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Energy Brief for Aug 23.23

by market analysts Stephen Platt and Mike McElroy

Price Overview

Weakness was seen early in the session as the October crude probed down to an intraday low at 77.62 before recovering after the release of the DOE report, ultimately settling with a loss of 75 cents at 78.89. The products experienced less severe selling as both ended with a loss of just over 1 cent.

A myriad of negative economic signals from global economies weakened prices overnight. This added to the front and center concerns over China, as their recovery continues to sputter and recent contraction in their crude imports in favor of ample on-hand inventories has helped create a growing consensus that Saudi Arabia will extend production cuts into October. Adding an overhanging skittishness to the market was the Fed’s upcoming Economic Policy Symposium in Jackson hole on August 24th-26th, which will be watched closely for any hints of future moves.

The DOE report sent mixed signals, with a draw in crude stocks of 6.1 mb rekindling buying as it was well above estimates for a decrease of 2.9. Refinery utilization saw a minor pullback to 94.5 percent but was still well above average, which helped lead to higher-than-expected builds in product stocks, with gasoline gaining 1.5 mb and distillate up by .9.

The early lows achieved a 38 percent retracement of the summer rally, with the 78-dollar area now marking key support. Trade below there could lead to a test of 76.00. Price recovery will find resistance at the 9-day moving average currently at 80.35, with a settlement through there needed to signal a reversal of the current downtrend.

DTN Oct Crude Oil chart 8.23.23
DTN Oct Nat Gas Daily chart 8.23.23

Natural Gas

Momentum has turned back to the downside after Monday’s minor recovery, as the October contract lost over 8 cents yesterday and followed that up with a 6 cent drop today, settling at 2.592. The losses came despite intense heat across much of the country that is expected to remain in place into the end of the week. Lackluster LNG flows have dampened the market, coupled with multiple tropical storms that are being monitored for their potential effects on the Gulf. With many LNG facilities along the coast, the risk to export flows has overtaken production shut-ins over the past few years as the key concern as disruptions can back up natural gas supplies. The market tested the July and early August lows in the 2.57-2.58 range today as that level remains key support. A settlement below that area could portend a test of the June low at 2.377. A turn higher will find initial resistance at 2.70.

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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