Daily Market Movers (% Price Change)
By: Marty Armstrong | July 31, 2024
• Top Movers
Cocoa (NYCSCE) Futures 5.44 %
Coconut Oil 4.64 %
NY Natural Gas Futures 4.42 %
Platinum / Gold Ratio 2.56 %
NY Silver COMEX Futures 2.36 %
• Bottom Movers
Iron Ore 62% Fe CFR China (TSI) 3.12 %
Canola Futures 2.71 %
AU - Victoria Base-Load Electricity Futures 2.13 %
London Spot Lead 1.89 %
LME Tin (99.85%) 1.83 %
*Close from the last completed Daily
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Natural Gas Bullish Reversal May Lead to Rising Prices
By: Bruce Powers | July 30, 2024
• After testing recent support levels, natural gas rallied, signaling a bullish reversal and potential rise in prices.
Today’s price action shows a bullish reversal day for natural gas. Natural gas rallied to a three-day high of 2.13 on Tuesday following another test of recent support levels earlier in the session. Support was seen off the day’s low of 1.991. That was a slight decline below the prior retracement low of 1.994.
Earlier in today’s trading session the sellers were in charge, which led to a new trend low. But then the buyers took back control, reflecting strong demand, and took the price of natural gas to a three-day high of 2.13, at the time of this writing.
Bullish Daily Reversal Following New Trend Low
A bullish reversal of a false breakdown is now in process. It is a sign of improving demand and indicates that the price of natural gas may continue to test higher prices. Notice that recent lows were tested as support over the past three days and each time support was retained. Nevertheless, further signs of strengthening will be needed to further confirm improving demand. A daily close at a three-day high, above Monday’s high of 2.10, will provide the next sign of strengthening.
20-Day Moving Average May See Resistance
If natural gas does proceed higher, it will first be heading up into potential resistance around the 20-Day MA, currently at 2.21. The internal downtrend line can also provide a guide. A little higher is a weekly high and the most recent daily swing high at 2.27. Natural gas will need to get above that high before there is greater confidence that it may continue to rise.
I rise above 2.27 will trigger a bullish weekly reversal and take out the lower swing high on the daily chart, a clear indication that the downtrend correction is reversing to a bullish rally. The level of momentum of the rally is an open question. Until there is a bullish breakout above the 2.21 high the downtrend is dominant.
Natural gas could consolidate, and trade range bound around the bottom of the trend yet retain support at the current lows and the 2.21 resistance. To help avoid that scenario, the 2.21 is being highlighted. Once this week is over, this week’s high can possibly be used as a bullish signal.
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Crude Oil Nears Key Support Amid Bearish Correction
By: Bruce Powers | July 30, 2024
• The bearish trend in crude oil persists, nearing critical support levels. Once complete, technical analysis indicates possible eventual upside breakout.
A bearish correction in crude oil continued Tuesday, with crude falling to a new retracement low of 75.42, at the time of this writing. Previously, the price area around the 61.8% Fibonacci retracement at 77.32 retained support for four days last week. Yesterday, crude broke to the downside and the decline continues today. Crude oil looks to be heading to test support around the 78.6% Fibonacci retracement at 75.30. If it fails to hold as support, then the lower internal uptrend line is the next lower target. It can be watched along with the 88.6% Fibonacci retracement level at 74.10.
Moves Closer to a Solid Bottom
Although the expectation for a completion of the bearish retracement last week has failed, today’s decline shows crude oil getting closer to completing the pullback. It has been stuck within a large developing symmetrical triangle consolidation pattern for over six months and the bearish trend continuation this week extends the time for a potential breakout of the pattern. As crude gets close to the apex of the triangle, the closer it gets to a breakout. This makes the upcoming retracement low a possible early entry for an eventual upside breakout of the triangle pattern.
Of course, a bearish breakdown is always a possibility but there is some technical evidence pointing to an eventual upside breakout. Investors will be watching for an upcoming bottom closely as it may provide the best risk versus reward entry for a potential upside bullish breakout. Nonetheless, some will find a rally to test higher price levels within the consolidation pattern also attractive.
Monthly Chart Shows Correction Likely Resolved to the Upside
The more compelling argument for an eventual upside breakout of the triangle comes from the monthly chart (not shown). It shows support congregating around the 200-Month MA since it was hit as support in December 2022. Last month was almost an exact retest of the 200-Month line as support. The low for the month was 72.73 and the 200-Month line was at 73.12.
