Daily Energy Market Update 12-9-2024

Crude is up 99 cents???? RB is up 3.13 cents???? ULSD is up 4.24

Overview

Oil prices are higher today as heightened tensions in the Middle East following the overthrow of Syrian President Bashar al-Assad by rebels and a Chinese move to a looser monetary policy offset concerns over weak demand that was highlighted by Saudi Aramco's price cuts to Asian buyers.

China will adopt an "appropriately loose" monetary policy next year, the first easing of its stance in some 14 years, alongside a more proactive fiscal policy to spur economic growth, the Politburo was quoted as saying on Monday.? "The policy tone shows strong confidence against Trump threats" of tariffs, as per one analyst. (Reuters) The need for stimulus is evidenced by Chinese inflation data that showed year on year inflation having risen at a meager 0.2%, missing the market’s expected level of 0.5%. "The still-subdued pace of price recovery may continue to underscore weak domestic demand [in China]", as per one analyst cited in Platts.?

The Assad family has lost control of Syria after more than 50 years of brutal dictatorship. In the face of an astonishingly swift rebel offensive, President Bashar al-Assad and his family fled to Moscow and were granted political asylum, an official source in Russia told CNN. The leader of the main rebel group called the toppling of Assad a “victory for the entire Islamic nation”. Israeli Prime Minister Benjamin Netanyahu said he had ordered the military to seize the demilitarized buffer zone between Israel and Syria to defend villages in Israel's north , and warned Syrians in the area to stay home for their safety. (Dow Jones)

In addition, tension in the Mideast has been ratcheted up somewhat as hostilities between Israel and Lebanon persist. The [Israeli Air Force] struck Hezbollah terrorists operating within a weapons storage facility in southern Lebanon, in violation of the ceasefire agreement between Israel and Lebanon.", Israel announced. (Platts)

Saudi Arabia lowered its Official Selling Price (OSP) for its flagship A-Light crude oil to Asia for January loadings by 80 cents, which was in line with the 70-90 cent cut seen in a Reuters survey. The cut makes the premium for Saudi crude versus the Oman/Dubai average the lowest since early 2021. The Saudis also cut their Heavy and Medium grade OSP's to Asia by 70 cents. Their cut is a reflection of weak demand and an attempt possibly to win back/keep market share, Reuters states.

Evidence of weaker demand is the fact that crude imports into Asia were down 310 MBPD for the first 11 months of 2023 at a total 26.58 MMBPD, as per LSEG Research. But, November's Asian crude imports rose to a 6 month high of 27.05 MMBPD. This was up almost 1 MMBPD from October's imports of 26.06 MMBPD. Saudi Arabia is the biggest supplier to Asia and has seen its market share recover in recent months. Asia buys 70% of the Saudi's crude. By lowering its OSPs for Asia, Aramco keeps its crude pricing more competitive with grades from exporters such as Angola and Nigeria. The lower OSPs may also reflect that the U.S. dollar has strengthened in recent weeks, meaning that lower oil prices in dollars aren't fully reflected in local currencies in key Asian buyers, Reuters commented. Saudi OSP's to the U.S. were unchanged for January loadings. OSP's to NW Europe and the Med were cut by $1.10.

Money managers added a very small amount to their net length in WTI on ICE/CME combined in the week ended Tuesday December 3. They added 2,871 contracts. RB net length fell by 697 contracts during the same period. The ULSD net short position held by managed money rose by 504 contracts to a total of 27,890 contracts. Speculative net long positions in ICE low sulfur gasoil futures fell 8,727 contracts to 15,260 in the week to Dec. 3, according to ICE data.

Diesel and gasoil stocks in the Amsterdam-Rotterdam-Antwerp hub dropped 5.7% in the week ended Dec. 5 to 2.130 million metric tons, as the end-of-year destocking drew nearer, Insights Global data showed. This puts stock levels up 17% on the year, as the market remains well supplied. Platts adds in its commentary that "the European diesel market appears balanced, with steady supply and demand levels.

