Energy Market Update 1-26-2024

Crude is down 39 cents???? March RB is down 50 points???? March ULSD is down 30 points

Overview

A word being used today to describe oil prices is "consolidating". News wires tout the factors that have helped energy prices rise this week to their best value since the end of November: a better than expected 4th quarter U.S. GDP figure, the DOE crude draw, geopolitical risk, and hopes for Chinese demand on the back of the Central Bank's lowering of reserve requirements.

Vortexa data analysts say that Chinese seaborne crude imports this month have been running below 10 MMBPD. This is down from a rate of over 11 MMBPD seen last month.? According to data from the General Administration of Customs and Mintec calculations, China’s imports of crude petroleum oil reached an average of 11.43 MMBPD in December, up from 10.37 MMBPD in November. (Quantum Commodities/mintecglobal)

Kuwait Oil Tanker Co. became the latest operator to suspend transit via the Red Sea. (Quantum Commodities)

Baker Hughes is saying that they see North American oilfield spending declining in 2024. This follows what we reported in our daily update on January 19, wherein Platts said they are looking for flattish to slightly up or down North American/US capital budgets, while S&P Global's view has North American capex down as much as 10% this year. Baker Hughes says "In North America, activity continues to lag, and we are now anticipating no meaningful recovery in activity during the first half of the year,". Baker Hughes said it now expects North America spending to be down in low to mid-single digits in 2024. In 2024, the company expects international oilfield spending to grow in high single-digit, down from its earlier projection of low double-digit growth.(Reuters)

Bloomberg reporting says that OPEC+ does not plan any changes to their current output accord at their meeting next week given that prices have rebounded of late.

The December PCE (Personal Consumption Expenditures) index came in as expected with a monthly increase of 0.2% and a yearly rate of +2.6%.

Technicals

Momentum is cresting for all the 5 major energy contracts, with all overbought, except the RB.

Spot WTI has resistance at 77.92-77.97 and support at 75.65-75.75.

March RB support lies at 2.2500-2.2515 and then at the 2.23 area. Resistance lies at the double top from Thursday/today at 2.2933-2.2950 and then at the 2.3175 area.

ULSD for March sees support at the 2.72 area and then at 2.6875-2.6900. Resistance lies at Thursday's high at 2.7695 and then at the prominent high from Nov 30 at 2.7827.

Notable in the Brent on the DC chart is yesterday's high of 82.57 having missed by 1 cent filling a gap left from Nov. 30. Above that resistance lies at 83.80-83.85. Support is seen at 80.06-80.13.

Natural Gas- March NG is down 1.1 cents

NG prices are a little lower as the market assesses the bullish EIA storage data offset by the continued warm weather pattern expected into early February.

The EIA storage data showed a healthy withdrawal of 326 BCF, beating expectations by 3-6 BCF. This put the storage total in the U.S. at 2.856 TCF. This is still +110 BCF /+4.0% versus last year's level and +142 BCF/+5.2% versus the 5 year average. The narrative of sell the fact after the EIA data came to fruition as Feb spot NG futures fell by about 17 cents into the close from the value seen right before the stats. Next week's EIA number though is seen reducing the surplus further. Estimates we have seen are for a draw of between 201 and 228 BCF. The 5 year average is a draw of 185 BCF. Last year's draw was 141 BCF.

Today is the last trading day for the February NG options, with open interest on the CME showing the $2.50 strike with just under 35,000 contracts outstanding, while the $2.75 strike has just over 40,000 total contracts outstanding.

Lower prices and higher demand this winter are set to drive a return to strong growth in global natural gas consumption in 2024, IEA said today. This year, natural gas demand is set for 2.5% growth, following a meager 0.5% increase in 2023, the agency said in its latest Gas Market Report for Q1 2024. The significantly lower natural gas prices – compared to the 2022 highs – are supporting higher demand, as are colder temperatures this winter compared to the exceptionally mild winter of 2022/2023, the IEA said. LNG supply growth is seen at just 3.5% this year, compared to an average growth rate of 8% in the 2016-2020 period, the IEA said. The lower growth would be the result of delays in new liquefaction plants and issues surrounding the availability of feed gas at existing projects that could push back supply growth to 2025.? (Oil Price.com)

The topic of LNG projects was the subject of news in the U.S. yesterday with the following headline: "Biden Set to Halt Review of Natural Gas Export Approvals on Friday". At issue is whether additional exports are in the public interest, a threshold under federal law, giving great weight to the potential climate consequences of additional exports. The pause is set to at least temporarily stall projects in development, including Commonwealth LNG, Energy Transfer LP and Venture Global LNG Inc. facilities planned in Louisiana. (Bloomberg) The 3 projects cited have a total liquefication of over 6 BCF/d. These are due to come on well into the future with dates of service beginning in 2026 and even out to 2028. There was little reaction to the news headline that we saw in the NG curve yesterday that would have signaled a concern about the demand loss if these projects were to be delayed.

Mild temperatures and consistently high stock levels among Asian utilities continue to cloud the post-winter market outlook for LNG cargoes in the region, with procurement activity for spot volumes expected to be reduced despite significantly lower prices. (Platts) JKM prices for March through May are between $9.39 and $9.525/MMbtu. The forward curve shows prices for the summer higher than that seen in the front end. European TTF pricing is showing the same phenomenon with Feb TTF today falling to a fresh recent low of 26.340 Euros/Mwh ($7.72/MMbtu). July TTF is trading at 28.250 Euros/Mwh ($8.29/MMbtu).?

Kinder Morgan remains bullish on natural gas demand growth. It continues to have a bullish outlook for natural gas demand banking on higher demand from LNG export facilities and increased exports to Mexico. (Reuters)

Technically March NG's momentum is trying to turn positive. We are tempted to say that the contract has found a near term range based on the price action seen this week. That range is from 2.078 to 2.334. Near term support lies at 2.098-2.107 and resistance lies at 2.250-2.257.

Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC