Written on: June 1, 2020

Energy Price Report

Monday, June 1, 2020

Energy futures are trading mixed on Monday as market participants weighed news that OPEC+ was getting closer to a deal on extending oil output cuts against mixed trade in European equities and US stock market index futures and continued tensions between the US and China. US stock market index futures are trading mixed this morning as Dow futures are up 0.1%, the S&P futures are trading flat, while Nasdaq futures are down 0.2%. As of this writing, the US dollar index is down 0.2%, which is supportive for crude prices. Market participants awaited the Markit US Manufacturing PMI, the ISM Manufacturing Index, and construction spending data for further direction.

In the news this morning, Reuters reported that OPEC and Russia are moving closer to a compromise on extending the current output cuts beyond June, for one to two months longer, according to two OPEC+ sources. Additionally, Algeria proposed that OPEC+ hold a meeting on June 4 rather than on June 9-10 as previously planned, and Russia has said that it has no objection to this proposal. In more news, China said that if the US attempts to harm Chinese interests, there will be firm countermeasures, as a response to a US decision to begin ending special treatment for Hong Kong, which was announced by President Trump on Friday.

Asian stock markets closed higher overnight amid neutral to supportive economic data releases. China’s May Caixin Manufacturing PMI came in at 50.7, beating consensus at 49.6. Japan’s Manufacturing PMI for the same month came in at 38.4, unchanged from the previous month. The May Manufacturing PMI in India came in at 30.8, up from 27.4 the previous month. The Nikkei closed 0.8% higher, the Shanghai Composite added 2.2%, and the Hang Seng jumped 3.4%.

The Eurozone Manufacturing PMI for May came in at 39.4, just below expectations at 39.5. French Manufacturing PMI for the same month came in at 40.6, beating the Econoday consensus at 40.3. The CIPS Manufacturing PMI in the UK came in at 40.7, above forecasts at 40.6. On the other hand, German Manufacturing PMI for the month came in at 36.6, below expectations at 36.8. Accordingly, Germany’s DAX was trading 1.7% lower this morning, while the UK’s FTSE 100 and France’s CAC 40 were up 1.3% each.

Energy futures strengthened on Friday amid another double-digit drop of 15 in the US oil rig count, despite US-China tensions and mixed trade in equities. WTI crude rose $1.78 to settle at $35.49 a barrel, Brent crude edged up 4 cents to close at $35.33 a barrel, gasoline futures settled 2.74 cents higher to $1.0259 per gallon, heating oil climbed 3.91 cents higher to $0.9647 per gallon and natural gas futures rose by 2.2 cents to settle at $1.849 per MMBTU.