Energy Market Update 2-21-2024

Crude is down 30 cents???? April RB is up 71 points??? April ULSD is down 1.53 cents

Overview

Crude prices are suffering from expectations of interest rates staying higher for longer. Prices tried to rally in Asian trading on the back of continued concern over Mideast tension.

The Federal Open Market Committee meeting minutes, to be released at 2 PM EST today, will likely shed some light on the US central bank's rate cut stance. "While a lot of progress has been made from the core CPI peak of 6.6% in September 2022, it is not yet to the level that would give the Fed much reason to cut rates in the near term," JPMorgan's Head of Research said. (Platts)

Middle East tensions escalated after the US vetoed a draft United Nations Security Council resolution demanding an immediate humanitarian ceasefire in the Israel-Hamas war late Feb. 20, according to local media. The US continues to push the 15-member body to call for a temporary ceasefire linked to the release of hostages held by Hamas.? (Platts)

European equities fell from near a record high amid disappointing earnings from some of the region’s largest companies. (Bloomberg)

The API data will be released after the close today followed by the DOE's data tomorrow at 11 AM EST.

Technicals

Momentum is negative for the energies.

WTI has a rollover gap from 77.38 to 77.67 from the expiration of the March futures contract yesterday. Resistance lies above that at 78.44-78.47. Support comes in at 75.75-75.83.

April RB sees support at 2.5040-2.5051. The overnight low is 2.5013. Below this support comes in at 2.4825-2.4830. Resistance comes in at 2.5475-2.5500 and then at 2.5700.

ULSD for April sees support at 2.6505 and then at 2.6159-2.6173. Resistance lies at 2.7000-2.7020.

Notable are the walls of resistance that have formed over the past few sessions on the DC charts for Brent and Gasoil. On the Brent DC chart, 4 of the 5 prior highs lie at 83.60-83.66. In Gasoil, the prior 3 highs lie at 858.25-858.75.

Natural Gas--March NG is up 20.3 cents

NG prices? are higher today as Chesapeake Energy says it plans to curb production "given current market dynamics," raising expectations more producers could reduce output with prices at three-and-a-half year lows.? The June 2024 through October 2024 strip is leading the up move today. They are currently up 25 to 26.5 cents.

After the close Tuesday, Chesapeake Energy reported fourth-quarter output fell to 3.43 BCF/d, from 4.05 BCF/d the previous year. Chesapeake Energy forecast a drop in spending on baseline production this year. Its capital spending plan will fund about 2.7 BCF/d in volumes this year, the company said. The volume for this year amounts to a 22% reduction from their 4th quarter 2023 volume.? (Reuters)

NG output has slipped recently. Wood Mackenzie sees output at 104.0 BCF/d in their latest estimate. This is down from an estimate of 104.8 BCF/d over the prior 7 days. An EBW analyst said Tuesday that production was down 0.5 to 1.0 BCF/d from the level seen over the weekend. (NGI) Celsius Energy analysis from Tuesday adds : "I'm showing a slow trend lower the past 10 days after output reached a 2024 high of 105.1 BCF/d on Feb 7. Today’s volumes look to come in at 103.8 BCF/d.

"With milder weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would fall from 130.3 BCF/d this week to 117.5 BCF/d next week. This was a total of 1.4 BCF/d lower from Friday's estimate.

A colleague last week had written how the NG options market had shown more interest in the calls than the puts, as he saw the put skew having eased. In regard to that, Friday's open interest from the CME showed a large increase in the March $1.60 through $1.80 call option strikes. We suspect that this was insurance against a rally in NG pricing. The options expire next Monday Feb. 26.? With an eye toward the expiration of the options, the $2.00 strike open interest for the March LN/NG options on the CME has a total of almost 58,000 contracts outstanding as of the close Tuesday. Is that a magnet for the futures price over the next 3 days?

We see 3 things that cumulatively present a supportive picture for NG: 1) producers signaling they will dial back output (2) a very short position in futures/options being held by speculative interests (3) an oversold technical condition on the charts.

Technically NG has positive momentum on the DC chart, rising from an oversold condition that had existed since the beginning of the month. Spot futures are holding currently over what we had seen as resistance yesterday of 1.684-1.685. The overnight low is 1.677. Support below that comes in at 1.637-1.640. Resistance at 1.785-1.786 is being tested. Above that resistance is seen at 1.828-1.833 via the March 60 minute chart.

Disclaimer

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