Energy Market Update 12-13-2023

Crude is up 34 cents??? RB is up 33 points? ULSD is up 2.24 cents

Overview

Energies are higher now after overnight making fresh lows overnight for the recent down move. Several different reasons were given for the price weakness overnight, but key seems to be the accord reached today at the COP28 climate summit calling for a transition away from fossil fuels. The boost this morning is being attributed to OPEC keeping demand forecasts unchanged in the monthly report issued today.Delegates at the UN conference on climate agreed to a ‘historic package’ of climate measures, although a ‘phase out’ phrase was omitted, for which more than 100 nations had pleaded, taking some of the bite out of the accord. (Al Jazeera) WSJ reporting saw the accord as weakening energy prices as the deal seeks to transition away from fossil fuels versus simply reducing emissions and or increasing renewable energy usage.?

OPEC kept its demand and supply forecasts for 2024 unchanged from last month's estimates. OPEC kept its forecast for world oil demand growth in 2023 steady at 2.46 MMBPD. In 2024, OPEC sees demand growth of 2.25 MMBPD, also unchanged from last month. OPEC left the Non-OPEC supply growth forecast for 2024 unchanged at +1.4 MMBPD. OPEC says that their November oil output fell by 57 MBPD to 27.84 MMBPD, citing secondary sources. They blamed "exaggerated concerns" about demand for a recent drop in prices. (Reuters/WSJ)

Various reasons seen in news wire reports were given for the price weakness of the past day or so. The reasons included a fear of the Fed leaving rates higher for longer, which would support the dollar and hurt commodities. The Fed will release minutes from their meeting later today. Also cited is a worry over OPEC+'s weak commitment to reducing output and worries about global demand next year.

Yesterday, Bloomberg reported that Russian seaborne crude exports in the 4 weeks to December 10th rose to a 5 month high at 3.2 MMBPD. But, this may have been due to a need to make up for lost exports from earlier due to storms seen in the Black Sea weeks ago.

The EIA yesterday, in issuing its monthly STEO, significantly lowered their price forecast for crude oil for next year. WTI next year is now seen averaging $78.07, down from November's estimate of $89.24. Brent is seen averaging $82.57 in 2024, down from November's estimate of $93.24. U.S. crude output this year is seen at 12.93 MMBPD, up from the forecast last month of 12.90 MMBPD. The expected production for 2024 was lowered to 13.11 MMBPD from the 13.15 MMBPD forecast in November. Total world output for 2023 was raised to 101.62 from the November estimate of 101.54 MMBPD, while next year's global output was lowered to 102.19 MMBD from 102.55 in November's forecast.

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

Crude Oil???? -1.2/-1.5?????? -2.349

Gasoline??????? +1.9?????????? +5.8

Distillate???? +0.4/+0.6?????? -0.3

Cushing??????? -0.115????????? +1.4

Runs??????????? +0.3%????????? n/av

The WTI/LO options for January expire tomorrow. The $70 puts on the CME have open interest of roughly 10,000 contacts, which is not excessive.

Technicals

Momentums for the energies are neutral.

WTI spot futures see support at 67.50-67.51 and resistance at 70.10-70.15.

RB for January sees support at 1.9480 from a major low in early May seen on the January daily chart. Resistance lies at 2.0362-2.0376.

ULSD spot futures have support at the lows of yesterday/today at 2.5000 and 2.4838. Resistance comes in at 2.5611-2.5618 and then not until the wall established recently near 2.62.

Natural Gas--NG is down 1.0 cents

NG is down slightly versus settlement after making a fresh 6 month low overnight with the warm weather forecast for the next 2 weeks weighing. Also contributing to the weakness is record production and reduced exports to Mexico. WSJ comments that NG tried making "cautious gains" today amid what we suspect is mostly a technical bounce.

U.S. pipeline exports to Mexico fell to an average of 3.8 BCF/d so far in December, down from 5.6 BCF/d in November and a record 6.9 BCF/d in September. On a daily basis, U.S. exports to Mexico were on track to drop to a preliminary 3.5 BCF/d on Tuesday, their lowest since May 2020. (Reuters)

LSEG said average gas output in the Lower 48 U.S. states rose to 108.4 BCF/d so far in December from a record 108.3 BCF/d in November. LSEG forecast U.S. gas demand in the Lower 48, including exports, would slide from 123.7 BCF/d this week to 122.8 BCF/d next week. On Monday LSEG had predicted next week's demand at 123.8 BCF/d.?

TTF prices slipped further earlier today to a fresh low for recent pricing, although they are now a bit higher versus settlement. European gas extended last week's declines amid ongoing weakness in demand. North Asia LNG prices also edged lower as strong inventory levels limit demand in the spot market. (Quantum Commodities) “Inventory levels remain seasonal high, and each passing day without a significant boost to demand will add further downward pressure on the price,"-as per a bank analyst in Europe. EU storage was 90.4% full as of December 11, according to data from Gas Infrastructure Europe. (Oil Price.com)The EIA has stated that global LNG supplies and natural gas stocks will likely meet demand this winter 2023–24, but risks remain. Risks to this balance are associated with possible extreme weather and supply issues. (EIA.gov)

The EIA in its monthly STEO report lowered their price forecasts for this year and next. In 2023 HH prices are seen averaging $2.56 versus November's forecast of $2.67. In 2024 prices are seen averaging $2.79, down quite a bit from last month's estimate of $3.25. Supply this year was left unchanged at 103.7 BCF/d, and next year's estimate was lowered to 104.9 BCF/d from 105.1 BCF/d. Demand this year is seen at 89.5 BCF, up 0.1 BCF/d from November's estimate. In 2024 demand is to rise to 89.6 BCF/d, versus last month's estimate of 89.0 BCF/d. The end of withdrawal season(March 2024) storage estimate was raised to 2.023 TCF from last month's estimate of 1.994 TCF. The EIA estimated that the benchmark Henry Hub spot prices will average about $2.80/MMBtu for the November-March period, marking a 60-cent reduction from the EIA's November estimate.

Technically NG remains oversold basis its RSI indicator on the DC chart. Open interest rose significantly again yesterday n NG futures on the CME, which we take to be more new shorts being added. Support for the spot NG futures is seen at 2.250-2.258, which was tested overnight with a low of 2.238. Resistance lies at 2.441-2.448.

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