Daily Energy Market Update 12-3-2024

Crude is up $1.05????? RB is up 2.35 cents????? ULSD is up 2.81 cents

Overview

Energy prices are higher as the market is expecting? OPEC+ to delay bringing back some of its output. In addition, the possibility of a further 25 basis point cut in U.S. interest rates in December is seen as supportive. Platts adds that rising geopolitical tension is also supporting prices.

OPEC+ is likely at its meeting on Thursday to extend its latest round of oil output cuts until the end of the first quarter, four OPEC+ sources told Reuters, to provide additional support for the oil market. An output hike of 180 MBPD - a fraction of the total - was planned for January from the eight members involved in OPEC+'s most recent cuts of 2.2 MMBPD. An issue that needs to be addressed is a 300 MBPD output hike for the United Arab Emirates agreed in June that is scheduled to start in January 2025 and be phased in gradually. The UAE is keen for that to go ahead, the sources said. (Reuters)

Platts highlights the fragile cease fire between Israel and Lebanon, as well as the prospect for sanctions against Iran in a new Trump administration as supporting prices. Further strikes were exchanged between Israel and Hezbollah, piling onto the ceasefire violations that threaten the legitimacy of the previously negotiated truce.

CFTC data showed money managers did very little to change their RB and WTI positioning on the CME in the week ended Tuesday November 26, while they added a small amount to their net short in ULSD. Net shorts in ULSD rose by 3,842 contracts to an 8 week high of 27,386 contracts. RB net length fell by 200 contracts. WTI net length on ICE/CME combined rose by 4,940 contracts.

China is to consume about 3% less gasoline in 2025, with total demand forecasted at 159.57 million metric tons ( equal to about 3.65 MMBPD) , data from consultancy Mysteel Oilchem showed. Diesel demand in China is expected slide 3.2% from 2024 to 198.44 million metric tons ( equal to about 4.056 MMBPD)?? next year. Demand for both fuels peaked in 2021, the consultancy added. The drop in demand is seen due to a weaker economy and a rapid rise in EV sales. EV and hybrid sales in China topped combustion engine vehicle sales for the first time in July. (Quantum Commodities/Reuters)

Some expectations for increased Chinese stimulus measures at the Chinese Central Economic Work Conference Dec. 11 have painted a more bullish picture, as per Platts commentary.

The EIA , in their weekly report for retail regular gasoline prices, says that the average fell as of Monday to $3.034, which is the lowest since May 31,2021.

Technicals

Momentum remains negative for the energies, although that for the WTI looks to be turning towards neutral.

WTI spot futures now has 3 lows below $68, which look to be forming support. Support lies at 67.71-67.79. Resistance comes in at 69.69 and then at 70.30-70.38.

The RB spot futures bounced off the DC chart's lower bollinger band yesterday. RB has support at the low seen yesterday at 1.8964-1.8968. Resistance lies at 1.9923-1.9935. The lower bollinger lies today at 1.900.

ULSD spot futures have support at the double bottom of yesterday/today at 2.1722-2.1738. Resistance lies at 2.2462-2.2487.

Natural Gas--NG is down 8.3 cents

NG spot futures prices are lower today amid the backdrop of warmer weather coming mid-December and rising production seen recently. But, feedgas demand has been strong of late providing some support.

Lower-48 state dry gas production Monday was 104.5 BCF/day (-1.2% y/y), according to Bloomberg data. LSEG data says that December production has averaged 101.8 BCF/d, up from November's average of 101.4 BCF/d.

Feedgas demand for the export LNG terminals in Monday's flow was said to have risen to 14.6 BCF/d, which is equal to the amount seen one year ago, Celsius Energy reports. Bloomberg data put the feed gas demand at 14.2 BCF/d, up 8.7% on the week.

The CFTC COT report issued Monday showed money managers covered a lot of their short positions in the week ended Tuesday November 26, coinciding with the sharp rally to above $3.50. The net short positon fell by 61,574 contracts to a total 61,717 contracts.

Adding to the negative back drop of the past 24 hours is the report from the EIA showing U.S. natural gas inventories entered winter 2024–25 at the highest levels since 2016, sitting 6% above the 5-year (2019–23) average. According to estimates from the EIA, working natural gas storage in the Lower 48 states closed the injection season with 3,922 BCF. This, despite below-average injections into storage for the entire injection season. Nearly every week in the 2024 injection season saw less natural gas injected than the 5-year average, partly because starting inventories were relatively full, the EIA says. Net injections into natural gas storage during the injection season totaled 1,640 BCF, 21% less than the 5-year average. Overall, EIA forecasts natural gas withdrawals during the 2024–25 heating season will total 1,957 BCF and that inventories will be 6% above the 5-year (2020–24) average at the end of March 2025. Based off the 3,922 BCF total above, that would put end of season storage at 1,965 BCF. The most recent "Desk" survey sees end of season storage at 1,859 BCF.?

Reuters has an article saying that global gas prices will continue to rise. Natural gas prices in Asia, Europe and North America have climbed by around 30% to 50% so far in 2024, and look set to keep rising over the coming months as forecasts for cold weather trigger higher heating demand in key consumer hubs. Higher gas-fired generation for heating across North America, Europe and North Asia is the main near-term driver of global gas prices. What's more, for the first time in years, average temperatures across the key gas markets of China, Japan and mainland Europe are all set to slip below long-term averages this month. Active restocking of rapidly-declining gas inventories in Europe and Asia should also spur strong gas demand, even if temperatures turn mild again in those areas. Reuters commentary adds :" That should ensure gas market sentiment remains broadly bullish until the upcoming winter is over, and that prices may have little scope to retreat until well into 2025."

Technically, the spot NG futures have broken below the low of 3.148 seen yesterday. Next support is seen at the 3.07 area. Momentum has turned negative. Resistance lies at 3.234-3.236 and then at the 3.28 area.

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