Daily Energy Market Update May 21, 2025

Overview

Energies are higher on the back of news that Israel is preparing to launch an attack on Iranian nuclear facilities, raising oil supply concerns out of the Mideast.

U.S. intelligence suggests that Israel is preparing to strike Iranian nuclear facilities, CNN reported on Tuesday, citing multiple U.S. officials. "Such an escalation would not only put Iranian supply at risk, but also in large parts of the broader region," analysts at ING say. ING adds though :" "However, it seems the market is not entirely convinced by these reports--at least for now."  (Reuters/WSJ)

Data seen Tuesday showed Kazakhstan's crude oil production has risen by 2% in May, in defiance of pressure from OPEC+ to reduce their output. Kazakhstan has repeatedly breached its OPEC+ production quotas, citing the difficulty of telling Western oil majors, such as Chevron and ExxonMobil, to curtail their plans. Kazakhstan's crude oil production, excluding gas condensate, averaged 1.86 MMBPD on May 1-19. Under the latest OPEC+ agreement, Kazakhstan's OPEC+ quota for May rose to 1.486 MMBPD.  (Reuters)

The EU adopted four sets of sanctions against Russia over the war in Ukraine on Tuesday, including a 17th package targeting Moscow’s shadow fleet. The four new sets of measures will hit over 130 entities and individuals. As part of the 17th package, the EU will list 75 new entities including major Russian oil firm Surgutneftegaz, a shipping insurance company and four shadow fleet management firms involved in the UAE, Turkey and Hong Kong, EU sources said.  Another 189 vessels, of which 183 are oil tankers, have been added to the list, taking the total number of listed vessels to 324. (Reuters)

Additionally, the EU is considering lowering the price cap on Russian oil to $50 from the current $60. The G7 price cap was agreed in December 2022, banning trade in Russian crude oil transported by tankers if the price paid was above $60 per barrel and prohibiting shipping, insurance and re-insurance companies from handling cargoes of Russian crude around the globe, unless it is sold for less than the price cap. Russia has been bypassing the G7 price cap through a "shadow fleet" of tankers that do not get their insurance from western companies and Russian Urals crude has been trading above the price cap for much of the time. The average price for Russian crude dropped to $55.64 per barrel, falling below the Western-imposed price cap of $60. (Reuters/OilPrice)

API                 Forecast           Actual

Crude Oil      -0.652/-1.6      +2.499

Gasoline        -0.5/-1.1          -3.238

Distillate        -0.8/-1.7          -1.401

Cushing            n/av              -0.443

Runs             +0.3/+1.1%        n/av

Data from earlier this week showed Chinese refinery thruput in April was down 1.4% year on year as state refiners were undergoing maintenance and independent, teapot refiners lowered their run rate due to thinner margins. The April refinery rate was 14.12 MMBPD. The daily processing rate in April declined by 4.9% compared with March. Overall, Chinese refineries operated at 73.83% capacity in April, the lowest since 2022, down 1.7 percentage points from March and down 5.35 percentage points from a year earlier, according to Chinese consultancy Sublime China. Diesel production hit a 32 month low due to increased global trade tensions. “Teapot runs were hit hard by sanctions yet started to recover slowly from March with workarounds found to continue to take Russian and Iranian crudes. Teapot runs recovery was slow and weak driven by the falling gasoline and diesel demand pressured by EV penetration and persistently dismal housing sector,” as per Rsytad Energy commentary. Worries about sanctions have also led to about five plants in Shandong halting purchases of Iranian crude since last month. (Trading view/Quantum Commodities)

The EIA shows that retail diesel prices rose by 6 cents in the last week.  It ends a streak of five consecutive declines. The futures price for ultra low sulfur diesel (ULSD) on the CME commodity exchange had risen for much of the first two weeks of May. With the normal lag of retail prices to futures and wholesale prices, the jump in the EIA's benchmark was not surprising. The price as of the week of 5/19 is $3.536. The prior week's price was the lowest seen since the week of 12/23/2024.

Technicals

The overnight highs were seen on the opening last. Prices have fallen back quite a bit from those highs. RB momentum basis the July daily chart is neutral. The ULSD July daily chart and WTI DC charts still have negative momentum. The WTI DC chart and RB July charts have seen their best price today since the beginning of April.

