Energy Market Update 2-23-2024

Crude is down $1.10??? April RB is down 3.28 cents???? April ULSD is down 2.63 cents

Overview

Oil prices are lower as a Federal Reserve Governor said that he needs more data before he would recommend an interest rate reduction this year.

The Fed Governor also pushed back on the idea that the Fed risks sending the economy into recession if it waits too long to cut rates, saying the Fed can afford to "wait a little longer". (Reuters)

DOE data was more supportive than the API data with crude supplies rising less, gasoline supplies drawing versus building and distillate supplies drawing more than seen in the API data. Yet, overall these stats did not seem to offer any great change in a supply/demand narrative. Product demand remains on the weaker side, while refinery runs have remained low seasonally amid the ongoing maintenance. The four-week average crude inputs to refineries stood at 14.701 MMBPD, a decline of 401 MBPD versus 2023. Capacity utilization was unchanged at 80.6%. Gasoline demand rose by a scant 32 MBPD to 8.2 MMBPD, which trails significantly behind the prior 2 years' demand. In 2023, demand stood at 8.910 MMBPD and in 2022 it was 8.657 MMBPD. Distillate demand rose by 426 MBPD to 3.94 MMBPD. This beat last year's demand of 3.771 MMBPD, but trailed that seen in 2022 of 4.233 MMBPD. One supportive element in the stats that stuck out was the drop in net crude imports of 434 MBPD to a fairly low total of 1.689 MMBPD.

India's crude oil imports rose to a monthly record in January after the Red Sea shipping crisis delayed the December arrival of cargoes from the Americas. India's oil imports hit 5.24 MMBPD in January, up 17% from December and 3.5% higher than a year earlier. The previous monthly high in India's imports was 5.1 MMBPD in Jan 2018. Indian refiners turned to nearby suppliers in the Middle East to avoid disruption from the delays and make up for the diversion of Russian light sweet Sokol oil, supplies of which were hit by payment woes and tougher Western sanctions. (Reuters)

Israel Prime Minister Benjamin Netanyahu's war cabinet has approved sending negotiators to truce talks taking place in Paris on Friday. According to the Wall Street Journal, Hamas is willing to accept the release of 3,000 prisoners in a swap for hostages while discussing a permanent ceasefire during a six-week truce.

Technicals

Momentum is negative for the energies, although the April daily charts for the products suggest that they have found ranges.

For April RB the range looks to be between 2.6330-2.6340 and 2.44 for now. In between those levels, we see support at 2.5051-2.5069 and resistance at 2.5683-2.5696 and 2.5868-2.5875.

For April ULSD, the range looks to lie between 2.57 and 2.88. Nearby support lies at the 2.65 area and resistance at the 2.72 area.

WTI spot futures see support at 76.32-76.38 and resistance at 78.69-78.77.

Natural Gas- April NG is down 9.2 cents

NG is lower as the narrative continues of a high amount of gas in storage and overall weak demand in the near term, but the June through October strip continues to hold up better than the front end with the expected output cuts announced of late seen affecting the supply overage as the year goes on.

The EIA data showed a draw of 60 BCF, but a revision of -5 BCF to last week's data made for a draw that met forecasts. Total storage stood at 2.470 TCF as of Feb. 16. This is +265 BCF / +12.0 % versus last year and +451 BCF / +22.3 % versus the 5 year average.

The NG/LN March options expire Monday with a significant open interest in the $2.00 strike. Total open interest at that strike is over 69,000 contracts. The only other nearby call strike with any notable open interest is the $1.90 call with 10,305 contracts open. The nearby put strikes have the following open interest: $1.50 put 25,389 contracts / $1.60 put 15,521 contracts / $1.75 put 16,792 contracts.

The TTF contract has fallen to its lowest value since April 2021, as storage remains ample and demand has been low. Today's price is the lowest since before Russia started curtailing supplies in 2021. Today's low is 22.450 Euros/Mwh, which equates to $6.58. EU gas storage facilities were more than 64 per cent full as of Wednesday, a record high for the time of the year, according to data from Gas Infrastructure Europe, an industry body. (Financial Times)

Technically April NG has positive momentum, although it may have carved out a range looking at the price action this week. That range would be from 1.868/1.877 on the high side and 1.633/1.640 on the low side. Support at 1.744/1.749 has been pierced today. Below this support is seen at 1.704/1.709. Resistance comes in at 1.800 area via the 60 minute April chart.

Disclaimer

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