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Energy Brief for June 12.23

by market analysts Stephen Platt and Mike McElroy

Price Overview

Prices kicked off the week under extensive selling pressure, as the crude oil lost over 3 dollars to settle at 67.12 basis July, while the gasoline and heating oil were lower by 11 and 5 cents respectively. The weakness accelerated early in the session as stops were elected below the 68 area and quickly lead to a drop to the intraday low at 66.80. Weakness emanated from concerns over Fed actions, with Wednesday’s meeting expected to produce a pause in rate increases, while sentiment is swinging toward a return to hikes next month. Monthly reports from OPEC and the IEA due out tomorrow also amped up worries about downward revisions to demand expectations.

Concerns which include higher than expected supplies from Russia, Iran and Venezuela, expanding production in some non-OPEC countries, and economic uncertainty in China and the US have managed to outweigh the additional output cuts recently announce by Saudi Arabia.

Despite these concerns, global stocks are likely to decline into the second half of 2023. An announcement late last week by the DOE that they would be purchasing 3 mb of crude oil for the SPR may begin to underpin the market, with an additional 3 mb set to be purchased in the near future. The poor close today opens the chance for further downside near term, with 66.00 the next level of psychological support. If sentiment can turn back to the upside there is little substantial resistance until the 70-dollar level.

Wednesday’s DOE report is pointing to a drop in crude stocks of 1.3 mb, while gasoline is expected to gain .6 mb and distillate are estimated higher by 1.6. Refinery utilization is expected to show a minor downtick to 95.7 percent.

DTN July Crude Oil chart 6.12.23
DTN July Nat Gas chart 6.12.23

Natural Gas

The trading week got underway with two sided trade, as the July ended in the middle of the day’s range at 2.254 for a gain of just over 1 cent. The positive settlement came in spite of production regaining the 102 bcf level over the weekend and continuing LNG maintenance. Forecasts were near unchanged coming out of the weekend, but with minor downward revisisons in CDD expectations. Trade seemed unwilling to test the downside, with the historically low price environment having little weather risk priced in. Look for the market to continue to trade uneventfully until more convincing heat begins to develop. The low at 2.136 remains the next support level, while the 2.38-2.41 range marks initial resistance, with a settlement through that area necessary to build any momentum for further gains.

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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