PETROLEUM COMPLEX (WTI | BRENT | ULSD | RBOB)
The complex strengthened for a second consecutive session today amid gains in European shares, despite strength in the US dollar. Russian oil and gas condensate production edged down from 10.46mb/d in April to 10.45mb/d last month, according to Reuters calculations based on an Interfax report. In economic news, retail sales in Germany fell by a sharper than expected 5.5% in April (vs 2.6%). The Producer Prices Index for Eurozone, on the other hand, rose 1.0% in April, above the Econoday consensus at 0.9%. The DAX closed 0.2% higher, the FTSE 100 added 0.4%, and the CAC 40 rose 0.5%. As of this writing, US stock market indexes were trading mixed near the unchanged mark with the Nasdaq down 0.09%, while the Dow was steady and the S&P 500 was up 0.04%. Unsupportive for crude oil prices, the US dollar index was up 0.12%.
NATURAL GAS | WEATHER | INVENTORIES
NYMEX natural gas futures turned back south today amid a lower nuclear power outage rate and a loosening picture of next week's market balance, despite a stronger two-week degree day forecast. The Global Forecast System raised its two-week cooling degree day forecast by 3 to 172 - which is still above both the 146 CDDs seen last year and the 135-CDD 30-year average. Refinitiv analysts now see total US supply of 98.4bcf/d outpacing US demand at 89.3bcf/d next week, implying larger injections of 9.1bcf/d (compared to yesterday’s forecast at 8.5bcf/d). The nuclear power outage rate fell from 8% yesterday to 5% today, which is still below both last year's 12% outage rate and also the 8% five-year average. Next-day cash natural gas prices were mixed with Henry Hub up 11 cents to $3.02/mmBtu, while Transco Zone 6 pricing in New York fell 17 cents to $2.19/mmBtu and Algonquin citygate prices dropped 24 cents to $1.93/mmBtu. The National Hurricane Center does not expect any Atlantic tropical cyclone activity over the next 48 hours. According to a Reuters poll of analysts, estimates for the weekly EIA petroleum inventory report for the week ended May 28 call for a 2.4mb 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 1.5mb and gasoline stockpiles are expected to decrease by 1.5mb as well. API petroleum inventories for the same week are due this afternoon at 4:30. The EIA is also due to release its weekly natural gas storage report tomorrow, and a Reuters poll of analysts calls for a 92bcf injection. This would fall short of last year's 103bcf rise and the 96bcf five-year average.
ENERGY TECHNICALS (WTI | ULSD | RBOB | NG)
ULSD futures gapped higher and rose 1.7% in an inside session today. The RSI, candlesticks, moving averages, and the MACD are bullish, while slow stochastics point lower. We are going to take a bullish stance now. Bulls took out the $2.0810 resistance level, which now becomes nearby support followed by $2.0462, whereas $2.1135 (yesterday’s high) and $2.1415 are seen offering resistance. RBOB futures also gapped higher and rose 1.1%, but did so in an inside session, somewhat consistent with our bullish bias which we maintain. We continue to see nearby resistance at $2.2170, followed by $2.2500, while $2.1108 and then the 50-day ma ($2.0549) are expected to offer support. Slow stochastics look set to leave overbought conditions, while the RSI, candlesticks, and the MACD all point higher. Similar to products, WTI futures gapped higher and rose 1.6% in an upside session today with bulls taking out the $67.98 resistance level. This now becomes nearby support, followed by $66.85, whereas $73.29 and then the $75.00 mark are our nearby resistance levels. We remain bullish for now. Lastly, natural gas futures fell 0.9% in an inside session today – not so consistent with our bullish bias. Slow stochastics continue to point higher, along with the MACD, while the RSI is bearish. We are going to stick to our bullish bias for a bit longer, seeing nearby resistance at $3.171 and then up at $3.316, with $2.898 and $2.758 seen offering support.