That’s close for a monthly time frame. Crude strengthened off that low. Further, the 50-Month MA gave a bullish signal last month as it crossed above the 200-Month line. Moreover, there was a bullish reversal signaled this month as crude rallied above June’s high of 83.02 earlier this month. This month’s low remains above June’s low of 72.73.
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Weakness In Different Forms. The Energy Report
By: Phil Flynn | July 30, 2024
Oil prices are shaky as Asian markets are selling off as investors run for cover ahead of big economic reports this week. This comes as the German GDP went into contraction with -1.0 growth as their economy suffers because of its blind following of the green energy agenda. The rest of the EuroZone did a bit better with 0.3% reading beating the forecast of 0.2%, but still weaker than the previous 0.3% growth number
On one hand this data confirms fears about the potential for weakening energy demand but also opens the door for more stimulus around the globe. With the US poised to cut interest rates and China showing a wiliness to do what it takes in a world where the global supply versus demand balance is still tighter than it’s been in years. While the market backwardation has backed off a bit, the margin for error is still razor thin.
And while the market has been downplaying geopolitical risk factors, the Biden administration may be guilted into putting more sanctions on Venezuela after most people believe that Vince Maduro stole the election, even though they desperately want that oil as they head into the US presidential election.
The Biden Team also moved to avoid criticism for their politicization of the Strategic Petroleum Reserve by buying back 4 million barrels for the caverns. Yet that should only tighten US supply more as we most likely will see another draw on crude oil inventories this week.
I am expecting to see a 2-million-barrel drawdown in crude oil, and I expect to see similar drawdowns in products. Last week the EIA said that US crude supply is about 5% below the five-year average for this time of year. Total motor gasoline is about 2% below the five year and distillate fuel inventories are 9% below the five-year average.
Ok I know I slammed BP, but I will give credit where credit is due. Reuters reported that BP increased its dividend and extended its share repurchasing program on Tuesday as it reported a forecast beating second-quarter profit of $2.76 billion, with weak refining offset by stronger oil prices and retail. The result is likely to ease pressure on CEO Murray Auchincloss after BP fell short of profit expectations in the previous two quarters. The 53-year-old Canadian who took office in January, has vowed to revamp BP’s operations and focus on the most profitable ones, mostly in oil and gas.” Let’s hope this is a trend.
August natural gas went off the board below 2 dollars in a sign that many producers are struggling. Associated gas keeps flowing and even with near record demand it’s hard to keep prices high. Part of the problem was the Freeport LNG closure and that was enough to the scales to that ignominious close.
Production of gas may be helped by some reversal of inflation in drilling. Woods MacKenzie reported that after peaking in 2023, Lower 48 well costs are expected to decline 10% in 2024 and 1% in 2025. According to the report, “2024 tight oil costs: the push and pull between efficiency and OFS rates” lower pricing for OCTG, propellant and diesel, combined with substantial drilling and completion efficiency gains, have helped reduce E&P costs. However, additional reduction will be difficult in this environment, as oilfield equipment and services companies (OSF) seek to keep margins high.
EBW Analytics says that national electricity loads sank by nearly 7% week-over-week alongside faltering cooling demand, with steep losses across the Eastern Interconnect and ERCOT overpowering modest load gains across CAISO. Power sector gas burns shed a modeled 1.1 Bcf/d week-over-week. Sinking natural gas spot prices are promoting price-induced coal-to-gas fuel switching, with price-sensitive gas burns up 1.0 Bcf/d relative to the beginning of July. This week national cooling demand may edge higher—but weakness across the South Central and Southeast may linger, limiting power burn gains to 1.4 Bcf/d week-over-week. Still, heat could rebound sharply by 35% from limited weekend levels into Friday and next weekend. Looking forward, talk of an August heat wave and a tropical storm may give the market some support.
The Fox Weather channel is saying that odds increase for tropical depression or storm to form and track toward Florida, Southeast US this week. The odds of development have been slowly increasing since the weekend and currently stand at a 50-50 chance. If the system strengthens into a tropical storm, it will be named Debby – the fourth named storm of the 2024 Atlantic hurricane season. Download the Fox Weather ap to keep up on developments.
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Natural Gas Eyes Resistance After Bullish Rally
By: Bruce Powers | July 29, 2024
• Natural gas rallied to 2.10, marking a bullish reversal, but the overall trend remains bearish with significant resistance ahead.
Natural gas triggered a bullish reversal on Monday as it rallied above Friday’s high of 2.08 earlier during Monday’s trading session to reach a high of 2.10 for the day. This was the first day in five days that natural gas exceeded the prior day’s high. It established a higher daily high and higher daily low for the day. The advance follows a test of recent support earlier in the session at the day’s low of 2.00. Last Friday’s low, and current support for the current decline was at 1.99.
Downtrend Remains Dominant
There is the potential for today’s advance to strengthen further and lead to higher prices. Nevertheless, natural gas remains in a clear downtrend, below both the downtrend line and the 20-Day MA. Downward pressure continues to dominate following last week’s bearish close. On a weekly basis, it completed a bearish shooting star candlestick pattern on the weekly chart (not shown).
Moreover, last week closed at the low of the week and below the previous week’s low of 2.015. This is bearish behavior in that time frame. What this analysis seems to indicate is that, if natural gas bounces higher it remains likely to encounter resistance that turns prices back down for a retest of trend lows and possibly a drop through last week’s low.
Below 1.99 Targets 1.94
If last week’s low is busted to the downside, then natural gas looks to be heading towards a possible support zone from around 1.94 to 1.91. The first price level is a prior minor swing high, while the second completes a 78.6% Fibonacci retracement. Further down is the filling of the gap from April at 1.85, followed 1.83 and 1.80. The 1.80 price level is the middle of the bottom symmetrical triangle pattern, while 1.83 completes a falling ABCD pattern where the CD leg of the decline is twice the price change in the first AB leg.
Resistance Likely at Trendline or 20-Day Line
Today’s high of 2.10 is nearby resistance. If there is a bullish breakout above the high then resistance may be encountered around the downtrend line or 20-Day MA, currently at 2.23. However, last week’s high of 2.27 is a key resistance level as a rally above it will trigger a bullish reversal as a lower swing high comprising the price structure of the downtrend correction would be violated.
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2 Oil Stocks to Watch Amid Presidential Race, Earnings
By: Schaeffer's Investment Research | July 29, 2024
• Chevron and Exxon Mobil will report earnings on Friday, Aug. 2
• Wall Street is weighing how a new president will impact the energy sector
The presidential race is heating up, with Vice President Kamala Harris now the likely Democratic nominee against former President Donald Trump. Investors have been weighing the implications either leadership may have on the energy sector, especially as both Chevron Corp (NYSE:CVX) and Exxon Mobil Corp (NYSE:XOM) prepare to report second-quarter earnings before the open on Friday, Aug. 2.
Chevron stock was last seen down 1.7% to trade at $155.25. Shares ran into resistance at the $164 level earlier this month, while the 80-day moving average also emerged as a level of pressure in the subsequent pullback. CVX is today looking snap a three-day win streak, but still sports a slim year-to-date lead.
Exxon Mobil stock is struggling as well, down 1.1% to trade at $116.03 at last check. While the $120 level has capped rallies since April, the 40-day moving average helped shares bounce. XOM appears to be finding new resistance at $118, but is still up 15.9% this year.
CVX has a solid history of post-earnings reactions, but it could go either way for XOM. The former finished five of the last eight next-day sessions higher, while the latter was lower in the last four.
Regardless of direction, Chevron and Exxon Mobil shares averaged 3.3% and 2.2% moves in the past two years, respectively. This time, the options pits are pricing in a bigger-than-usual swings of 3.8% for CVX, and 3.5% for XOM.
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Democracy And Oil. The Energy Report
By: Phil Flynn | July 29, 2024
Oil prices are coiling in a tight trading range waiting to see if rising geopolitical risks will start to boil over. Israel, responding to Hezbollah attacks in Lebanon and a disputed election in heavy oil producer Venezuela, are just a few of the risks to start this week. If you have any question as to whom the Biden-Harris administration is rooting for in these conflicts maybe these headlines will give you an idea.
Vice President Harris apparently seemed to ignore the obvious. Not only did Venezuelan President Vince Maduro use the military to stop people from voting and had his thugs steel voting booths, but they also then have the nerve to declare victory. Yet Vice President Harris appears to have no problem with those results. The Vice President tweeted that, “”The United States stands with the people of Venezuela who expressed their voice in today’s historic presidential election. The will of the Venezuelan people must be respected. Despite the many challenges, we will continue to work toward a more democratic, prosperous, and secure future for the people of Venezuela.” No comment from the supposed President.
