Morning Update 05.09.25

Overview

Energy prices are higher boosted by hope for an improvement in the trade war between the U.S. and China with the upcoming talks this weekend. This comes on the heels of the U.S./U.K. trade agreement seen yesterday. Also seen boosting prices are further sanctions aimed at Iranian crude sales. We also see the recent spate of news of lower U.S. oil production as being supportive.

President Trump said on Thursday he expects there to be substantive negotiations between the U.S. and China on trade this weekend and predicted that punitive U.S. tariffs on Beijing of 145% would likely come down. This morning President Trump tweeted that 80% tariffs on China seem right. Crude oil prices retreated after the President's tweet as the 80% tariff level is still seen as punitive. But, Commerce Secretary Lutnick said to Bloomberg TV on Thursday that trade deals with South Korea and Japan could take significantly more time to complete than the framework agreement President Trump announced with the UK.

Reuters reported today that that India has offered to slash its tariff gap with the U.S. to less than 4% from nearly 13% now. India has been importing a lot more U.S. crude oil as the two negotiate trade relations. In April, India imported 326 MBPD of U.S. crude, which represented a solid 34% increase from March, Vortexa data shows. March imports ran at a pace of 244 MBPD.  Kpler is showing that as many as 11.2 MMBBL (373.3 MBPD)  of U.S. crude were en route to India, scheduled to arrive in June. This would be the highest U.S. crude volume arriving in India since August 2024. (Oil Price)

OPEC's April oil output fell by 30 MBPD to 26.60 MMBPD. The biggest reduction came from Venezuela, as as cargo cancellations to U.S. oil company Chevron forced ships to return. But, Iranian supply was seen higher, thus mitigating some of the OPEC production decline. (Reuters)

The U.S. Treasury Department sanctioned a third Chinese independent refinery over purchases of Iranian oil, signaling continued pressure on Tehran ahead of an expected fourth round of nuclear talks. (WSJ)

China's exports beat forecasts in April, buoyed by demand for materials from overseas manufacturers who rushed out to take advantage of President Trump's 90 day tariff pause.  Customs data on Friday showed exports rose 8.1% year-on-year in April, beating a forecast of a 1.9% increase in a Reuters poll of economists,  but slowing from the 12.4% jump in March. Imports fell 0.2%, compared with expectations for a 5.9% drop, suggesting domestic demand may be holding up better than expected as policymakers continue to take steps to prop up the $19 trillion economy. Exports to Southeast Asian countries rose 20.8% in April. China's exports to the U.S., meanwhile, fell 21%.  (Reuters)

Oil and gas drilling permit applications in Texas, the top U.S. oil-producing state, fell to their lowest last month since February 2021, consultancy Enverus said. Operators in Texas submitted 570 new drilling permit applications in April, down from 795 in March according to Enverus. The drop is seen due to concerns that rising OPEC+ supplies and a trade war will continue to hit crude prices.  (Reuters)

ConocoPhillips beat Wall Street estimates for first-quarter profit on Thursday on strong production volumes, but warned that weak oil prices would likely lead to output cuts in the industry. Conoco's CEO said a crude price outlook in the $50s or low $50s could still trigger widespread activity reductions, even among larger players. (Reuters) Occidental Petroleum said in their earnings call this week, that it was reducing its Permian rig count by two, and also said it was lowering combined operating and capital expenditures by $350 million this year, with only "minimal" impact to production. (Motley Fool) Shale producer Diamondback said on Monday it will drop three rigs in the second quarter, and could reduce activity further if oil prices fall more. Rival Coterra Energy is reducing its 2025 Permian activity by three rigs, while producer Matador Resources is dropping one drilling rig by the middle of 2025. (Reuters)

In the LO/WTI, the Jan/Feb Feb/March and March/April 1 month flat priced call spread options traded, each for a cost of 25 cents. The July $65 call open interest rose quite a bit. Much of it was seen in a trade in which the $65 call was bought 2 times against selling 1 July $63 call and a delta amount of futures was sold at a price of $59.50.

Technicals

Momentum is positive basis the DC charts for the energies.

WTI spot futures have support at 59.43-59.50 and then at 58.76. Resistance lies at 62.06-62.07 and then at 63.31-63.34.

RB for June sees support at 2.0865-2.0870 and then at 2.0590-2.0596. Resistance lies at 2.1327-2.1331. The 100 day moving average basis the DC chart intersects at 2.0778.

ULSD June futures see support at 2.0263-2.0283 and resistance at 2.100.

Natural Gas 

NG prices are higher as feedgas volumes/LNG exports have improved in recent days, some heat is building in the forecast,  and this month gas production has declined.

Thursday's retreat in NG prices came as the EIA storage report disappointed with a slightly greater build than expected. Thursday's fall in NG prices, mostly seen due to the larger than expected gas storage figure, came even as weather forecasts built more heat. NatGasWeather.com said Thursday that forecasts shifted hotter for the southern and southeastern regions of the US for May 14-19, with highs in the 90s.

The EIA gas storage data seen Thursday showed a build of 104 BCF. This raised total gas in storage to 2.145 TCF. That is -412 BCF / -16.11% versus last year, but +30 BCF / +1.42 % versus the 5 year average. The next 3 weeks are also seen with builds over 100 BCF and will thus add to the surplus to the 5 year average.

Average natural gas deliveries to US LNG export terminals decreased 1.3 BCF/d on the week to 15.1 BCF/d, according to S&P Global Commodity Insights.

LSEG said average gas output in the Lower 48 US states fell to 103.4 BCF/d so far in May, down from a monthly record of 105.8 BCF/d in April. Reuters notes that further cuts in U.S. oil production will lead to a drop in gas output, as about 37% of US gas production comes from associated gas.

Mexico natural gas imports of U.S. gas are up above the 7 BCF/d mark, a figure usually seen in the hot summer months. So far this week, volumes are climbing to over 7.1 BCF/d, reflecting an increment of almost half a BCF from the first four days of the month.”, as per a Wood Mackenzie analyst. Wood Mackenzie data has cross-border flows up 2% so far in May compared to last month. April had seen an 8% boost compared to March.  (NGI)

Temperatures in Texas next week will rise with Dallas seeing highs that are 3 to 7 degrees above normal. Houston will see highs that are 2 to 5 degrees above normal, while San Antonio will see highs that range from 9 to 13 degrees above normal, as temperatures there will rise over 100 degrees.

US and Russian officials have held discussions about the US helping to revive Russian gas sales to Europe, eight sources told Reuters. Sources close to the bilateral discussions said carving out a renewed role for Moscow in the European Union's gas market could help cement a peace deal with Russia. Russia now supplies 19% of Europe's demand, down from 40%, mainly consisting of LNG and some piped via Turkey along the TurkStream pipeline.

In NG options trading on the CME on Thursday, we saw the following trades. The June $4.50/$5.00 call spread traded 1.1 cents. The July $3.60 put was purchased against selling of 2 of the $3.30 puts--with the $3.30 put seller collecting 0.6 cents. The NG / LN June $3.00 / $2.25 put spread traded for a cost of 2.8 and 3.0 cents.

Technically NG momentum on the DC chart looks to be cresting. The price pattern, though, shows higher lows in trading this week, although we see a likely trading range from the activity in NG futures this week. Resistance comes in at 3.747-3.751 and then at 3.827-3.830. Support is seen at 3.527-3.531 and then at 3.462-3.466. The 100 day moving average on the DC chart intersects at 3.724.

Disclaimer 

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC