PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
Petroleum futures rose today amid gains in European shares and weakness in the US dollar, despite mixed trade in US equities. Reuters reported that OPEC+ oil producers have agreed to stick to their existing plan to gradually ease supply cuts through July, according to an OPEC source, as the group weighed expectations of a demand recovery against a possible increase in Iranian production. In European economic news, the flash May Harmonized Index of Consumer Prices (HICP) for the Eurozone rose 2.0% year-on-year, above expectations at 1.9%. The Eurozone unemployment rate fell from 8.1% to 8.0% in April, while expectations called for no change. The final manufacturing PMI for the Eurozone came in at 63.1, beating forecasts at 62.8. Indexes for Germany (64.4) and France (59.4) also beat expectations, while the index for the UK was a miss by coming in at 65.6. The CAC 40 closed 0.66% higher, the FTSE 100 added 0.82%, and the DAX rallied 0.95%. In North American news, Canadian GDP for March rose 1.1%, topping the Econoday consensus at 1.0%. On the other hand, GDP for the first quarter rose 1.4%, below the 1.6% forecast. In US news, the ISM Manufacturing Index rose from 60.7 to 61.2 in May, beating consensus at 60.9. The Markit Manufacturing PMI for last month was finalized at 62.1, above the 61.5 expectation and up from 60.5 in April. On the other hand, US construction spending rose 0.2% in April, below forecasts at 0.6%. As of this writing, US stock market indexes were trading mixed near the unchanged mark with the Dow up 0.1%, while the S&P 500 and the Nasdaq were both down 0.1%. Supportive for crude oil prices, the US dollar index was down 0.2%.
NATURAL GAS | WEATHER | INVENTORIES
Natural gas futures continued higher today with a tighter US market balance expectation and a stronger two-week cooling degree day forecast, despite a lower nuclear power outage rate. The Global Forecast System raised its two-week cooling degree day forecast from 145 to 169, which is well above the 146 CDDs seen last year, and also the 132-CDD 30-year average. Also supportive, Refinitiv analysts raised their total US demand forecast for this week by 1.3bcf/d to 85.4bcf/d, but cut their supply forecast by 0.1bcf/d to 97.6bcf/d, implying smaller 12.2bcf/d injections. The market is seen tightening further next week, as total US supply of 98.7bcf/d is seen outpacing US demand at 90.2bcf/d, implying injections of 8.5bcf/d. Next-day cash natural gas prices strengthened, with Henry Hub prices adding 6 cents to hit $2.91/mmBtu, Algonquin citygate prices rising by 12 cents to $2.17/mmBtu and Transco Zone 6 prices in New York strengthening by 6 cents to $2.36/mmBtu. The National Hurricane Center expects no tropical cyclone formation over the next 48 hours. In unsupportive news, the nuclear power outage rate fell from 8% to 5% today, which is well below last year's 12% outage rate and the 8% five-year average. According to a Reuters poll of analysts, estimates for the weekly EIA petroleum inventory report for the week ended May 28 call for a 2.1mb draw from US crude stocks amid a 0.8 percentage point predicted increase in the nation’s refinery utilization rate. Distillate stocks are expected to fall by 1.4mb and gasoline stockpiles are expected to decrease by 1.4mb as well. API petroleum inventories for the same week are due tomorrow at 4:30, due to the holiday on Monday.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures rose 1.6% in an upside session today, hitting a fresh multi-year high ($2.1135), but futures settled in the bottom half of the daily range keeping us on the sidelines for a bit longer. Slow stochastics are still overbought but look set to leave the overbought territory, while the RSI points higher. The MACD and candlestick remain neutral. Bulls took out the $2.0462 resistance level, which now becomes nearby support, followed by the 9-day ma ($2.0285), while $2.0810 and then $2.1135 (today’s high) are expected to offer resistance. RBOB futures, where we were bullish, added 1.6% in an upside session today. We remain bullish, seeing nearby resistance at $2.2170 and then up at $2.2500, whereas $2.1108 and the 50-day ma ($2.0501) are seen offering support. Slow stochastics are still overbought, while the RSI points higher, along with candlesticks, and the MACD looks set to cross bullishly. WTI settled 2.1% higher in a bottom half of today’s daily range, consistent with our neutral/bullish bias which we maintain. Slow stochastics look set to leave overbought territory, while the RSI, the MACD, and candlesticks all point higher. Bulls took out the $66.85 resistance level, which now becomes nearby support, along with $63.75, while $67.98 (tested today) and then $73.29 are our nearby resistance levels. NYMEX natural gas futures gapped higher and rallied 4.0% in an upside session today – consistent with our bullish bias which we maintain. We continue to see nearby resistance at $3.171 and then at $3.316, with $2.898 and $2.758 seen offering support.