Energy Market Update 12-4-2023

Crude is down 54 cents????? Rb is down 63 points???? ULSD is up 1.4 cents

Overview

After starting the session higher on geopolitical tension, crude has turned lower on concerns over the OPEC agreement given its voluntary nature and rising non-OPEC supply.

Evidence of the crude market's "gloom" is the Brent front month spread falling into contango. European crude is facing a supply glut due to a combination of weak regional crude demand and an influx of cargoes from the US. (Bloomberg)

Oil was supported at the beginning of the overnight session on the back of news of Houthi drones attacking a U.S. destroyer and three commercial ships operating in the Red Sea with the U.S. warning the Houthis over these attacks.(Bloomberg)? Also, the U.S. said that it is reviewing its options after Venezuela? failed to release American detainees by November 30. (Bloomberg)

The Al-Zour refinery in Kuwait is now fully operational as the third of the three mini refineries was brought online on Sunday. This will gradually increase the refining capacity of the facility to 615 MBPD from the current capacity of 410 MBPD. The plant halted its operational activities last month after a fuel gas feed was halted. (ING)

On Friday, Fed Chairman Powell said that Fed rate cut speculation is 'premature,' and that rate hikes are still possible. (Yahoo Finance)

Gasoline prices at the pump in the U.S. continue to slip. Today the price fell to $3.242. Gasoline prices at the pump have fallen for 10 straight weeks. According to GasBuddy, consumers should expect those low prices for the next several months. (komonews.com/foxbusiness)

The Baker Hughes report seen Friday showed the oil rig count rose by 5 units.

CFTC data issued Friday saw money managers raise their net length in RB & ULSD. ULSD length rose by 3,637 contracts and RB by 1,949 contracts. WTI length fell by 7,663 contracts combined on ICE/CME combined. ING says that the WTI length fall is the 9th weekly fall in a row. In contrast, money managers increased their net longs in ICE Brent by 11,630 lots over the last week after reporting five consecutive weeks of decline. (ING)

Technicals

The energies have negative momentum as they have tested their lower DC bollinger bands today.

For WTI, the DC chart's lower bollinger intersects at about 73.25. Support below is seen at 72.67-72.75 and then at the recent low at 72.16. Resistance comes in at the overnight high at 75.03-75.11.

RB's DC chart based lower bollinger lies at about 2.1060. Support lies at 2.0900-2.0923, which is the overnight low. Below this support lies at the 2.07 area. Resistance is seen at 2.1537-2.1552.

The ULSD DC chart's lower bollinger lies at 2.6775. Support comes in at 2.6184, which is a low from late July this year. Resistance comes in at 2.7206-2.7220.

Natural Gas--NG is down 13.5 cents

NG is lower as one forecaster wrote : "we can write off December as being mostly mild in between a first week cold snap in the East and a Christmas/New Year's period that becomes stormy with widespread cold from the High Plains to the Atlantic coastline." The weather has prompted an analyst to write :"Still hard to argue the bull case for natgas in this environment."

Platts details strong LNG imports into Europe so far this month after November imports were the highest since May. The US is supplying nearly 70% of the total of imports seen so far in December. Cooler temps in Europe are keeping the market steady amid the supply. "Europe Faces Freezing Week as Snow and Ice Delay Flights: reads the Bloomberg headline, as they add that the U.K. is exporting power to Norway in a rare occurrence. The market is still optimistic around storage levels across Europe, suggesting that inventories should be well-enough supplied to last until the end of the winter season. However, if a cold snap were to ensue and Russian LNG was cut-off completely, prices could be subject to hikes in the coming months, as per Platts commentary.

Asia spot LNG prices fell last week to a 7-week low on tepid demand and improved supply, according to Reuters. The average LNG price for January delivery into north-east Asia fell to $15.7/MMbtu. The fall came despite cold weather, Reuters adds. Argus Media says that higher nuke output is squeezing out some end users and that global supply is improving as maintenance has ended at 2 Australian facilities, in addition to the resumption of LNG exports out of Egypt. The price for deliveries in January to Europe were said to be $12.46/MMbtu as of November 30. Cargo availability in the wider Atlantic basin remains high, with only a few firms facing an incentive to redirect loadings away from Europe and to northeast Asia instead, as per Argus analysis.

China announced that total installed renewable energy power generation capacity exceeded 1.4 billion kilowatts, accounting for nearly 50% of the country's total installed power generation capacity. The renewable power generation total includes hydropower generation. (www.nea.gov.cn)

The UNG ETF has drawn inflows totaling nearly $220 million over the course of the last month, according to data from LSEG Lipper. That is the equivalent of about a quarter of the $946 million in inflows the fund saw in the first 10 months of the year. Investors are said to be banking on more typical seasonal weather patterns heading into winter.? (Reuters)

CFTC data issued Friday showed money managers raised their net short position by 1,507 contracts. Their net total short position rose to 104,061 contracts.

The Baker Hughes report seen Friday showed the NG rig count fell by 1 unit.

Technically, NG is trying to hold on to positive momentum even as price action is not supportive. There is a small gap from Friday to today at 2.752 to 2.754. Above that resistance lies at 2.815-2.820. Support comes in at the recent low at 2.669 and then at 2.600-2.606.

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