Daily Energy Market Update June 5,2025

Overview

Energies are higher in a slow news environment today. Support is said to be coming from geopolitical tension and the Canadian wildfire loss of supply. Watchwords being used in news wire accounts today are "steady" and "stabilizing".

Trump said he spoke with Putin Wednesday though “not a conversation that will lead to immediate peace." Putin said that he will have to respond to the recent Ukrainian attacks on Russian air fields. (CNN) President Trump also said that he needs a definitive answer from Iran soon on a nuclear deal. (WSJ) 

The DOE statistics disappointed for products with very large inventory builds as demand was weak and refinery runs rose much more than forecast.  Gasoline inventories built by 5.219 MMBBL. Gasoline inventories rose in every PADD Region last week. GasBuddy commented inventories rose “even in hard-hit PADD 5, where refinery issues have plagued output.” Gasoline supplies built even as there was a large drop in finished gasoline production. Gasoline production fell to 9.037 MMBPD from 9.751 MMBPD in the prior week. Gasoline demand fell by 1.189 MMBPD to 8.263 MMBPD. GasBuddy offers the following comment: “Very soft weekly gasoline demand due to the holiday hangover.” This week's gasoline demand was well below that seen in 2023 (9.218 MMBPD) and 2024 (8.946 MMBPD). Distillate supplies rose by 4.23 MMBBL, but were still 16% below the 5 year average for the period, as per the DOE. Distillate demand fell by 742 MBPD to 3.151 MMBPD. This demand lagged the prior 2 years demand of 3.367 and 3.814 MMBPD. Refinery capacity usage rose by 3.2% to 93.4 %. Forecasts were calling for usage to rise by 0.6 to 0.9%. Crude inputs to refineries rose by 670 MBPD to 16.998 MMBPD. This total input is very close to the level  of crude that was going to refineries one year ago; the stats of 6/5/2024 showed runs of 17.144 MMBPD. The rise in crude inputs was behind the crude stockpile draw of 4.302 MMBBL.

Saudi Arabia cut its prices for Asian crude buyers for July close to the lowest level in four years on Wednesday, in what the market sees as the country’s attempt to regain market share. The Saudis lowered their flagship A-Light crude OSP by 20 cents to Asian customers for July to $1.20 a barrel above the Oman/Dubai average. Medium grade crude saw an OSP drop of 10 cents, while their Heavy crude price remained unchanged. The 20 cent reduction for A-Light is less than a 35 cent reduction forecast in a survey of refiners and traders by Bloomberg. Prices to the Med and NW Europe rose by $1.80 across the board. The price for A-Light crude to the US rose by 10 cents. Medium and Heavy crudes saw OSP's stay unchanged.

Prior to announcing their OSP, news from Saudi Arabia had Bloomberg sources reporting that Saudi is pushing for higher oil output in the months ahead to regain market share. The Saudis are looking to add "at least" 411 MBPD in August and potentially September the report says.

Canada is prepared to strike back against the United States if talks with Washington to remove President  Trump's tariffs did not succeed, Prime Minister  Carney said on Wednesday. (Reuters)

Freight Waves, a price reporting firm for the freight market, has detailed the decline in diesel demand. Consumption of nonjet fuel distillates, a category that is almost 90% ULSD, was 3.65 MMBPD in the week ended May 23, according to the latest weekly report of the EIA. It’s the third consecutive year that the demand figure for the last week of May was less than in the prior year. Whether it is because of upticks in intermodal service, better diesel engine efficiency, conversion of heating oil usage to natural gas (because heating oil is in that number) or a series of relatively warm winters in the U.S. Northeast where heating oil is the fuel of choice, the demand figure stands in stark contrast to the 10-year average for May’s final weekly EIA report of 3.92 MMBPD.

The Brent and WTI crude call-put volatility skews continue to narrow this week, extending a trend since early May. The second month Brent call-put volatility skew is today at -2.4% compared to wider than -5% in early May.  The Dec25 call-put skews have also narrowed to the least bearish since early April. (Market News) The suggestion is that Canadian wildfire supply losses and geopolitical tensions are overwhelming soft global demand and rising OPEC+ supply.

