Written on: July 5, 2023

Energy Price Report

Wednesday, July 5, 2023

Energy Prices Rebound

Energy prices are rebounding on Wednesday, ahead of an OPEC meeting, despite a downgrade to Morgan Stanley’s Brent crude price forecast, strength in the US dollar and weakness in both European shares and in US stock market index futures.

Quiet Day on Economic Calendar

Traders have a relatively quiet day ahead of them on the economic calendar with only US factory orders figures scheduled to be released this morning. The weekly EIA inventory report will be released tomorrow, a day later due to the holiday on Tuesday.

Barrel Cost Projections

According to Reuters, United Arab Emirates energy minister Suhail Al Mazrouei has said that the additional output cuts by Saudi Arabia and export cuts by Russia that were announced on Monday should be sufficient to help balance the oil market.  Also, in the news today, Morgan Stanley has lowered its Brent crude oil price forecast for the third quarter from $77.50 a barrel to $75.00 and its fourth quarter forecast from $75.00 a barrel to $70.00.  Morgan Stanley also cut its price forecasts for the first and second quarter of next year by $5.00 a barrel, citing that non-OPEC+ supply will be growing faster than demand next year.

Asian Markets

Asian shares closed in the red overnight with the Nikkei edging down 0.25%, the Shanghai Composite losing 0.69%, and the Hang Seng tumbling 1.57% lower. The S&P Composite PMI for China came in at 52.5 for June, down from 55.6 in May. In European news, the Producer Price Index for the entire Eurozone fell 1.9% last month, while forecasts called for a smaller dip of 1.7%. The final June S&P Global Composite PMI for the Eurozone came in at 49.9, below expectations at 50.3 and back in the contractionary territory. Indexes for both Germany and France missed expectations by coming in at 50.6 and 47.2, respectively. In the UK, the June CIPS/S&P Global Composite PMI came in at 52.8, matching the flash estimate. As of this writing, the FTSE 100 and the DAX had lost 0.6%, while the CAC 40 was down 0.7%. US stock market index futures were seeing similar losses of around 0.6% this morning. Also unsupportive for crude oil prices, the US dollar index was up 0.2%.

Energy Futures

Petroleum futures lost ground on Monday amid weakness in European shares, despite strength in US equities and news of additional voluntary oil output cuts by Saudi Arabia and export reductions by Russia.  Brent crude fell 76 cents to $74.65 a barrel, WTI crude lost 85 cents to close at $69.79, gasoline futures settled 8.25 cents weaker at $2.4624 per gallon, heating oil dropped 3.98 cents lower to $2.3773 and natural gas fell 8.9 cents to settle at $2.709 per MMBTU.