Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
The complex continued to retrench as the June crude oil lost 83 cents to settle at 70.04, while the gasoline dropped 2.75 cents and the heating oil was off by 4.4. Economic concerns ruled the day as talks over the US debt ceiling made little headway, raising recession concerns and precipitating dollar strength, which spilled over to weaken the petroleum complex.
China’s CPI data release late Wednesday showed a tepid rate of inflation at .1 percent, below estimates for an increase of .4, and added concern over the pace of economic recovery following the lifting of COVID restrictions. Comments from US Energy Secretary Granholm suggesting that the US could begin purchases for the SPR as early as next month offered underlying support to the market.
The poor close likely leads to downside follow-through early next week, with minor support at 70.00 and below there at 68.75. Initial resistance should surface at the 9-day moving average near 71.17, and a push above that level won’t find much in the way until this week’s highs just under 74.00.
Natural Gas
The second half of the week had seen constrained volatility as the range since Wednesday encompassed 12 cents, until midday today when prices broke out to the upside in the wake of the Baker Hughes Rig Count. With a decrease of 16 gas rigs, the market had a knee-jerk reaction that flushed out stops above the 2.25 level and pushed prices to an intraday high at 2.335. At the end of the day June had gained 7.6 cents to settle at 2.266. The action exemplified a market that was looking for something to do, with trade in the midst of shoulder season and lacking any fundamental excitement. Yesterday’s storage report showed an injection of 78 bcf, slightly above estimates and leaving total stocks 18.4 percent above the 5-year average. The move higher helps distance the market from the lows, and if momentum can be maintained early next week it may signal that a seasonal bottom is in. The 20-day moving average near 2.315 held up today and offers initial resistance. A push above there targets the 2.50-2.55 range which would achieve a 38 percent retracement of the break since early March. Support comes in near 2.15 and then 2.07.
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