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Energy Brief June 19

by Archer Financial Services | Jun 19, 2019
by Steve Platt and Mike McElroy

Price Overview

Price action was muted today as the entire commodity sector awaited the Fed announcement this afternoon.  As expected they took no action, but did indicate a willingness to lower rates if justified.  The lull followed yesterday’s sharp move higher after hope was revived for a China trade deal as President Trump indicated that he would be meeting with Chinese President Xi at the G20 summit.  The announcement from OPEC that they had agreed on July 1st & 2nd for their meeting also helped settle the market, with continued geopolitical tensions in the Persian Gulf offering background support.
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The market seemed to brush off the weekly storage numbers at least for now.  The DOE Report indicated a 3.1 mb draw from crude stocks, which was larger than expectations in the 1.0 mb area.  Gasoline inventories decreased 1.7 mb, opposite expectations for a 1 mb build, and distillate stocks also slipped, as they were off by .6 mb verses expectations for a build of the same amount. 

We still believe the failure to respond to the myriad of geopolitical happenings suggests that the market will have difficulty staging a significant rally.  The 55.00-56.00 area basis August should offer solid near term resistance.

 

Natural Gas

The market tried to rally early in the session on slightly improved demand prospects but was unable to induce any follow through interest.  Prices stumbled late in the day, with the active August putting in an intraday low at 2.255.  Recent mild temperatures have allowed for the improvement in storage levels and has helped to alleviate concerns over what had been an extended shortfall.  Tomorrow’s report is expected to show a 113 bcf injection compared to 84 on the five year average.  With LNG news continuing to be positive and other factors such as coal switching coming into view, we look for limited downside from here with the 2.20 area offering good support.

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Charts Courtesy of DTN Prophet X


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 views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. 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 ADMIS position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to. The authors of this piece currently maintain positions in the commodities mentioned within this report. Charts Courtesy of DTN Prophet X, EIA.

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