Daily Energy Market Update May 1, 2025

Overview

Energies are down quite a bit again this morning, weighed down by the U.S. GDP data from yesterday showing a contraction in the economy. Also weighing on energy prices today is the prospect for further production increases from OPEC+ with news yesterday that the Saudis can sustain a period of lower oil prices.

Crude prices fell midday Wednesday as the Kingdom of Saudi Arabia was said to have "briefed allies and industry experts that the kingdom can sustain a period of low oil prices."  The Saudis are said to be unwilling to prop up the market with further oil cuts. They are irritated by the consistent overproduction by Kazakhstan and Iraq. (Reuters)

Further amplifying the negative news seen yesterday that the U.S. economy contracted in the first quarter is a Reuters poll saying that President Trump's tariffs have made it probable the global economy will slip into recession this year. And today, the International Monetary Fund said it now expects Middle East and North Africa economies to grow by just 2.6% in 2025 as uncertainties stemming from a global trade war and weaker oil prices weigh on the region. The fresh projection marked a sharp downgrade from its October projection of 4% growth. (Reuters)

The DOE stats seen Wednesday showed better than expected stock draws in crude oil and gasoline. Crude supplies fell by 2.696 MMBBL, fueled by an increase in crude exports of 572 MBPD and a rise in crude inputs to refineries of 189 MBPD. Crude supplies are 6% below the 5 year average. Gasoline supplies fell by 4.003 MMBBL and are 4% below the 5 year average. Gasoline demand fell by 316 MBPD on the week, but remains firm at 9.098 MMBPD, beating the prior 2 years figures of 8.618 MMBPD. Distillate demand fell by 353 MBPD this week to a total of 3.55 MMBPD, which lags the prior 2 years figures of 3.678 and 3.872 MMBPD. Yet, distillate supplies are 13 % below the 5 year average. The 4 week average demands for gasoline and distillate remain strong relative to a year ago.  The 4 week average demand for distillate is 3.829 MMBPD, which is 10.3% better than last year's 3.470 average. Gasoline demand on a 4 week average basis stands at 8.850, which is up 3.2% from last year's 8.579 MMBPD level.

The monthly Reuters poll of 40 economists and analysts for crude oil prices for this year saw them reduce their forecasts quite a bit from last month. Brent crude is seen averaging $68.96, down $3.96 from March's forecast of $72.94. WTI is seen averaging $65.08, down $4.08 from last month's forecast. The Reuters article cites analysts saying that oil production will slow if prices stay at current levels, and they suggest that further OPEC+ production hikes may not happen.

The bearish tone of the market was underscored with open interest in WTI futures on the CME rising by over 52,000 contracts from Wednesday's activity. The contract months from June to November saw sizeable increases that we perceive to be new shorts.

Further evidence of the bearish tone is seen via the call-put skew in Brent and WTI that has swung further to the puts this week. The WTI 2nd month put skew has widened to -15.1% from -7.2% earlier in the week, as per Market News data. Market News adds that this is the greatest skew to the puts seen since 2021. Additionally, Brent crude second month at-the-money implied volatility has rebounded this week to the highest since March 2023 at 45.6% and WTI up to 50.2%.

In WTI options, the Calendar 2026 strip 1 month flat calls traded 27 cents. The open interest for each of the 12 one month CSO's rose by 1,000 contracts on the back of these trades.

Technicals

The one positive for the energies at present is the fact that the crude oils and distillates are testing their DC chart lower bollinger bands. But, momentum and price action remain negative.

The WTI DC chart has the look of a head and shoulders formation that suggests a slide down to near $53. The attached chart shows the head of the formation at $65.09 and the neck line at the $58.76 area. Thus the range is over 6 dollars between those 2 points and the break of the $58.76 area thus projects a possible move down to near $53.

For now the WTI spot futures may have found some short term support due to the testing of the DC chart's lower bollinger band, which lies at 57.89. Support basis the DC chart lies at the major low of 55.12 from April 9th. Resistance comes in at 58.76, which is a prior low seen on the DC chart.

RB spot futures see support at the 1.98 area and then at 1.9635-1.9636. Resistance comes in at the 2.04 area and above that at 2.0545-2.0565.

ULSD spot futures have a rollover gap from the May futures expiration. That gap goes up to 2.0263. That is where we see resistance. Support comes in at the April 9th major low at 1.9373. Today's low is 1.9623. The DC chart's lower bollinger intersects at 2.0113.

Natural Gas - NG is up 4.0 cents

NG spot futures are higher this morning as forecasts dial in a bit more cooling demand. NG's rise is also likely due to the prospect for crude production to drop in U.S. shale basins, thus curtailing associated gas production.

Production is already tailing off with Bloomberg data showing US domestic natural gas production at its lowest since Feb. 20. Production is down 2.88 BCF/d on the day to 103.2 BCF/d, and is down 2.94 BCF/d compared to the 30 day average.

Weather demand rising is seen as the GFS 6z 15day forecast is showing an addition of 15 CDDs and loss of 8 HDDs, confirming the above normal temperatures. (Market News)

Freeport LNG received FERC approval on April 30 to begin cooling down its final offline LNG storage tank and related equipment at its Texas export facility, Platts said. This approval is a step toward full operational restoration following a June 2022 explosion and fire. Additionally, this week Golden Pass LNG Terminal LLC has received federal approval to move forward with commissioning several major systems at its export facility. The commissioning of these systems marks a major milestone toward full operational capability. (ABC12newsnow.com)

The EIA gas storage data for this week is seen as a build of 106 to 110 BCF, as per news wire surveys. This compares to last year's build of 64 BCF and the 5 year average build of 58 BCF. A triple digit injection would be the first such since May of 2023. The projected injection today will thus flip the deficit to the 5 year average to a surplus.

NG futures open interest on the CME rose by 17,400 contracts in Wednesday's trading. Large increases were seen in the July, September, November and December contracts. We lean to the open interest increase being more so new length rather than shorts, given that the price pattern seen during the day was more of an upward than downward one.

One interesting notable trade seen in NG options yesterday on the CME was in the January February spread CSO. Size traded in the 15 cent/25 cent/35 cent put option butterfly at a price of 1.6 cents. The trade was done with a reference price of 30.2 cents for the underlying futures spread.

Technically NG has positive momentum basis the DC chart. Support for the spot futures is seen at the prior 2 sessions' lows at 3.307-3.313 and 3.260. Resistance is seen at 3.457-3.462. Above that resistance comes in at 3.576-3.583.

Enjoyed this article?

Subscribe to never miss an issue. Daily updates provide a comprehensive analysis of both the fundamentals and technical factors driving energy markets.

Click below to view our other newsletters on our website:

Ethanol Update 

Natural Gas Update

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