Energy Market Update 11-29-2023

Crude is up 84 cents??? January RB is up 1.78 cents??? January ULSD is down 2.45 cents

Overview

Crude Oil and RB are rallying further today on expectations for more production cuts from OPEC+ and due to the continued disruption to production and exports out of Kazakhstan due to the Back Sea storm. ULSD is lower, dragged down by the unexpected build in supplies seen in the API data.

Since Monday, Kazakhstan has been forced to shut in 56% of its oil production due to a storm in the Black Sea, that has hampered exports from Kazakhstan and Russia. The storm has disrupted up to 2 MMBPD of oil exports raising the prospect of short-term supply tightness, Reuters reports. Russia's transportation ministry said Wednesday that Black Sea weather conditions remained unfavorable for shipping and that restrictions would remain in place, Reuters reported.

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

Crude Oil???? -0.9/+0.9???????? -0.817

Gasoline????? +0.1/+0.2???????? -0.9

Distillate????? -0.39/-0.8???????? +2.8

Cushing??? ???? n/av??????????????? -0.5

Runs?????????? +0.8%????????????? n/av

The Saudis are seen cutting their January OSP to Asia by $1.05 as per a survey from Bloomberg. Competing barrels from the U.S., Guyana and the North Sea are forcing the Saudis to consider the cut.We alluded yesterday to sanctions on Russian vessels causing issues for Russia's ability to sell its oil. We have seen an article on Reuters that details a tanker being stuck in the waters off India. India has a "dilemma" as to whether to dock the ship and thus anger the U.S., which has recently sought to hamper Russia's ability to sell its oil.

Today, the 3rd quarter U.S. GDP data was raised to 5.2% from an initially reported 4.9% rate of growth. It was the biggest increase in a decade if the pandemic years of 2020-21 are excluded. GDP is on track to expand at a mild 1% to 2% annual clip in the fourth quarter, the most recent forecasts show. (Marketwatch)

Technicals

RB and WTI momentum remain positive, while that for the ULSD looks to be cresting.

January WTI sees resistance at 78.69-78.77. Support lies at 76.15-76.21 and then at 75.21-75.31.

January RB support comes in at 2.1802-2.1812 and then at 2.1574-2.1586. Resistance lies at 2.2364-2.2382 and then at 2.2553-2.2573.

ULSD for January sees support at 2.7611-2.7617 and then at 2.7400-2.7405. Resistance lies at the 2.8344 area and then at the recent highs at 2.8638-2.8660.

Natural Gas--NG is down 2 ticks

NG is slightly lower as the mantra of strong production and a warming trend in early December continues.

The same notion seems to be driving the prospects for NG pricing next year, as per NGI. The combination of relatively soft weather-driven demand and record production put the U.S. natural gas market on a path to price-pressuring oversupply well into 2024, a growing chorus of analysts cautioned in November.

LSEG said average gas output in the Lower 48 U.S. states rose to 107.7 BCF/d so far in November, up from a record 104.2 BCF/d in October. The figure for November production is up 0.3 BCF/d from the prior data seen.

Meteorologists projected the weather would swing from colder than normal now to warmer than normal from Nov. 30-Dec. 12. (Reuters)

U.S. NG demand is seen at 127.3 BCF/d this week rising to 118.9 BCF/d next week. These were a combined 3.9 BCF/d lower than the numbers seen the day before.

U.S. pipeline exports to Mexico, meanwhile, have fallen to an average of 5.7 BCF/d so far in November, down from 6.5 BCF/d in October and a record 7.0 BCF/d in August.

TTF prices continue to slide even as as a cold snap in Europe is set to last 7-10 days. December TTF prices, which expire today, have made a fresh low on the daily December chart since late January 2022. There is a gap on the daily nearby chart for TTF that goes from 39.500 to 38.625 Euros/Mwh. Resistance lies in the 46 Euro area. Momentum is negative.

Technically, momentum for the NG spot futures has turned positive on the DC chart basis. Also supportive is the very low RSI reading seen on the January daily NG chart. The reading is 27. A reading under 30 means an oversold contract. Support for the spot futures lies at 2.745-2.750. Resistance comes in at 2.864-2.865 and then at 2.921-2.922. Notable to us technically is the very high level of open interest in the spot January 2024 contract. As of yesterday, the CME said open interest for that contract month was 335,377 contracts. This contrasts with the 3 prior contracts when they became the spot month. In the 3 prior months, open interest started the spot month between 226.276 and 288,406 contracts. We mention this, because of what is seen as a very large speculative short positioning given the latest CFTC data. Thus, we wonder if a short covering rally is in the offing?

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