Daiy Energy Market Update 11-22-2024

Crude is down 9 cents????? January RB is down 1.25 cents???? January ULSD is down 1.66 cents

Overview

Energy prices are lower now after attempting to rally overnight. Prices are being hurt by a poor PMI reading out of Europe.? But, energy prices are higher on the week, underpinned by tension surrounding Ukraine, cold weather fueling demand and news of better Chinese crude imports arriving this month.

Euro zone business activity took a surprisingly sharp turn for the worse this month as the bloc's dominant services industry contracted and manufacturing sank deeper into recession, a survey showed on Friday. HCOB's preliminary composite euro zone Purchasing Managers' Index, compiled by S&P Global, sank to a 10-month low of 48.1 in November, below the 50 mark separating growth from contraction. A Reuters poll had predicted no change from October's 50.0. An ING analyst added this commentary: " "New business is weakening again for both manufacturing and services with export orders in particular being down sharply as the euro zone economy battles weak demand from abroad."

The Euro has fallen to its worst value since November 2022 as the ECB is seen cutting rates, with today's PMI data reinforcing the view of an impending rate cut. The market-implied odds of a half-point rate cut next month jumped to more than 50%, from about 15% on Thursday.?? (Bloomberg)

Tension surrounding Russia has risen as new sanctions have been imposed. New sanctions were imposed against Gazprombank, a major Russian institution that had previously evaded sanctions as it provided a means for some European countries to continue to pay for Russian gas. This means that countries in Europe that were still importing Russian gas will no longer be able to do so. (Platts)

Looking ahead, market participants are awaiting the OPEC+ bi-annual meeting, scheduled to take place on Dec. 1. According to a note by HSBC Global Research, OPEC+ are expected to announce another three-month extension of their cuts until April 2025. (Platts)

Russia will lift the gasoline export ban earlier than planned, Deputy Prime Minister Alexander Novak was quoted as saying by local media, but declined to specify when the ban will be lifted. Concerns have risen about the domestic Russian market seeing prices surge and become tight if and when the export is lifted. (Platts)

Technicals

Technically WTI is continuing its stepladder up price action today with momentum for the energies remaining positive.?

January WTI futures see support at 68.69=68.75 and resistance at 71.03-71.11.

January ULSD sees support at 2.2450-2.2460. Resistance lies at 2.2859-2.2869 and then at 2.3068-2.3069. The highs yesterday and today are 2.2876 and 2.3033.

January RB support comes in at 1.9607-1.9613. Resistance lies at 2.0202-2.0217.?

Natural Gas--January NG is down 12.7 cents

NG prices are now lower after posting a fresh more than one year high overnight, but futures prices have since retreated by over 30 cents. Volume overnight was light; so we believe that the up move overnight was not a function of major short covering or fresh buy orders. The weather is finally causing withdrawals --as seen by the surprise draw in yesterday's EIA data. The coming weeks will see the storage surplus shrink as the upcoming weather is seen as slightly below normal, but will producers bring back production given the recent sharp rise in prices?

Yesterday's EIA gas storage data showed a (surprise) draw of 3 BCF. Total storage stood at 3.971 TCF as of Nov. 15. This is +141 BCF / +3.68% versus last year's level and +239 BCF / +6.41 % versus the 5 year average.

As a colleague commented today : " volatility is alive and very well". Evidence of that is the large increases in options open interest on the CME in yesterday's activity. January put option open interest rose by over 15,000 contracts, while the January call open interest rose by over 12,000 contracts. The increases were across a myriad of nearby and way out of the money options, in particular the January $2.00 and $2.50 puts. The December LN/NG options expire Monday.? Notable open interest is seen in the December $3.00 calls, which have open interest of over 31,000 contracts. The December $3.25 calls have open interest of over 24,000 contracts. The December $3.00 puts have open interest of over 27,000 contracts. The December $3.25 puts have open interest of over 10,000 contracts.

Notable is the very heavy volume seen in NG futures trading yesterday on the CME. WSJ data is saying that volume was over 1 million contracts. This reinforces the notion of a temporary top being in place as tops and bottoms are accentuated by heavy volume. Total open interest in the NG futures on the CME fell by over 33,000 contracts in Thursday's activity, with the December, January and February contracts seeing large open interest declines, suggesting short covering may have been in effect in the rally seen Thursday.

One colleague suggested in overnight commentary: " buyers beware". Another colleague commented: " I am NOT overly bulled up here by any means but Winter should NEVER be "over" by beginning of second week in November.

Technically NG futures have tested the upper bollinger bands on the DC and January daily charts, as well as the weekly NG continuation chart, thus suggesting upside resistance. Additionally momentum on the January daily chart looks to be cresting. The January NG chart's upper bollinger band intersects at 3.561. Resistance lies up at 3.494-3.501. This is well below the highs seen in the January futures yesterday and then overnight at 3.593 and 3.639. Support for the January futures lies at 3.261-3.264 and then at 3.220. The weekly chart's bollinger band intersects at about 3.263.

Disclaimer

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