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Energy Brief for Apr 10.24

by market analysts Stephen Platt and Mike McElroy

Price Overview

The petroleum complex saw good buying late in the session, with the crude settling 98 cents higher at 86.21 on reports the US and its allies believe a major missile strike by Iran on Israel was imminent. The news helped reverse early pressure in response to a build in US crude and product inventories. A deadlock in Gaza cease-fire talks along with threats from Iran regarding the Straits of Hormuz also deterred selling interest. A cautious tone prevailed on the upside as doubts over the strength of the Chinese economy emerged following a downgrade by Fitch to negative on their sovereign credit rating. The report cited risks to public finances as the economy faces increasing uncertainty in its shift to new growth models.

The DOE report showed crude inventories building by a larger than expected 5.8 mb. In gasoline, stocks built by .7 while distillates were up 1.7 mb. Total stocks of crude and products rose 12.4 mb. Refinery utilization fell .3 to 88.3 percent. Total disappearance levels fell to 19.2 mb compared to 21.3 last week. Gasoline disappearance fell to 8.6 from 9.2 in the prior week while distillate disappearance declined to 3.0 mb/d from 3.5. For the year to date, distillates are off 4.4 and gasoline is down .8 percent from 2023. Net exports contracted to .8 mb from 1.7 last week.

DTN May24 Crude Oil chart on 4.10.24
DTN May Nat Gas chart on 4.10.24

Expect setbacks to be limited, with support near the 84.00 level basis May. We are still looking for the 88-90 range to be tested on the uncertainty associated with geopolitical tension in the Middle East and the likelihood that Russia will reduce exports to levels consistent with the OPEC+ agreement. On the upside, resistance will be based on ideas that dollar strength and higher prices will temper demand, particularly from China and India. Higher prices will encourage renewed efforts to expand output by non-OPEC producers, limiting stock drawdowns later this year. The higher-than-expected increase in March CPI will also moderate US economic growth and likewise demand as interest rates remain higher for longer in 2024. The OPEC Monthly Report due for release tomorrow and IEA Monthly Report on Friday should provide guidance as we move into the 2nd half of the year and give clues as to whether an end to voluntary cuts by OPEC+ might be in the cards.

Natural Gas

The market continued to find good buying interest into midweek, gaining 2.8 cents yesterday and reaching an intraday high at 1.943 today before settling with a small gain at 1.885 basis May. Attention has been homing in on activity at Freeport, which jumped to 1.5 bcf today in early nominations, with total flows near 13.5, which would be the highest since early March if confirmed. Production has added to the upside bias, with total output dropping below 97 bcf/d as shoulder season maintenance picks up. The strength temporarily pushed prices above the upper end of our recent range but found good resistance at the trendline draw from the November/January highs. Despite the strength, the market remains burdened by the overall negative fundamental picture as demand continues to be tepid and storage levels in the US and Europe maintain ample levels. Resistance will be substantial near today’s highs at 1.943, followed by the psychological 2-dollar level. A pullback will encounter support at the 9-day moving average near 1.83 and below there at this week’s low near 1.75.  

The authors of this piece do not currently maintain positions in the commodities mentioned within this report.

Charts Courtesy of DTN Prophet X, EIA, Reuters


Learn more about Stephen Platt here

Learn more about Mike McElroy here

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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