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Correction in Energy Complex

CRUDE OIL

We think a subtle change has taken place in the energy complex, with the market initially rallying on Monday off the idea that the Iranian talks on sanctions were derailed when in fact they were simply delayed. In other words, the trade has rushed to bullish conclusions on nearly every key headline and that suggests a temporary top is in place.

It appears that the gasoline market is breaking down this morning after failing to post a new high for the move like crude oil and diesel yesterday. In our opinion, the gasoline market is becoming vulnerable to significant corrective action unless weekly implied gasoline demand readings increase again and show signs that demand can climb faster than US refiners can push out additional product supply.

An oil pump jack

NATURAL GAS

Natural gas prices fell back yesterday and appeared to run into technical and perhaps fundamental resistance at the $3.121 level. However, in the early going today it seems as if the July contract has recovered and put fresh shorts under pressure. We also suspect that less than stellar Chinese import/export data for the month of May has tamped down hope for strengthening US LNG exports to China and US LNG exports to China might be undermined after signs of renewed US/Chinese trade tensions emerged overnight.

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