Canada’s wildfires may impact gasoline prices in the U.S. 25 % of crude oil in U.S. refineries comes from Canada. Much of the crude oil in U.S. refineries in the Midwest and Rocky Mountains comes from Canada. GasBuddy commentary adds : " if this hit to Canadian oil production continues for potentially more than a week or two, and/or if it worsens in terms of the amount of oil shut in, it could be a bit more problematic to these refineries." But, Gasbuddy adds that currently there has been no gasoline price impact.  ”Nearly 70% of U.S. refining capacity runs most efficiently with heavier crude.”, as per American Fuel & Petrochemical Manufacturers commentary. (Independent)

Technicals

Momentum is positive for the WTI & ULSD basis the DC chart, with the RB momentum trying to turn positive.

In as much as its DC chart based momentum is positive, the past 3 highs for spot WTI futures are 63.88, 63.89 and 63.96. Above that we see resistance at 64.86-64.87. Support comes in at 61.48-61.53. Notable in WTI on the DC chart is the narrowing/tightening of the bollinger bands, which is referred to as a "squeeze". This signifies a period of calm in the market. The squeeze is often followed by a breakout, either upward or downward. But, a squeeze alone doesn't guarantee a breakout.

)Natural Gas - NG is up 1.2 cents

NG prices are now higher, after spending the overnight lower due to the expectation for a larger than average storage injection in today's EIA data.  Weak cash pricing has also likely contributed to prices slipping the past 24 hours. Also, demand forecasts for the coming 2 weeks have been dialed back.

The EIA storage data due out today is seen as a build of 110 to 113 BCF. This compares to last year's build of 94 BCF and the 5 year average build of 98 BCF. This would be the 6th straight week of an injection of more than 100 BCF.

Wednesday's pricing for next day Henry Hub cash gas was between $2.76 and $2.85. This is a very large discount to the front month futures price. This large differential has been cited as giving incentive to storage operators to buy the cash and sell the futures to lock in storage costs. The large differential was also said to have weighed similarly on June futures last month. And one analyst commented :" "A weak Henry Hub physical market, [though], still below $3.00, may act as a short-term brake on warranted medium-term bullish enthusiasm,".

On Wednesday, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 94.8 BCF/d this week to 97.1 BCF/ next week. These forecasts were down a total of 5.4 BCF/d from those seen Monday.

Lower 48 natural gas demand edged up today to the highest since April 16 at 70.31 BCF/d to remain above the previous five-year average around 65.4 BCF/d, Bloomberg data shows.

U.S. domestic natural gas production is estimated today at 105.0 BCF/d today, having recovered from a low of 104.3 BCF/d on June 3. Production averaged 106.38 BCF/d over the previous 30 days, according to Bloomberg data.

Settlements on Wednesday showed July 2025 through October 2025 were lower on the day, compared to Calendar year 2026 settling higher by 1.7 cents for January to as much as +4.3 cents for December 2026. We read into this a few things: 1) the front is weak as cash remains well below the futures  (2) large storage injections have seen the curve staying wide; the October January spread is trading within 2 cents of its lowest recent price of $1.189. (3) the back end of the curve is telling us that it sees demand rising and or production leveling off. 

Also notable from CME trading in NG futures from Wednesday is the large open interest increase seen. Open interest rose by a total of 20,722 contracts with increases in August through May ( except for December). We see this as more new length versus short positions given prices rose during the session from 9 am to the closing bell at 2:30 pm.

The strength exhibited by the Calendar 2026 versus nearer contracts settlements is reflected in analysis by BofA. The likelihood of average Henry Hub prices rising above $4/MMBtu this year is decreasing, according to BofA. However, the upside in 2026 is growing as LNG feed gas demand continues to surge, they say. Flagging gas-to-power demand and hefty storage rates could keep 2025 prices to around $3.75, but could lift exponentially by the following summer. The bank increased its guidance for average prices in 2026 to $4.75.

Technically NG still has positive momentum basis the DC chart. We see a possible bull pennant formation on the DC chart, suggesting that the upward price pattern is currently paused. Support for the spot futures is seen at 3.608-3.613 and then at 3.527-3.531. Resistance lies at 3.764 and then at 3.840. The 100 day moving average for the spot futures basis the DC chart intersects at 3.698. 

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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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