WTI spot futures have support at the double bottom from yesterday/today at 62.19/62.20 and then at 61.53-61.57. Resistance at 63.90-63.92 was tested overnight with the high of 64.19. Above this resistance is seen at 64.86-64.87.

July RB sees support at 2.0922-2.0939 and then at 2.0813-2.0821. Resistance comes in at 2.1384-2.1399. The overnight high is 2.1480. Resistance above that is seen at 2.1545. The July RB has risen back above the 50 day moving average that lies at 2.0918.

July ULSD support comes in at the overnight low at 2.1004-2.1016 and then at the prior 2 sessions' lows at 2.0750-2.0761. Resistance comes in at 2.1397-2.1404, which was tested with an overnight high of 2.1449. Above that resistance is seen at 2.1586. ULSD has risen back above the 50 day moving average on the July daily chart. That average is at 2.0958 today.

Natural Gas - NG is

NG futures are slightly lower now after rallying earlier this morning, thus continuing the strong rally seen Tuesday. The watchwords used the past 24 hours for the rally are dip-buying, bargain hunting and short covering. Record natural gas exports to Mexico are also seen as supportive.

The notion of short covering is evidenced by the large drop in the June futures open interest seen on the CME from Tuesday's activity. Total open interest in NG futures fell by 18,860 contracts, with June down 22,890 contracts.

Comments seen from colleagues suggest some doubt as to the strength of the rally. "Natural Gas Prices Surge On Overdue Dip-Buying Despite No Significant Change In Fundamentals Or Weather;" "fundamentals stink, the weather is awful, production is to high, wind and solar are on a tear".

Several large options trades were noted in the LN/NG contract on the CME Tuesday. The June $3.25 put was actively traded.  The June $3.25/$3.00 put spread traded 5.3 cents with delta June futures buys at $3.37. The same $3.25/$3.00 June put spread traded 8.3 cents with June delta futures purchases at $3.25. The $3.25 put itself traded 8.8 cents with delta futures priced at $3.31. Large volume traded in the July $4.00/$4.50 call spread at 8.2 cents with July delta futures sales valued at $3.61. The January/February 1 month calendar spread options traded. The 25 cent/15 cent put spread traded 5.8 cents with a reference price for the underlying futures spread of 28.1 cents. The Jan/Feb spread settled Tuesday at 29.8 cents.

TTF prices have risen over the past 36 hours as Russia's inability to agree to a ceasefire with Ukraine puts supply concerns back in focus. Prices were also buoyed by an outage of uncertain duration at a gas field in Norway, as per WSJ reporting.  Kpler analysis sees TTF prices as range bound between 34 and 45 Euros. "The outlook remains range-bound due to relaxed EU storage targets and upcoming maintenance at key regasification sites. " Kpler says. Today's TTF June spot futures are trading near 37.7 Euro/Mwh ( =$12.53 /MMbtu).  (Reuters/NGI/WSJ)

Technically there is a gap to fill on the TTF DC chart from 40.500 to 40.840. Support lies at the 34 Euro area from recent price action.

Asian natural gas prices have also been steady at above $11 and gained 4% last week as more buyers waded into the market to replenish inventories as summer nears as per NGI reporting. The US/China tariff pause saw industrial sentiment improve and thus demand pick up last week. Some utilities and traders stepped in to pick up June cargoes, as per a Reuters source. "The market was not tight from a fundamental perspective, but lower prices have tempted some buyers who need to satisfy their contractual volume obligations.", the source added. In April,  China recorded its lowest LNG demand since October 2022, and was seen reselling U.S.-sourced LNG cargoes to Europe due to a tariff war with the United States. (Reuters/WSJ/NGI)

The JKM spot futures price for July on the CME settled at $12.515 on Tuesday. The attached chart suggests that the recent rally may stall as momentum for the JKM futures basis the DC chart is overbought.

Technically in NG futures, light resistance at the 3.499-3.500 area has been tested this morning with a high of 3.513. Above this resistance is seen at 3.576-3.583. Support is seen at 3.335-3.340, which is just below the overnight low of 3.346. Below that support is seen at the 3.260-3.270 area. Momentum basis the DC chart remains negative. But, as one colleague said : "you're not going to make any money getting short at $3.".

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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.

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