Energy Market Update 11-30-2023

Crude is up 85 cents January RB is up 1/2 cent January ULSD is up 2.87 cents

Overview

Energies are higher as OPEC+ is said to have agreed on a preliminary deal to cut output by over 1 MMBPD, as per a Reuters report. A continuation of Saudi Arabia's 1 MMBPD voluntary cut is expected to be supplemented by additional and smaller cuts from other members, delegates added. But, Energy Aspects analysis says " a new official group cut of 1 million barrels a day would actually be only half as big in real terms because some countries are already pumping below their targets." Without a further cut, oil supply would be in a significant surplus in the coming months, as per S&P Global. (Bloomberg)

Prices were also supported by ongoing loading delays on the Black Sea, which continued into a fourth day with high winds and big waves threatening to persist through the week, delaying loading at the port of Novorossiysk, where Russian and Kazakh crude oil and products are loaded. (Quantum Commodities)

Chinese PMI data seen today disappointed. The official PMI from the government fell to 49.4 in November from 49.5 in October, missing economists' forecast of 49.7. Domestic and foreign orders have "dried up" to quote WSJ. New export orders were down for the 9th month in a row. Reuters adds that a further worrying sign is the services sector's PMI fell for the first time in 12 months. The Factory PMI has contracted in 7 of the last 8 months. These numbers have spurred some to say that more policy support is needed. But, Reuters adds that the Bank of China is constrained when it comes to implementing further monetary stimulus over concerns a widening interest rate differential with the West may weaken the currency and spur capital outflows.

The DOE stats were not supportive, as builds across the board were greater than forecasts. Distillate stocks rose by 5.217 MMBBL, versus the forecast for a small draw. Demand fell by 1.096 MMBPD on the week to a very low figure of 3.014 MMBPD. This compares to the prior 2 years' demand of 3.656 and 4.209 MMBPD. Gasoline supplies rose by 1.764 MMBBL. Forecasts were for a very small build. But, Quantum Commodities reports that the stocks in Padd1 for gasoline are at an 8 month low. Padd1 includes the NY Harbor, which is the delivery point for the RB contract on the CME. Gasoline demand fell by 274 MBPD to 8.206 MMBPD, slightly below last year's demand of 8.317 MMBPD and lagging 2021's demand of 8.796 MMBPD. (We wish to add that RB length has been favored by speculative interest the past few weeks as per CFTC position reporting.) Crude supplies rose by 1.61 MMBBL. The expectation was for build of less than 1 MMBBL. Net crude imports fell by 665 MBPD to a very low total of just over 1 MMBPD. In addition aiding crude was the large increase in refinery inputs of 518 MBPD, taking total refinery runs back over 16 MMBPD, further underscoring maintenance has ended.

Likely helping energies Wednesday was the following narrative seen on Reuters: "While the tone from Federal Reserve officials' comments on Wednesday was mixed, investors still focused on comments made on Tuesday by Fed Governor Christopher Waller - an influential and previously hawkish voice at the U.S. central bank. Waller had said rate cuts could begin in months if inflation keeps easing." "On Wednesday the Fed's Bank of Atlanta President Raphael Bostic said he expects U.S. growth to slow and inflation to continue to ease on the back of tight monetary policy." The dollar index fell to a 3 1/2 month low early Wednesday, likely also supporting energies.

Today is the last trading day for the December RB & ULSD futures contracts as well as the January Brent futures.

Technicals

Momentum is positive for the energies as prices have risen to near the highs seen at the beginning of the month.

WTI January futures see support at 77.09 and then at 76.21-76.23. Resistance comes in at 79.77 and then at 80.99-81.05.

January RB sees support at 2.2330-2.2340, tested with a low of 2.2335. Below that support lies at 2.2112-2.2114. Resistance comes in at 2.2868-2.2887 and then at 2.3087-2.3090.

ULSD for January sees support at 2.8012-2.8029 and then at 2.7803-2.7817. Today's low lies between those at 2.7909. Resistance lies at 2.8887-2.8890.

Natural Gas--NG is up 2.7 cents

NG prices are higher on what looks to be some short covering " to trim some of the heavy losses recorded in recent sessions.", to quote NGI. Also supporting prices are forecasts that set up some late December cold.

In Europe, with limited solar generation and wind generation temporarily suppressed by a high-pressure system over the region, grids are entering a period of maximum demand for gas-fired and coal-fired generation, according to Reuters. TTF prices are higher now after slipping to a fresh low for the January daily contract as weather in Europe into December is set to cut the 5 year surplus by 100 BCF from +500 BCF, as per Celsius Energy analysis.

The EIA storage data is seen as a small withdrawal, which will increase the surpluses to last year and the 5 year average. Storage is seen falling by 9 to 13 BCF. This compares to last year's withdrawal of 80 BCF and the 5 year average draw of 44 BCF.

In the spot market meanwhile, extreme cold in the U.S. Northeast this week boosted next-day gas prices in New England by 15% to $10.22/MMbtu for Wednesday, their highest since February for a second day in a row. (Reuters)

On Wednesday, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would drop from 128.3 BCF/d this week to 119.2 BCF/d next week. This revision from Tuesday's forecast added 1.3 BCF/d total to demand.

Technically NG has positive momentum and for now looks to have put in a foothold near 2.70 when looking at price action on the DC chart this week. January has support at 2.745-2.750 and then at the 2.71 area, Resistance comes in at 2.864-2.870 and then at 2.921-2.922.

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