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Energy Brief for June 24.24

by market analysts Stephen Platt and Mike McElroy

Price Overview

Crude oil settled 90 cents higher at 81.63 basis August. Buying interest was noted on prospects for seasonally strong demand in the summer tightening inventories and physical barrels following stabilization to the global economy, tighter sanctions by Europe against Russian oil shipments, and fears of tensions building between Hezbollah and Israel. Concerns that demand pressures might be prompted by dollar strength dissipated. Expectations for further inventory declines into the third quarter continued to be a key consideration as disappearance levels are watched globally.

In the near term the market will be closely watching US inventories and disappearance levels, particularly for gasoline, making this week’s DOE report a key focal point. Further price increases will be contingent on whether demand strengthens more than currently expected, along with the direction of the war in the Middle East. In addition, commitments by Russia and Iraq to reduce output levels to compensate for previous overproduction will be watched. Given the Middle East situation and potential for inventories to be balanced in the second half of the year, values are likely to consolidate in the 78-82 range basis August until more concise data on US and Chinese inventory trends are indicated. A penetration of the 82.50 level opens up the potential for a move back toward 85.00, while critical support exists near the 100-day moving average at 78.25.

DTN Aug24 Crude Oil chart 6.24.24
DTN Aug Natural Gas chart on 6.24.24

DOE estimates point to a decline in crude stocks of 3.0 mb, with gasoline expected lower by 1.1 mb and distillate higher by .4. Refinery utilization is forecast to be unchanged at 93.5 percent.

Natural Gas

Overnight action saw the market weaker, with the days’ low at 2.78 achieved soon after the Sunday evening open. A jump in production over the weekend to the 100 bcf area initiated the negative sentiment, while LNG flows remained tepid under 13 bcf to add to the downside bias as maintenance and other temporary issues continued. Prices worked higher throughout the day session, as the August ended with a gain of 11.2 cents at 2.948. The recovery lacked solid backing, with trade unwilling to relinquish additional risk premium with the hot temperature regime currently in place. Total stocks of gas are 561 bcf above the 5-year average, making a breakaway rally difficult without a continuation of the current heat wave through July and beyond. The 2.97-3.00 area is key resistance, with a settlement through that range signaling a retest of the double top near 3.22. Minor support should be found near 2.85, with today’s low at 2.78 a key level that needs to be maintained to avoid a test back down to the 2.60 area.

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

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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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