Your Daily Energy Report for May 22, 2024
Posted on 2024-05-22
Crude Oil
Crude Oil futures for July settled down -$.56 or -.717% at $77.57. Oil prices dropped on Wednesday, marking the third consecutive day of decline, as concerns about oil demand resurfaced following indications from Federal Reserve officials that interest rate cuts might be delayed due to ongoing inflation. The minutes from the Federal Reserve's May policy meeting, released on Wednesday, revealed that inflation could persist longer than anticipated. Lower interest rates typically reduce borrowing costs, potentially boosting economic growth and oil demand. However, the crude markets have faced pressure from weakening fundamentals, such as declining spot Brent prices compared to futures and lower refinery margins. Additionally, the physical crude markets have shown signs of weakening, with the premium of Brent's first-month contract over the second, known as backwardation, nearing its lowest point since January, indicating easing concerns about tight prompt supply.
Natural Gas
Gas futures for July settled up $.003 or .106% at $2.842.U.S. natural gas futures rebounded from early losses, reaching a four-month high as the market anticipates a hot summer. Positive storage reports, lower production compared to last year, robust LNG feedgas flows, and early heatwaves in Texas and the southern U.S. are driving the rally, according to a forecaster. The EIA is anticipated to report a third consecutive below-average increase in underground storage for last week, further reducing the still high inventory surpluses. Additionally, the forecast for an especially active Atlantic hurricane season this year presents further risks to the U.S. oil and natural gas sector, with meteorologists predicting 20-25 named storms and possibly more than 30.