Yet at least in some countries there is some semblance of reason. It is being reported that governments all over South America are declaring that they will NOT accept the results of the stolen Venezuelan election by Nicolás Maduro and his socialist regime. The government of Peru has emphatically stated that it “will not accept the violation of the popular will of the Venezuelan people.” Costa Rica President Rodrigo Chaves Robles stated, “We will work with the democratic governments of the continent and international organizations to ensure that the sacred will of the Venezuelan people is respected.” Chilean President Gabriel Boric: “The Maduro regime must understand that the results it publishes are difficult to believe.”
Israel’s attack on Lebanon and the Hezbollah terror group is keeping the market on edge, raising concerns of a wider conflict. The Wall Street Journal reported that Israel’s government authorized a retaliatory strike against Hezbollah in Lebanon, amid an American-led diplomatic push to contain the fallout from a strike that killed 12 young people in the Israel-controlled Golan Heights. Israel and the U.S. have accused the Iran-backed militia Hezbollah of carrying out Saturday’s strike.
Yet the Biden Harris Administration seems to want to help Hezbollah. Israeli reports say Lebanese officials now confirm that US envoy and NSC official Amos Hochstein passed information of Israeli strikes in advance of those strikes to Lebanon which of course is the terror group Hezbollah.
Iran, who supports Hezbollah with the millions of dollars the US has given them under the Biden Harris Administration directly and indirectly by ignoring sanctions, is becoming bolder. Reports say that Iran seized on Friday the Togo-flagged Pearl G tanker carrying 700,000 liters of crude in the Gulf, Iran’s semi-official Tasnim news agency reported on Monday.
This sad foreign policy with no real clarity of any sort and the lack of leadership is only spinning the world closer to conflict. The leadership void in the United States is leading to more global instability.
This comes as we get a dire warning that the lack of investment in fossil fuels is leaving us with a big void in our economic future. Rystad Energy’s latest research shows global recoverable oil reserves held largely steady at around 1,500 billion barrels, down some 52 billion barrels from our 2023 analysis. Of this year-over-year decrease, 30 billion barrels are due to one year of production, and 22 billion barrels are mostly due to downward adjustments of contingent resources in discoveries.
The largest downward revisions are seen in Saudi Arabia, where development priorities have shifted from offshore capacity expansions to onshore infill drilling. The only country with any significant increase in 2024 is Argentina, with a gain of 4 billion barrels thanks to the de-risking of shale projects in the Vaca Muerta formation. They say that the total recoverable oil resource of 1,500 billion barrels gives an upper limit of how much oil can be produced over the next 100 years or more. Of course this upper limit is only realistic and economical if oil demand is not impacted by the energy transition, meaning oil prices would rise far above $100 per barrel. In this theoretical “high case,” total oil production would peak around 2035 at 120 million barrels per day (bpd), then decline steeply to 85 million bpd in 2050. They estimated that total recoverable oil resources have fallen by 700 billion barrels since 2019 due to reduced exploration activities.
Exploration has fallen as investors fear new discoveries will remain stranded due to the ongoing electrification of vehicles and the expected slump in both oil demand and crude prices. They warn that the world’s remaining oil reserves are insufficient to support oil demand if there is no transition to electric vehicles. Attempts to limit the supply of oil will have hardly any effect on limiting global warming. Instead, the only feasible way of keeping global temperatures rising less than 2.0 degrees Celsius is to ensure fast electrification of road transportation.”
The crude oil market is struggling to move higher even as there’s evidence that the supplies are tightening. Ongoing concerns about the Chinese economy still seems to be one of the things that is holding us back and the calendar as well these all cracks and gasoline cracks seem to be improving just a little bit and that also suggests that US demand is still robust. We’re expecting drawdowns across the board when it comes to inventories following last week’s very bullish report. Look to buy dips.
Traders also should download the Fox Weather app as a tropical storm could come into play for the markets later this week. Fox Weather is reporting that Atlantic disturbance could become tropical depression or storm and track toward Florida this week. There is a medium chance that the disturbance will develop, but the odds have been increasing over the weekend. If the system were to become a tropical storm, it would be named Debby – the fourth named storm of the 2024 Atlantic hurricane season.
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