Energy Market Update 10-25-2023

Crude is down 7 cents???? December RB is up 1.7 cents??? December ULSD is down 2.7 cents

Overview

Energies are mixed with crude oil near unchanged, RB higher and ULSD lower befitting the news seen the past 24 hours. RB is propped up by the strong API draw seen last night, while ULSD is the casualty of poor European economic data seen yesterday. Crude is supported by Mideast concerns and a healthy API stockpile draw, but that is mitigated by the economic news and a firm U.S. dollar.

The European PMI data yesterday led to the following headline from ING, which is behind the weakness in ULSD : " No relief for eurozone economy at start of 4Q". A Eurozone lending survey by the ECB shows that higher rates and weak economic conditions are having an effect on borrowing. Demand for borrowing weakened "substantially" in Q3, mainly driven by the level of interest rates at the moment. The need for Fixed Investment borrowing is seen as a negative contributor, thus leading to weak economic activity in Europe in the coming quarters, ING adds.?

API????????????? Forecast?????????? Actual

Crude Oil????? Unch/+0.24??? ? -2,668

Gasoline?????? -0.3/-0.9????????? -4.169

Distillate????? -1.1/-1.17???????? -2.313

Cushing???????? -0.49???????????? +0.513

Runs???????????? +0.5%???????????? n/av

U.S. and Saudi Arabia leaders on Tuesday discussed efforts to prevent the conflict from widening to potentially include major oil producer Iran. (Reuters)? The Wall Street Journal reported that Saudi Arabia intercepted one of the cruise missiles fired toward Israel last week by Iran-backed Houthi rebels.

Oil prices also steadied after China rolled out fresh stimulus plans for certain areas of the economy, although the property sector remains troubled. Bloomberg wrote that the Chinese government is not happy with the slowdown in growth seen, thus issuing more sovereign debt and raising the budget deficit ratio. But, Bloomberg adds that the support package is conservative at about 0.8% of GDP.? But, demand for crude oil in China could be limited as Beijing put a ceiling for its oil refining capacity at 1 billion metric tons (20 MMBPD) by 2025 to streamline its vast oil processing sector and curb carbon emissions. In 2022, China's processing capacity stood at 920 million metric tons, overtaking the United States as the world's largest oil processor.? (Refinitiv/Reuters)

Platts reports that Asian jet fuel/kerosene demand is to remain slow until the end of 2023, due to "tepid" demand and ample supply from China. Jet fuel demand is being hurt by the off season travel demand lull. OAG data shows that global airline capacity is set to drop by 1.1 million seats / 1% in the week beginning October 23. Kerosene demand is low in Northeast Asia due to a mild winter. The cash differential for jet in Singapore fell to 60 cents yesterday. The average for October is 94 cents, down from $2.26 in September. But, Platts adds that the outlook for Asian jet/kerosene remains positive into 2024 as air travel patterns continue to normalize in the new year.??

Technicals

Energies are showing negative momentum. ULSD & RB open interest fell quite a bit with Tuesday's activity as November saw a lot of liquidation. RB & the Crude oils are having inside days today.

WTI spot futures see support at 82.91-82.94 and then at 82.15-82.23. Resistance lies at 85.12-85.20 and then at 86.30-86.39.

RB for December sees support at 2.2442-2.2466, which was tested with a low of 2.2437. Below that support is seen in the 2.23 area. Resistance lies at 2.3016-2.3018 and then in the 2.3225 area.

December ULSD has support at the 2.900 area and then at 2.8411-2.8435. Resistance comes in at the 2.98 area and then at 3.0280-3.0300.

Natural Gas--November NG is up 2.6 cents? / December NG is up 4.0 cents

NG is rallying further feeding off of Tuesday's news that saw a drop in NG production due to pipeline and maintenance issues and forecasts for a few cold days next week helped rally NG. NGI adds today that the market is getting "the first taste of winter".

The following headline from the EIA issued this morning may also be supporting NG prices : "The number of operating U.S. natural gas rigs has declined 24% since start of 2023". The drop in rigs is being driven by the low price for NG seen this year, as well as the drop in crude rigs operated in the Permian region, where much of the NG production is associated gas from oil production.

Output was on track to drop about 3.5 BCF/d to a preliminary two-week low of 102.8 BCF/d on Tuesday due mostly to reductions in Texas, Louisiana, Pennsylvania and Ohio, down from a record 106.2 BCF/d on Monday, as per Reuters reporting. The drop in production in Texas was due to a pipeline issue on the 2.1 BCF/d Permian Highway gas pipe, which transports gas from West Texas to the Texas Gulf Coast. This caused cash prices at the Waha hub in the Permian to drop to around 12 cents per mmBtu for Tuesday. (Reuters)

Demand for the next 2 weeks was revised Tuesday.? LSEG forecast U.S. gas demand, including exports, would jump from 97.2 BCF/d this week to 106.4 BCF/d next week. These were up from Monday's estimates of 97.0 and 104.6 BCF/d respectively.?

The LN/NG options for November in the CME show the $3 strike having open interest as of Tuesday's close totaling just over 52,700 contracts between puts and calls combined.? These options expire tomorrow.?

Technically December NG has negative momentum, but the price action of the past 3 sessions is looking like a stepladder up, with the double bottom at 3.216 adding further support. Support lies above that at today's low at 3.317 and then at 3.264-3.269. Resistance at 3.386-3.389 was tested with a high today of 3.393. Above this we see good resistance in the 3.47 area.

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