Energy Prices Pressured Downward

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Energy commodities futures closed in the red weekly, due to the combination of oversupply worries and persistent high Fed rates, negatively affecting the demand.

Crude Oil

Crude oil production prolong oversupply concerns
  • WTI crude futures gained 1.1% to settle at $77.7 per barrel on Friday but booked a 3% weekly loss after U.S. economic data reinforced expectations that interest rates might remain elevated for an extended period, hurting the US economy’s outlook and energy demand.
  • EIA data showed a surprise uptick in US crude inventories last week, with supplies at Cushing, Oklahoma, hitting their highest levels since July.
  • However, there was a positive note regarding US gasoline demand, which reached its highest level since November, providing some support to oil prices ahead of the US summer driving season.
  • All eyes now turn to the upcoming OPEC+ meeting scheduled for June 2, where key oil producers are anticipated to prolong output cuts to prevent a global oversupply and bolster prices.

Gasoline

Gasoline demand strengthened
  • Gasoline futures in the US were at the $2.49 per gallon mark in May, hovering close to their lowest level in three months after key supply gauges pointed to ample availability for fuel and crude oil feedstock.
  • Limiting the decline, the EIA report indicated a sharp increase in gasoline demand ahead of the Memorial Day weekend, with product supplied rising by nearly 440 thousand barrels per day last week.
  • EIA data showed strong demand for the fourth consecutive week, stated above 10 million bpd for the first time after late March, for the week ended 17th May.
  • Additionally, key oil-exporting nations struggled to keep output low enough to comply with OPEC production cuts this year, magnified by their protests over future cuts.

Natural Gas

Net money managed funds are rising steadily
  • US natural gas futures extended losses below $2.6/MMBtu on Friday, with a 4% loss weekly fall due to oversupply and increased output.
  • Speculators’ funds reached 4-month high, indicating bullish expectations in the short-term
  • US utilities added 78 billion cubic feet (bcf) of gas into storage last week, compared with market expectations of an 84 bcf increase. The report also showed gas stockpiles are 28.8% above the 5-year average.
  • Also, output has increased by 0.9 bcfd since hitting a 15-week low on May 1, indicating that some drillers started producing more gas in response to higher prices.
  • Despite this, weather forecasts indicate warmer temperatures until May 29, driving up gas consumption as power generators ramp up to meet the increased electricity demand for air conditioning.