Daily Energy Market Update 12-23-2024

Crude is down 35 cents???? February RB is down 0.42 cents???? February ULSD is up 0.29 cents

Overview

Crude oil prices have now fallen back into negative territory after trading higher overnight. A stronger U.S. dollar seems to have caused energy prices to ease back off their highs. The dollar was hovering around two-year highs on Monday morning, after hitting that milestone on Friday. Crude oil rallied slightly overnight, helped by cooling inflation as per Reuters commentary, and according to Bloomberg by the threat to reimpose U.S. control over the Panama Canal, through which roughly 2% of global oil supply flows.? (Reuters)

“Trump’s threats and rhetoric on the international scene are mostly noise for the oil markets at this point,” said one analyst. “Given the thin trading and lack of strong cues, I expect crude to slide sideways into the year-end.”

Traders took positive cues for crude oil from the U.S. government avoiding a shutdown over the weekend, as per Investing.com commentary. The US government pledged to increase public expenditure in a bid to support aggregate demand.? "Over the weekend, the US Senate passed legislation to extend public funding and end a brief government shutdown after missing a midnight Saturday deadline. The new legislation extends government funding until March 14 and allocates $100 billion for disaster-hit states and $10 billion for farmers,". (Platts)

Cash spreads between Brent and Dubai, meanwhile, have slipped into negative territory, with front-month cash Brent assessed at an 18 cents/b discount to cash Dubai on Dec. 23, as per Platts reporting. The Brent/Dubai futures spread was seen at a premium for the Brent of $1.08 on December 6th, down from a peak of $2.39 seen on October 4. (Reuters)

CFTC data shows money managers added a lot of length in WTI futures/options in the week ended Tuesday Dec.17. They added 59,547 contracts of net length --primarily through new long positions on the CME. The rise in WTI length was the most in over a year, as per Bloomberg. Money managers in the same period covered a lot of shorts in ULSD. The net short position fell by 14,689 contracts to a total net short of 32,134 contracts. The nets shorts fell mostly due to money managers covering short positions, while adding a small amount of new longs. RB net length fell by 5,933 contracts in Friday's report.

JPMorgan sees the oil market moving from balance in 2024 to a surplus of 1.2 MMBPD in 2025, as the bank forecasts non-OPEC+ supply increasing by 1.8 MMBPD in 2025 and OPEC output remaining at current levels. Macquarie analysts projected a growing supply surplus for next year, which will hold Brent prices to an average of $70.50 a barrel, down from this year's average of $79.64, they said in a December report.? (Reuters)

The CME will observe the following holiday hours this week : The energy contracts will close on Tuesday December 24 at 1:45 PM EST. The settlement/closing period for Tuesday will be from 1:28 to 1:30 PM EST. The CME will remain closed until Thursday December 26 at 6 PM EST.

Technicals

Momentum remains negative for the energies, although the pattern of prices seems to remain an overall sideways one.

February WTI sees support at 68.42-68.49 and then at 67.71-67.72. Resistance lies at 70.51-70.56. There is currently a double top from Friday/today at 69.85-69.94.

February RB sees support at the 1.93 area and then at 1.9120-1.9123. Resistance comes in at 1.9649-1.9659, which was tested with the overnight high of 1.9678. Above this resistance comes in at 1.9791-1.9795.

ULSD for February sees support at 2.2043-2.2047. Resistance is seen at the recent highs at 2.2779-2.2797.

Natural Gas -- NG is up 3.0 cents

NG is up as weather forecasts have added more cold to the early January period. Freeze-off risks and stronger LNG exports were also seen supporting prices recently. Today's spot futures price has risen to the best spot futures value since January 9, 2023. Today's spot futures value near $3.805 is up 18.5% from the settlement of the first trading day of the month.

Over the weekend, the near-term models continued to pivot towards an early January pattern shift favoring colder temperatures east of the Rockies & higher Gas-Weighted Degree Days (GWDDs).

Friday's early data showed LNG feedgas demand rising to 15.0 BCF/d, up +1.5 BCF/d vs last year and the third highest level on record, just below last winter’s 15.05 BCF/d all-time high. (Celsius)

On Friday, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 124.4 BCF/d this week to 130.2 BCF/d with cooler weather next week before falling to 119.4 BCF/d with milder weather in two weeks. The forecasts for "this" (meaning last) week and next (meaning this coming week) were up a total of 2.3 BCF/d from Thursday's estimates.?

Russia said on Monday that the situation with European countries that buy its gas through a transit deal via Ukraine is very complicated and needs more attention, after talks between President Vladimir Putin and Slovak Prime Minister Robert Fico. The transit deal is to expire at the end of the year, as Ukraine does not want to aid Moscow's military effort. Putin said last week it was clear there would be no new deal with Kyiv to send Russian gas through Ukraine to Europe. The flow through Ukraine accounts for around half of Russia's total pipeline gas exports to Europe. Slovakia, Italy, Austria and Czech Republic will be the most affected if it ends.? (Reuters) Further supply uncertainty was raised as Qatar has warned the EU that it will halt gas exports if fined under the EU's new Corporate Sustainability Due Diligence Directive. This law, which took effect in July 2024, imposes fines on companies for adverse human rights or environmental impacts. (Economic Times)?

The TTF contract has risen today to over 45 Euro/Mwh. The contract bottomed one week ago just below 39 Euro/Mwh. There is some support above that at the 42.3 Euro/Mwh area. Light resistance comes in at the 46 Euro/Mwh area and then at 48 Euro/Mwh.

NGI’s Spot Gas National Average rose Friday by 78.0 cents to $4.075.

CFTC data issued Friday shows money managers covered some of their net shorts in the week ended Tues. Dec 17. Net shorts fell by 13,306 contracts to a total net short position of 66,250 contracts. CME data for Friday's activity shows open interest having fallen by a total of 16,741 contracts. It looks like short covering in the January and February contracts. Some of the fall in January open interest may purely due to the expiration that comes this Friday.

Technically the NG futures have a mean reversion set up with the Friday settlement over the DC chart upper bollinger band. That band lies at the 3.76 area. The January daily chart sees the bollinger band today intersecting at 3.825. Today's high of 3.944 was made on the opening of the session last night. Some resistance is seen below that at 3.918-3.923. Support below lies at 3.765-3.769 and then at 3.726-3.732. The weekly continuation chart shows momentum that is getting very near overbought and looks to be cresting.

Disclaimer

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