In a positive development on the trade front, ahead of possible tariffs being imposed by the incoming Trump administration, the EU reached a deal with a South American bloc of 5 countries, named Mercosur, to remove over 90% of tariffs on goods exchanged between the two blocs, saving EU companies around €4 billion worth of duties each year. Mercosur comprises Argentina, Brazil, Paraguay, Uruguay, and since 2024, Bolivia. In terms of population, the trade deal would unite 730 million people (450 million in the EU), or about 8.9% of the global population. The EU is Mercosur’s second-largest trade partner for goods, following China and ahead of the United States. Conversely, Mercosur ranks as the EU’s tenth-largest trade partner for goods. Some European opposition, though, remains to the trade deal--notably from France and Poland.? (ING)

China's exports likely grew in November, slower than last month's bumper data but continuing an upbeat trend as Chinese exporters likely frontloaded shipments amid growing tariff risks from the incoming U.S. administration. Outbound shipments are expected to have risen 8.5% year-on-year by value in November, the median forecast of 22 economists in a Reuters poll showed, compared to a 12.7% jump in October. The trade data will be released tomorrow.? (Reuters) South Korea, a leading indicator of China's imports, reported a fourth-straight month of slowing exports growth in November, hitting a 14-month low, as shipments to the U.S. and China fell amid tariff uncertainty. (Reuters)

On the economic front, the ECB is widely expected to go for a further 25 basis point cut in Europe's interest rates this week, followed by a similar move by the US Fed next week. (Quantum Commodities)

The Baker Hughes oil rig count showed an increase of 5 units in Friday's report.??

Technicals

Momentum has turned positive for the products today on the DC charts. WTI momentum remains negative. As might be expected with the prospect/possibility for better industrial demand driven by Chinese stimulus measures, ULSD is leading today's up move.

WTI for January sees support at 66.92-66.98. Resistance lies at 69.11-69.16 and then at the recent high at 70.51.

RB for January sees support at the double bottom on the DC chart seen recently at 1.8949-1.8968. Resistance lies at 1.9504-1.9515 and then at 1.9793-1.9813.

January ULSD sees support at 2.1212-2.1226. The lower DC bollinger intersects above that today at the 2.1250 area. Resistance lies at 2.1992-2.1997 and then at the recent highs at 2.2319-2.2331.?

Natural Gas--NG is up 15.1 cents

Gas prices have gapped up over the weekend as weather forecasts turned colder, especially for the December 18-22 period, as per Celsius Energy. As we have highlighted a few times recently :"welcome to volatility and changing weather forecasts that look like they will shape the price action in the near term."

Also possibly supportive is the strong power burn seen Friday and Saturday, which may see some estimates for the coming week's storage data draw be revised upward.? Due to cold temperatures & weaker wind generation, the gas? power burn demand rose to an impressive 44.3 BCF/d Friday, up +14.1 BCF/d vs last year. It fell Saturday to 40.3 BCF/d, but that was still 12.9 BCF/d better than seen a year ago. Sunday's power burn fell to 28.0 BCF/d, which is down 0.5 BCF/d from a year ago. (Celsius Energy)

Money managers added 11,000 contracts to their net short position in futures/options on the CME in the week ended Tuesday December 3, bringing their net total short position to 72,717 contracts.?

Reuters details how "Europe's struggling industries are bracing for a new gas price shock over the coming winter months, as colder weather depletes stocks, competition with Asia for liquefied natural gas intensifies, and the prospect of reduced Russian supplies looms. Since the energy crisis of 2022,? dozens of firms across Europe have closed factories and cut activity and jobs as high gas prices undermined their competitiveness."? Today, the TTF price is near Euro 45.70/ MWh (=$13.39 / mmbtu) . That compares with average EU gas prices of 17.58 Euro/MWh (=$5.15/MMbtu) over five years before the pandemic, LSEG data showed.

TTF prices have eased back over the past 2 weeks after reaching an over one year high of 49.550 two weeks ago, as expectations are that gas supply would remain consistent through the end of the year, as per Investing.com commentary. There is a gap to fill on the TTF DC chart down to 43.99 Euro/MWh. Momentum is negative for the TTF spot futures basis the DC chart.

The gas rig count rose 2 units in Friday's Baker Hughes report.

Technically, NG still has negative momentum basis the DC chart. The gap created over the weekend goes down to 3.108. Given the advent of winter, spot futures prices seem unwilling to stay below $3 at the moment. Support lies at the 3.17 area and then at the filling of the gap. Upside resistance at 3.297-3.304 was tested with an overnight high of 3.324. The overnight high was seen on the opening of the session last night.

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