Daily Energy Market Update 12-6-2024

Crude is down 75 cents???? RB is down 1.99 cents????? ULSD is down 1.83 cents

Overview

Energy prices are lower as the market has "shrugged off" OPEC+'s decision to delay bringing back production, citing a continued over supply of oil next year. Also, demand concerns linger,? weighing on prices.

Contrary to several analysts' remarks suggesting that OPEC+'s decision will do little to shore up oversupply, ING comments that "admittedly the surplus is more manageable at around 500 MBPD, compared to 1 MMBPD expected previously. For the peak demand period of 3Q25 we now see the market essentially in balance, before returning to a surplus of 1 MMBPD in the final quarter of 2025." But ING adds: " While the action taken by OPEC+ may potentially provide a higher floor to the market than previously expected, ultimately the group will still have to accept lower prices. Expectations for a smaller surplus means that downside for ICE Brent is likely more limited in 2025 than initially expected." Previously, ING had forecast ICE Brent to average $69/bbl over 2025. However, following this action from OPEC+ they have increased this to $71/bbl. " (think.ing.com)? Additionally, analysts at HSBC, meanwhile, now expect a smaller oil market surplus of 0.2 MMBPD, from 0.5 MMBPD previously, it said in a note. (Reuters)

The U.S. Non Farm Payroll data issued today showed 227,000 new jobs added in November. Expectations were for an increase of 214,000 / 215,000 jobs. Revisions to October and September data saw a further 56,000 jobs added. Energy prices barely reacted to the news.

Nigerian crude sellers look to Europe with a large portion of their January volume still unsold. Spot trades in Nigeria remain fairly thin for the producer’s January crude oil trading cycle, sources have said, with the market looking to Europe with as many as 40 MMBBL yet to be placed, according to Platts reporting. There even remained some lingering December-loading barrels? on the prompt that have yet to find end-users including grades Bonny Light, Escravos and Forcados, one trader said. Nigeria’s crude oil trading cycles tend to focus in their earlier portions on buy tenders from oil companies across India, Indonesia and other Asian countries before the spot market moves toward the shorter-haul European buyers in search of demand.

Iraq’s total federal crude oil exports in November fell 31 MBPD to 3.296 MMBPD, meeting -- for the first time -- the oil ministry’s pledge to restrict the export rate to 3.300 MMBPD,? according to a SOMO comprehensive export table for the month seen by S&P Global Commodity Insights on Dec. 6. (Platts)

The focus of demand concerns recently has been largely on China, but Europe does not paint a rosy picture either. German industrial production fell in October by 1.0%, versus a Bloomberg forecast for a reading of +1.0%. Falling industrial output, combined with low level of orders, means there is a growing risk that the German economy will contract in the fourth quarter, Commerzbank says in a note. One professor adds : " in Germany the problem is growth. The German economy needs major adaptation to a new environment without Russian gas and in which making cars in Europe looks like a really bad business plan. From an economic point of view, that is harder to solve than the French problem." France's government upheaval this week is seen having an impact. Analysts fear France would enter a slow-burning crisis that could lead to a deterioration of sovereign creditworthiness and less economic growth. Economists warned that the lack of a fresh 2025 budget in France due to the government falling would set the country’s deficit higher, spur higher bond yields and deter international investors. (Reuters/WSJ/CNBC)

Technicals

Momentum is negative for the energies, with that for the products though waning on the downside.

ULSD spot futures have fallen to their lowest price since October 29. The price pattern on the DC chart of the past 10 days is one of a stepladder down. Support for the spot futures lies at 2.1265 and then at 2.1051-2.1065. Resistance lies at the 2.19 area.

RB for January sees support at 1.8964-1.8968 and then at 1.8812. The futures here have failed the rest of this week as yet to retest the 1.8968 low seen Monday. Resistance comes in at 1.9504-1.9515.

WTI spot futures see support at the recent low at 66.61. Resistance is seen at 69.11-69.16.?

Natural Gas- NG is down 5.1 cents

NG prices are lower today as a near term warm up is on tap for much of the Eastern half of the U.S. The market shrugged off the bearish EIA seen yesterday as it was suggested that the lower draw was due to the Thanksgiving holiday when industrial demand falls.

The EIA gas storage data seen Thursday showed a draw of 30 BCF. This put total storage at 3.937? TCF, which is + 185 BCF / +4.93 % versus last year and +284 BCF / +7.77 % versus the 5 year average. The next 2 weeks data will see considerable draws, shrinking the surpluses to last year and the 5 year average.

On Thursday, LSEG forecast average gas demand in the Lower 48, including exports, would drop from 137.0 BCF/d this week to 129.4 BCF/d next week. These forecasts were up 2.0 BCF/d total versus that seen Monday, primarily due to this week's demand forecast rising by 2.1 BCF/d.

Today is the first day of the double index roll, which traditionally is believed to see selling by funds of longs held in the first contract month against buying of the third contract month. But, in the last roll seen 2 months ago, the opposite happened during the roll period. The then front contract November gained on January as speculative short covering looks to have been the operative transaction. The November front futures contract gained on the January contract, only to then fall against the January after the roll ended. For now the January? March spread has negative momentum and has fallen in line with the flat price drop. The Jan March spread has support possibly at the low seen 1 month ago at 28.4 cents. Resistance is seen at about 44.5 cents for the spread. One colleague suggests though that the Jan March index roll could easily be trumped by changing weather and production forecasts that could impact natural gas futures prices more than repositioning being done by funds.?

NGI reports that Northeast gas prices have risen to their highest levels in quite a while this week as cold weather has invaded the region. Strong heating demand has spiked natural gas prices in the Northeast to near highs seen during Winter Storm Elliott in 2022. Another dose of cold weather is forecast for the coming weekend. The spot natural gas price at the New England benchmark Algonquin Citygate surged in the first days of December. The average jumped to $13.800/MMBtu on Monday, pulled back on Tuesday, and increased by $2.260 on Wednesday to $10.040, according to NGI data. NGI adds that Northeast demand has risen to 27.6 BCF/d, near to the Winter Storm Elliott of 2022 demand of 28.76 BCF/d.

Technically NG spot futures have negative momentum. Support below lies at 2.975-2.977 and then at 2.915-2.921, as per data from the January daily chart. Resistance is seen at the highs of overnight and of Wednesday at 3.088-3.092. Above that resistance lies at 3.171-3.173.

Disclaimer

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